Statewide solar incentives in California

The federal solar investment tax credit (ITC) is a huge factor in reducing your costs to go solar in California. If you install a residential solar panel system by the end of 2032, you can deduct 30% of the system's total cost — including equipment, labor and permits — from your federal taxes. For example, on a $20,000 system, you can get a $6,000 credit when you file your taxes.

The ITC drops to 26% in 2033 and 22% in 2034.

The solar tax credit is not a rebate or refund. A tax credit lets you subtract a specific amount of money from the amount of taxes you owe. You must claim it when you file federal taxes in the year that your solar panel system becomes operational. To do this, you have to complete Form 5695.

Am I eligible for the federal residential solar energy credit?

The federal solar investment tax credit is exclusively available to taxpayers who purchase and install solar panels at their homes. This distinction is vital — not everyone qualifies.

Trent, a solar customer in Rancho Mirage, told us about his experience: “We are Canadian residents, so we don't have access to the tax credits available with a purchase, so we went with the lease option.”

Be sure you’re eligible for all rebates or credits you plan to use to offset the cost of your system so you can make the most informed decision when choosing whether to buy or lease your system.

» SOLAR PANELS: Lease vs. buy

Top residential solar incentives in California

In addition to the federal tax credit, residents can take advantage of sales and property tax exemptions when they install solar panels.

• Property tax exclusion: California’s Active Solar Energy System Exclusion prevents the value of a qualifying solar energy system from being added to the property's assessment, meaning installing such a system won't increase property taxes. The exclusion should be automatic if you add solar panels to an existing structure.

  However, if your panels were installed when your home was built, you may have to submit a claim form to the California State Board of Equalization.

• CPUC rebate: California Public Utilities Commission’s Self-Generation Incentive Program (SGIP) offers rebates for installing energy storage technologies at homes, apartments, critical facilities and more.

  The program aims to provide power during outages, especially in high fire-threat areas and communities affected by public safety power shut-off events. Rebates vary from $850 per kilowatt-hour to $1,000 per kilowatt-hour. Apply for SGIP through this application database.

• No-cost rooftop solar installations: The Disadvantaged Communities - Single-family Solar Homes (DAC-SASH) program, run by GRID Alternatives, offers no-cost rooftop solar installations for income-qualified homeowners in disadvantaged communities. Find out if you live in an eligible community using this map from the California Environmental Protection Agency.

Property-Assessed Clean Energy (PACE) financing

In California, property-assessed clean energy (PACE) financing lets you borrow money to pay for solar panels and then pay it back through your property taxes. It’s a way to make energy improvements without a large upfront cost, but it makes your tax bill go up until the loan is paid off. PACE loans can also have higher interest rates than other financing options, which increases the total cost of the project.

California’s Active Solar Energy System Exclusion is scheduled to sunset on Jan. 1, 2025.

According to the California Statewide Communities Development Authority, the only residential Open PACE providers are CaliforniaFirst, FortiFi and Home Run Financing.

Local solar rebates and incentives

There are several local utility rebates available through individual California municipalities. Depending on your location, these rebates may be available through GoSolarSF, PG&E, Rancho Mirage Energy Authority and others.

• Los Angeles Department of Water and Power Feed-in Tariff program
• Pacific Power energy rebates
• PG&E renewable energy programs 
• Rancho Mirage Energy Authority rebate program
• Riverside Public Utilities solar information
• San Diego Gas & Electric solar options
• San Diego County Green Building Program
• Sonoma County Energy Independence Program (SCEIP)
• Southern California Edison residential solar programs
• Western Riverside Council of Governments HERO Program

What to know about net metering in California

Net metering compensates people with rooftop solar systems for excess electricity they feed back into the grid. California residents used to get full retail rate credits under Net Energy Metering (NEM) 2.0 terms. Now, with NEM 3.0, they get lower wholesale rates. NEM 2.0 rates are less than full retail rates by around 2 cents per kilowatt-hour (kWh) due to a nonbypassable charge. This reduces the compensation rates for new solar customers in California by about 75%.

NEM 3.0 (sometimes called “Net Billing Tariff”) only affects investor-owned utilities, like PG&E and Southern California Edison. For example, Burbank Water and Power customers are still eligible for BWP’s old net metering policy. It also doesn’t affect people who installed solar panels before April 15, 2023.

“We’ve probably been a little too successful in solar incentives,” Robert Flores, a solar expert at the University of California, Irvine, said. For those without rooftop solar panels, “the average utility bill is about 10% higher than it would have been because of people across the state participating in net metering programs.”

NEM 3.0 went into effect on April 15, 2023.

This is really unique to the Golden State: “In the middle of the day, we have a lot of solar on the grid, so the utility can buy electricity for 3 cents per kWh,” Flores said. “But, they are mandated to buy excess solar from their utility customers through net metering. You’re selling it back at 10, 15, 20 cents per kWh.”

Since NEM 3.0 is now more closely tied to wholesale electricity rates, there are times when the value of exported electricity exceeds $1 per kWh. This occurs in the early evening hours, when there is less sunlight but everyone is getting home and using a lot of electricity, according to Flores.

NEM 3.0 applies to homeowners who install new solar panels on April 15, 2023, or later. Under the new policy, electricity rates have higher charges in the evening, when solar isn't generating power, making solar less valuable for offsetting utility bills. Batteries that store solar energy to use at night will get higher compensation.

So, what does NEM 3.0 mean for homeowners buying solar panels? A slightly longer payback period and fewer monthly savings for buying solar panels. With fewer bill offsets, there’s less incentive to sell excess energy to the grid. Adding battery storage provides more savings compared with solar panels alone.

Going solar in California is still economically favorable, thanks to rising utility rates and cheaper solar panel prices. It’s just that, moving forward, residents will make less from any power they send back to the grid.

» MORE: Are solar panels worth it?

Find solar companies in California

There are hundreds of solar companies in California. Read our guide to the best solar companies for tips on how to pick the right one for you.

Bottom line: How much are solar panels in California?

The average cost to install solar panels in California before factoring in the federal solar investment tax credit (ITC) is $16,380. The price drops to $11,466 after the ITC.

The ConsumerAffairs Research Team conducted an in-depth analysis to determine how much it costs to go solar in California and the average solar costs in other states.

Solar costs: California vs. nearby states