Last updated: April 2025
Written by
Ben Zientara
California has many different solar incentives to reduce the cost of going solar and even help save money when you add a solar backup battery to your home.
As of April 2025:
California solar incentives can reduce the cost of the average solar panel installation by an estimated $6,780.
A solar installation with an average-sized backup battery can earn an additional $6,700 (or more) in tax credits and rebates.
California’s solar incentives can reduce solar panel payback time to 8 years or less because of the extremely high cost of electricity from the state’s biggest utility companies.
The average cost of a home solar installation in California is around $22,600 before incentives, making it $15,820 after the federal tax credit.
The cost to add an average home solar battery is $15,600 before incentives, and about $8,895 after the tax credit and the California battery rebates.
A solar battery is necessary to get the most value from a solar installation in California.
Considering all the solar incentives available, the payback period of the average solar+battery installation in California is about 8 years.
California no longer offers statewide solar rebates or other large incentives for homeowners who want to choose clean energy, but there are still several solar programs available that can help Californians take control of their energy bills.
Incentive | Estimated average savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $6,780 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal i |
Property tax exclusion | Less than $50 per year | All homeowners with solar panels | The value added by a new solar installation is excluded from property tax reassessment |
Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) | All or nearly all costs covered | Residential customers of PG&E, SCE, or SDG&E who live in the top 25% most disadvantaged communities statewide | Helps low-income homeowners in certain disadvantaged communities get solar panels installed for low or no cost |
Self-Generation Incentive Program (SGIP) | $2,025 | Customers of PG&E, SCE, SDG&E, and SoCalGas, and certain people living in high fire threat districts, Indian Country, or low-income housing | Incentives for installing battery storage of between $150 and $1,000 per kWh, based on qualifying factors |
Demand Side Grid Support (DSGS) Program | $350 per year | Tesla Powerwall owners | Powerwall owners who agree to let their batteries be remotely controlled during certain times of the year can earn payments |
Quick Facts
Value: 30% of solar installation costs
Frequency: One-time tax credit, can be rolled over to future tax years
How to apply: File IRS Form 5695 with annual tax return
There is no specific California solar tax credit, but the federal government offers a solar tax credit to all U.S. residents who own a home on which they install solar panels. The credit equals 30% of the cost to install solar, but can only be claimed by homeowners with the tax liability to claim the credit.
The average solar panel system in California will earn a tax credit of about $5,400. But, the value of the solar tax credit can depend largely on system size, which you can see in the following table:
System size | Estimated cost | Tax credit |
|---|---|---|
4 kW | $15,360 | $4,608 |
6 kW | $19,920 | $5,976 |
7.2 kW (CA average) | $22,608 | $6,782 |
10 kW | $29,000 | $8,700 |
Taxpayers can claim the credit in the year after their solar installation is complete. The credit applies to all costs of installing solar panels or home battery storage, except for costs associated with structural improvements to roofing materials that are not associated with generating energy.
Note: Lending companies often require paying the value of the solar tax credit toward a solar loan by 18 months to keep monthly payments low.
Quick Facts
Value: 0.75% of home value added by solar panels
Frequency: One-time, ongoing
How to apply: Automatic
The California Active Solar Energy System Exclusion prevents an automatic re-assessment of a property when the owner pays to install a solar energy system. Normally, the addition of a valuable asset, like solar panels, to a property triggers such a re-assessment.
The average market value added to a home by solar panels is estimated at around 6.8%, and the California state property tax rate is 0.75% per dollar of assessed value per year. However, it is difficult to determine the total value of the solar property tax exclusion because the assessed value of a home differs from the market value and is unique to each home.
Note that this is not a property tax exemption; instead, it temporarily excludes the value added by solar panels from assessment.
The Property Tax Exclusion applies only to the home's original owner when the solar panels were installed. A change in homeownership can result in a reassessment of the value. Talk with a tax professional for more information.
Quick Facts
Value: Covers most or all costs associated with a solar installation
Frequency: Up-front
How to apply: Qualify through GRID Alternatives
The DAC-SASH program is a low-income solar incentive program available to people who own and occupy homes in disadvantaged communities served by the state’s largest electric utility companies: PG&E, SCE, and SDG&E.
The program provides incentive payments that can be combined with other local incentives to mostly or fully cover the cost of rooftop solar panels for these residents. The non-profit GRID Alternatives administers the DAC-SASH program, which conducts workforce development, policy advocacy, and solar job skills training, and performs installations under the DAC-SASH program.
Quick Facts
Average CA electric rate: $0.29 per kWh
Net metering availability: Limited to LADWP territory
Solar buyback rate: Varies by utility
If you’ve been following the solar news in California lately, you know that net metering in most parts of the state is a whole mess.
Just a couple of years ago, California offered its Net Energy Metering (NEM) 2.0 program, under which homeowners earned nearly full credit for any excess energy their solar panels generated and sent to the grid during the day. Eligibility for NEM 2.0 ended on April 15th, 2023.
The state’s major utilities, Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E), now offer Net Billing, or NEM 3.0. Under NEM 3.0, the solar buyback rate averages about a quarter of the retail rate and changes during every hour of the day. It also has different values for weekdays and weekends and a new set of values for each month of the year. This makes it nearly impossible to calculate the savings from a solar installation accurately.
The one bright spot in all this is that you can still save the full retail rate of electricity by getting a home solar battery and self-consuming all the electricity your solar panels generate.
Read our full article on NEM 3.0 for more information.
If you are not serviced by one of California's “big three” utility companies, you might have access to a different set of solar buyback rules.
LADWP customers who get solar panels in Los Angeles can still get full retail-rate net metering, meaning they get the best solar savings possible.
Sacramento residents can sign up for SMUD’s Solar and Storage rate. Although exported solar energy is not credited, it is still a better deal than NEM 3 for solar customers.
Finally, a patchwork of co-ops and municipal utilities in outlying areas of eastern California have their own rules. Some of them are very hostile to grid-tied solar installations, so it might be a better idea to have a separate off-grid solar system to take care of some of your electricity needs in these areas.
There is one major solar battery incentive in California, the Self Generation Incentive Program (SGIP), which provides rebates to people who install home batteries. There is also a smaller program called the Demand Side Grid Support (DSGS) Program, which provides payments to homeowners with Tesla Powerwall batteries based on the energy drawn from those batteries during certain times of very high demand on the energy grid.
The SGIP rebate program offers a $150 discount per kWh of energy storage for customers of the three big utility companies that install small residential solar batteries.
Additional incentives are available to people who qualify under the “Equity” and “Equity Resiliency” requirements. The first group comprises people with lower incomes living in economically disadvantaged communities, and the second group comprises low-income households in high-risk fire areas.
The SGIP program is designed and authorized by the California Public Utilities Commission (CPUC). You can check the program's current status to see the current incentive amounts and total incentives available.
2025 update: The California Public Utilities Commission has passed a new resolution with $280 million in new funding for the Residential Solar and Storage Equity program. California households without existing home solar installations who make less than 80% of the Area Median Income or who qualify for existing low-income electricity programs may be able to use these funds to cover most or all of the cost of a new solar and storage installation. We will update this page when the program is fully implemented.
The DSGS program is a newer way to compensate battery owners for allowing their batteries to be partially discharged during certain hours of peak demand on the electricity grid. DSGS is a Virtual Power Plant program, meaning all the batteries are “aggregated” to act like a backup power plant.
Homeowners in PG&E, SCE, and SDG&E territories with batteries installed by participating companies like Sunrun, Sunnova, and Tesla can sign up to participate in the DSGS program and earn payments of up to $350 per year.
In exchange for the payments, battery owners agree to let software take remote control of their battery for a few days per year. During these events, the batteries power the homes where they’re installed, reducing grid demand.
Several cities and municipal electric companies offer solar incentives in California. Here is a listing of the incentives available from these entities:
City or utility | Program name | About | Website |
|---|---|---|---|
Alameda Municipal Power | Income Qualified Solar | Offers a $500 rebate for customers with household income under $106,000 who install solar panels. | |
Lancaster Energy | Power Choice | Allows residents to get Tesla solar and Powerwall installations at no upfront cost, but they must purchase the energy generated by the system over time. | |
LADWP (Los Angeles) | Solar Rooftops | Homeowners can “rent” their rooftop to LADWP and allow the utility to install solar panels on it in exchange for a monthly bill credit or annual check. | |
Sacramento (SMUD) | Battery storage incentives | Homeowners enrolled in the SMUD Solar and Storage Rate can earn up-front and ongoing incentives for Tesla Powerwall batteries, if they agree to let SMUD “optimize” their battery year-round. | |
San Diego | Green Building Incentive Program | Reduces fees for plan checks and building permits by 7.5% for projects that comply with certain resource conservation methods. | |
Silicon Valley Power Low Income | Income-qualified solar grant | Silicon Valley Power will pay the entire cost for a solar installation, up to $3.75 per watt, for up to 3 kilowatts, for customers enrolled in its Financial Rate Assistance Program. |
Community solar offers the benefits of solar power to people who can’t get solar panels installed on their roofs. Instead, the operators of large solar installations offer subscriptions to energy customers in a utility’s service territory, allowing these customers to claim the credit for the energy generated by their portion of the whole installation on their utility bills.
In California, Community solar has been stymied again and again by the CPUC, which has ruled in favor of utility proposals to limit the value of export credits, thereby limiting the financial benefits of community solar.
Most recently, the commission has pushed final implementation of a new community solar program until January 1st, 2026, pending federal grant funding for a Solar For All program. The Trump administration’s attempts to limit the disbursement of federal funds leave the program’s future uncertain.
A special kind of loan arrangement called PACE financing (Property Assessed Clean Energy) offers California homeowners a unique way to pay for residential solar panel installations and other energy-efficient upgrades.
PACE financing is a loan that is repaid through property tax assessments, meaning it is tied to the home, and not the individual borrower. The idea is that the cost of the additional property tax bill payments will be equal or less than the savings generated by the solar system on the home.
It’s often easier to qualify for a PACE loan than a traditional solar loan, and payments can be extended over terms from 10 to 20 years.
In general, we suggest choosing a traditional solar loan over PACE financing, but we recommend that interested homeowners discuss the issue with a trusted financial advisor before making any solar-related financing decisions.
The average cost of solar panels in California is $22,608 before incentives for a 7.2-kilowatt solar installation at $3.14 per watt of solar installed. After the federal solar tax credit, the average cost drops to $15,826
Average pre-incentive cost: $22,608
Federal tax credit: $22,608 x 30% = $6,782
Effective system cost: $22,608 - $6,782 = $12,600
A Tesla Powerwall 3 costs about $15,600 on average, bringing the total solar plus storage system cost to about $38,208 before incentives. This system is eligible for both the federal tax credit and the SGIP incentive, bringing the cost down to $25,328.
Average pre-incentive cost: $38,208
SGIP rebate: $150 x 13.5 kWh = $2,025
Net system cost after SGIP rebate: $38,208 - $2,025 = $36,183
Federal tax credit: $36,183 x 30% = $10,855
Effective system cost: $38,208 - $12,880 = $25,328
How do solar incentives and rebates work together? When calculating the value of solar incentives, you must first subtract the value of any rebates that reduce the upfront cost of the solar power system. The remaining balance is used to calculate any solar tax credits.
Quick Facts
Cost of grid power: $0.32/kWh - 2nd highest in the nation
Rate of increase in cost of grid power: 4.1% per year - 3rd highest in the nation
Median CA solar payback time: 8 years with battery, 10 years without
Ever since the passage of NEM 3, the question of whether solar is worth it in California has become very difficult to answer. Now that homeowners cannot earn large credits for selling solar energy back into the grid during the day, it has become much more common to add batteries to a home solar installation and self-consume as much solar energy as possible.
But batteries are expensive. As you can read above, adding a Tesla Powerwall nearly doubles the cost of a solar installation. Can this really be economical?
Yes, in fact, it can.
California has the seond-highest average electricity cost in the nation and the third-highest rate of increase in those costs. It’s pretty clear that electricity rates aren’t going down anytime soon.
In addition, when you sign up for California Net Billing, you have to go on a time-of-use rate plan. This means the cost of electricity from the grid changes based on the time of day, with the highest charges in the late afternoon and evening. If you can combine solar and battery storage to eliminate your grid usage during those times, you can save some serious money.
If you’re ready to get started on your solar journey, the next step is finding the best solar companies in your area and comparing multiple quotes for solar panels.
Ben Zientara is a writer, researcher, and solar policy analyst who has written about the residential solar industry, the electric grid, and state utility policy since 2013.
His early work included leading the team that produced the annual State Solar Power Rankings Report for the Solar Power Rocks website from 2015 to 2020. The rankings w...
Learn more about Ben Zientara