Solar in California: Still Worth It After NEM 3.0 Changed Everything

California built the modern residential solar industry. For over a decade, generous net metering, high electricity rates, and abundant sunshine made rooftop solar an obvious financial decision for millions of homeowners. Then NEM 3.0 arrived in April 2023 and cut the value of exported solar electricity by roughly 75%.

In 2026, California is still the largest residential solar market in America. But the economics have fundamentally changed. Solar still works here — the electricity rates are simply too high for it not to — but the strategy has shifted from "install panels and export everything" to "install panels and a battery and use everything yourself."

The Good News

The Highest Electricity Rates in the Continental US

This is the single biggest driver of California solar economics. PG&E, SCE, and SDG&E rates are staggering:

• PG&E: $0.35-$0.55/kWh depending on tier and time of use
• SCE (Southern California Edison): $0.30-$0.50/kWh
• SDG&E (San Diego Gas & Electric): $0.35-$0.55/kWh

The national average is $0.16/kWh. California homeowners pay 2-3x that. Every kWh your panels produce and you use directly is worth $0.35-$0.55 in avoided cost. Even after NEM 3.0, this makes the self-consumption math extremely strong.

Excellent Solar Resource

California averages 5.0-6.5 peak sun hours per day depending on region. Southern California and the Central Valley are among the best solar resources in the country. Even the Bay Area, which is cloudier, averages 4.8-5.5 peak sun hours.

SGIP Battery Rebate

The Self-Generation Incentive Program (SGIP) offers rebates for battery storage, especially for low-income households and those in high-fire-risk areas. Rebates can cover 25-85% of battery costs depending on eligibility. This is one of the most generous battery incentive programs in the country and makes the solar-plus-battery economics significantly better.

Property Tax Exclusion

California's Active Solar Energy System Exclusion prevents your property tax from increasing due to a solar installation through 2025-2026. Verify current status, as this exclusion has been extended multiple times. On a California home where property tax adds up fast, this matters.

The Challenges

NEM 3.0 Gutted Export Value

Under NEM 2.0, you got full retail credit for exported electricity — $0.30-$0.50/kWh. Under NEM 3.0, export credits are based on the "avoided cost" to the utility, which varies by time of day and season. In practice:

• Midday exports (when solar peaks): $0.05-$0.08/kWh
• Evening exports (when demand peaks): $0.15-$0.25/kWh

The midday rate is the killer. Your panels produce the most electricity when the export credit is the lowest. Without a battery to shift that production to evening hours, you lose 70-80% of the export value compared to NEM 2.0.

Solar-Only Systems No Longer Make Sense

Before NEM 3.0, you could install panels without a battery and still get great returns. That math no longer works in California. A solar-only system with significant midday exports will see payback periods of 12-15+ years. A solar-plus-battery system that stores midday production and uses it in the evening (when rates and export credits are highest) can cut payback to 7-10 years.

Batteries add $8,000-$14,000 to your system cost, but in California's post-NEM 3.0 world, they are not optional — they are the strategy.

High Installation Costs

California installation costs run $2.80-$3.30 per watt — above the national average. Permitting, labor costs, and regulatory requirements all add up. A typical 8kW system with battery runs $30,000-$40,000.

The California Solar Math (2026)

Typical 8kW solar + 13.5kWh battery (PG&E territory):

• Solar installed cost: $24,000 ($3.00/watt)
• Battery cost: $11,000
• Total system cost: $35,000
• Federal ITC: $0 (expired)
• SGIP rebate (if eligible): $2,000-$8,000
• Net cost: $27,000-$33,000

Annual production: ~12,500 kWh

Average PG&E rate: $0.42/kWh (blended TOU)

Self-consumption with battery: 85-90%

Annual savings calculation:

• Self-consumed: 10,625 kWh x $0.42 = $4,463
• Exported (evening, via battery): 1,250 kWh x $0.20 = $250
• Exported (midday excess): 625 kWh x $0.06 = $38
• Total annual savings: ~$4,750

Payback period: 6-7 years (with SGIP rebate), 7-9 years (without rebate)

25-year savings: $80,000-$120,000

Even after NEM 3.0, even without the federal tax credit, California solar-plus-battery still delivers one of the fastest paybacks in the country. The electricity rates are just that high.

With solar-plus-battery systems running $30,000-$40,000 in California, comparing multiple installer quotes is critical. Price differences of $3,000-$7,000 for the same equipment are common.

When Solar Makes Sense in California

Install if:

• You are a PG&E, SCE, or SDG&E customer paying $0.30+/kWh (that is nearly everyone)
• You can install a battery alongside solar (essential for NEM 3.0 economics)
• You qualify for SGIP battery rebates
• You plan to stay in the home 7+ years
• You are on a time-of-use rate plan (all NEM 3.0 customers are)

Wait or skip if:

• You are in a community choice aggregation with unusually low rates (rare but exists)
• You cannot install a battery due to space or HOA restrictions
• Your roof is heavily shaded or north-facing
• You are planning to move within 3-4 years
• You are a renter

Key Takeaways

• NEM 3.0 cut export values by 75% — midday exports are worth $0.05-$0.08/kWh
• California electricity rates are 2-3x the national average, making self-consumption extremely valuable
• Solar-plus-battery is now the only strategy that delivers strong returns in California
• SGIP battery rebates can cover 25-85% of battery costs for eligible households
• Payback runs 6-9 years for solar-plus-battery — still among the fastest in the country
• 25-year savings of $80,000-$120,000 are realistic given California rate trajectories
• Despite policy setbacks, California remains one of the best states for solar purely because rates are so high

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