Is Solar Worth It In California in 2026?

Yes, solar is still worth it in California in 2026—but the strategy for unlocking your full savings potential has shifted.

As of January 1, the homeowner-claimed tax credit for buying solar panels has expired. However, California homeowners have a brief window to benefit from the business-claimed tax credit through Third-Party Owned solar options, such as leases, Power Purchase Agreements (PPAs), and Prepaid Solar.

In this new era, your total return on investment, when your savings kick in, and whether solar is “worth it” depends largely on how you go solar.

Jump Ahead:

• How You Go Solar in 2026 Matters
• Comparing Your Solar Options in 2026
• Economic Snapshot: Utility Hikes vs. Solar Savings
• Final Verdict: Is Solar Worth It in California?
• Common Questions About Solar in California

 

 

The 2026 Shift: How You Go Solar Matters More

For over a decade, buying solar with cash or a loan was the best path to cost savings for Californians in a position to claim the federal tax credit. With new tax credit rules in 2026, it’s worth considering a few strategies to see which one best aligns with your savings goals.

Here’s why:

• So Long, Homeowner Tax Credit: Under the “One Big Beautiful Bill,” the federal tax credit claimed directly by homeowners who purchase solar and/or battery storage ended on January 1, 2026.
• Tapping into the Business Tax Credit: Solar leases, PPAs, and Prepaid Solar fall under the category of Third-Party Owned (TPO) solar, and still qualify for a business-claimed federal tax credit through the end of 2027. In a TPO arrangement, the provider claims the tax credit and passes that value to you in the form of lower monthly payments or a discount to the upfront cost of going solar.

The Result: Buying solar and/or battery in 2026 means paying full price, while TPO options allow you to benefit from a federal tax credit.

 

Comparing Your California Solar Options in 2026

With new tax credit rules, there are three basic options for going solar in California.

Direct Purchase (cash or loan)

Own and control the system from Day 1 with no restrictions on equipment selection. Even without a tax credit to claim, direct ownership can provide substantial long-term energy cost savings in California.

Standard Lease or PPA

Go solar for $0 down and make monthly payments to a third-party owner who monitors and maintains the system. Best described as “switching utilities” to lock in a lower, more predictable cost of electricity.

Related reading: Solar Lease vs. PPA in 2026: Find Your Best Path to Savings

Prepaid Solar

Pay upfront or finance solar for around 70% of the cost to purchase a comparable system. Think of this as a “service-to-ownership” model. A third-party provider owns and maintains the system for the first 5 years, after which you have the option to “buyout” the contract (typically at little to no cost, since the balance is paid upfront). See our guide to Prepaid Solar Leases & PPAs here.

 

Feature	Direct Ownership (Cash/Loan)	Prepaid Solar	Standards Lease/PPA
Federal tax credit	None	Claimed by provider, applied as discount to upfront cost	Claimed by provider, applied as discount to monthly payments
State/Local Incentives	Claimed by homeowner	Claimed by provider, applied as discount to upfront cost	Claimed by provider, applied as discount to monthly payments
Upfront cost	Full price	Typically 70% of direct purchase	Often $0
Monitoring & Maintenance	Homeowner’s responsibility	Provider’s responsibility until homeowner exercises option to take ownership	Provider’s responsibility
Equipment selection	No restrictions	Restricted by tax credit rules	Restricted by tax credit rules
Best for	Total system control and long-term ROI	Greatest long-term ROI	Greatest immediate monthly savings

California Economic Snapshot: Utility Hikes vs. Solar Savings

California remains one of the most expensive states for grid power, with the average bill effectively doubling over the last 10 years and more rate increases expected. Here’s what homeowners are facing in 2026:

• Utility Rate Inflation: Average California rates now sit at 31 to 34 cents per kilowatt-hour (kWh), nearly double the national average.
• The “Worth It” Threshold: Most California households reach “solar parity” (where solar is cheaper than the grid) if their monthly bill exceeds $150.
• Battery Necessity: Under NEM 3.0, exporting solar energy to the grid is less profitable for customers of SCE, PG&E, and SDG&E. To make solar “worth it” in 2026, nearly all systems now include a battery to store your power for use during expensive “Peak” hours (4 PM – 9 PM) when prices can reach over 70 cents per kWh.

2026 Rate Comparison by Major Utility

Utility Provider	Avg. Bundled Residential Rate (per kWh)	2026 Trend
PG&E	43-45 cents	Rising due to undergrounding projects
SCE	33-35 cents	12.9% increase took effect in late 2025
SDG&E	40-42 cents	Series of rate hikes approved through 2027

There’s reason to believe California utility rates will continue rising for the foreseeable future. Page 63 of this 2025 report by the CPUC (the board that approves utility rate hikes) forecasts 6-7% average annual rate increases through 2028 for all three utilities listed above.

 

Final Verdict: Is Solar Worth It in California?

If your average monthly electric bill is over $150, solar is absolutely worth it to lower your electricity costs, protect your home from power outages, and power your home with clean energy. With new tax credit rules in 2026, how you go solar matters more than ever. Start by considering your savings goals.

• If your goal is immediate bill relief, then a standard lease or PPA with $0 upfront cost can be a good fit. Also, consider financing a Prepaid Solar project to spread the cost of solar over consistent monthly payments.
• If you’d rather invest in greater long-term savings, then paying upfront for a direct purchase or Prepaid Solar project is likely a better fit.

Schedule a strategy session with an expert Energy Advisor to see which option is best for your home.

 

 

Common Questions About Solar in California

Did I miss the federal solar tax credit?

Only if you buy the system outright and it wasn’t installed before January 1, 2026. There is still a business-claimed solar tax credit available through the end of 2027 that homeowners can benefit from via Third-Party Owned solar. In a standard PPA or a lease, this tax credit is “baked into” your lower monthly rate. If you choose a Prepaid Solar option, the tax credit is claimed by the provider and applied as a discount to your upfront solar costs.

Is a battery really required in California?

Technically, no, but financially, yes. Under NEM 3.0, utilities pay very little for the excess solar power you send to the grid. Adding a battery improves your solar savings by storing your excess solar power to avoid using grid electricity during expensive “Peak” evening hours.

Does solar work during a PSPS (Public Safety Power Shutoff)?

Only if you have a backup-enabled battery storage system. Solar-only systems shut down during grid outages as a safety measure to protect utility lineworkers. With solar plus backup battery, you can continue producing, storing, and using solar power during PSPS events and other outages.