The 30% federal homeowner solar tax credit ended after 2025, but one of the main financial pressures that pushed California homeowners toward solar has not disappeared: the cost of buying electricity from the utility.
Residential solar entered 2026 facing a difficult adjustment.
The former homeowner federal tax credit ended, financing conditions changed, trade policy created additional equipment uncertainty, and residential installers entered a much different sales environment.
Wood Mackenzie expects U.S. residential solar installations to decline approximately 21% in 2026 compared with 2025.
But the same industry outlook expects residential solar to begin growing again in 2027, with rising retail electricity rates among the forces supporting that recovery.
California provides a clear example of why.
Even without the former federal homeowner tax credit, Californians still have to compare the cost of a home energy system with some of the highest residential electricity rates in the country.
California Electricity Rates Remain High in 2026
The California Public Advocates Office tracks residential electricity rates for the state's three largest investor-owned utilities: Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric.
Its July 2026 report shows the following average residential rates as of June 2026.
| Utility | June 2026 Average Residential Rate | 5-Year Change | 10-Year Change |
|---|---|---|---|
| SCE | About $0.337/kWh | +39% | +69% |
| PG&E | About $0.344/kWh | +56% | +101% |
| SDG&E | About $0.455/kWh | +42% | +97% |
The ten-year comparison runs from January 2016 through June 2026 and excludes the California Climate Credit.
PG&E's average residential rate more than doubled over that period. SDG&E came close to doubling, while SCE increased by more than two-thirds.
Those long-term changes matter when homeowners compare solar with continuing to purchase nearly all of their electricity from the utility.
NationPro USA covers the causes behind these costs in more detail in why California electricity rates are so high .
Rates Do Not Increase in a Straight Line Every Year
Homeowners should not interpret long-term rate growth as a promise that electricity prices will rise by the same percentage every year.
Utility rates can move both up and down as fuel costs, wildfire expenses, regulatory decisions, infrastructure spending and other costs change.
PG&E provides a good 2026 example.
The utility reduced residential electricity rates at the beginning of 2026, and the Public Advocates Office reported another March 2026 change that left PG&E's average residential rate approximately 3.7% lower than its January 1 level.
SCE and SDG&E also experienced smaller rate reductions during parts of 2026.
Short-term reductions, however, sit inside a much longer period of higher residential electricity costs.
The point is not that utility rates increase every single year. The point is that California homeowners making a 10-, 15- or 20-year energy decision should consider the long-term cost of grid electricity rather than assuming today's rate will stay unchanged.
What Has Been Driving California Electricity Rates?
California electricity bills reflect much more than the wholesale cost of producing power.
The Public Advocates Office identifies several statewide drivers behind rate growth, including:
- wildfire mitigation and wildfire liability costs
- transmission and distribution investment
- costs associated with earlier rooftop solar incentive structures
- utility operating and infrastructure expenses
- approved revenue requirements
Wildfire-related spending has become particularly large.
California utilities have invested heavily in vegetation management, equipment replacement, system hardening, undergrounding, insurance and other measures intended to reduce wildfire risk.
Those costs become part of the revenue utilities seek to recover.
Transmission and distribution systems also require continuing investment as California adds electric vehicles, electric heating, battery systems and other electrical loads.
The Federal Solar Tax Credit Ended, but the Utility Bill Did Not
For years, homeowners evaluating solar could include the federal Residential Clean Energy Credit in their calculation.
The credit covered 30% of eligible residential clean-energy expenditures through the end of 2025.
That changed for 2026.
According to the Internal Revenue Service , the Section 25D Residential Clean Energy Credit is not available for qualifying property installed after December 31, 2025.
Removing a 30% homeowner credit clearly changes the economics of purchasing solar.
But it does not remove the cost on the other side of the comparison.
A homeowner who chooses not to install solar will generally continue buying electricity from the utility.
The Solar Calculation in 2026 Is About Two Costs
Solar should not be evaluated only by asking how much the system costs.
The homeowner is choosing between two long-term energy paths.
Option 1: Continue Purchasing Electricity From the Utility
Under this path, the homeowner continues paying the applicable utility rate for nearly all household electricity.
Future costs will depend on:
- electricity usage
- rate changes
- time-of-use pricing
- new electrical loads
- utility fixed charges
- future regulatory decisions
Option 2: Produce Part of the Home's Electricity
Under this path, the homeowner installs a solar system designed to supply part of the home's electricity.
The homeowner may still buy electricity from the grid, but each kilowatt-hour produced and used directly by the home can reduce the amount that otherwise would need to be purchased from the utility.
That comparison is still relevant whether or not a federal homeowner tax credit exists.
Why Long-Term Rate Assumptions Matter
Solar proposals frequently compare the cost of a home energy system with estimated future utility costs.
Homeowners should understand how those estimates are built.
Compounding makes a major difference.
For example, if a hypothetical $300 monthly electricity cost increased by 6% every year for ten years, the same monthly cost would reach approximately $537.
At an 8% annual increase, it would reach approximately $648.
Those numbers are simple mathematical examples. They are not forecasts that California utility rates will rise by 6% or 8% every year.
Actual rates can increase, decrease or remain relatively flat in individual years.
The useful lesson is that even modest recurring increases can create large differences over a long period.
Do Not Let a Solar Proposal Assume Unrealistic Utility Inflation
Rising utility rates can strengthen the case for solar, but that does not mean every savings projection is reasonable.
If a salesperson shows a 20- or 25-year savings estimate, ask what annual utility-rate increase is being assumed.
Then ask how the result changes if that assumption is lower.
A good comparison should make the assumptions visible.
Homeowners should know:
- the current utility rate used in the analysis
- the assumed annual utility increase
- the home's current electricity usage
- the solar system's projected annual production
- any solar production degradation assumption
- how battery operation is modeled
- how much electricity is still expected to come from the grid
California's Current Solar Billing Rules Make Self-Consumption More Important
Electricity rates are only one part of the modern California solar calculation.
New PG&E, SCE and SDG&E solar customers generally take service under California's Net Billing Tariff, which utilities call the Solar Billing Plan.
Under the Net Billing Tariff, solar electricity used immediately by the home can offset electricity that otherwise would have been purchased from the utility.
Excess solar electricity exported to the grid receives a credit based on its value to the electric system.
The California Public Utilities Commission states that these export credits are usually lower than retail electricity rates, although they can be higher during certain late-summer evening periods.
This means a modern California solar design should pay close attention to when electricity is produced and when the household uses it.
Battery Storage Changes the Rate Equation
This is where battery storage becomes especially relevant.
Solar panels normally produce the most electricity during daylight hours.
Many homes continue using substantial electricity in the evening, when solar production falls.
A battery can store part of the daytime solar production and make that energy available later.
Depending on the utility rate plan, battery settings and system design, storage may help homeowners:
- use more solar electricity inside the home
- reduce grid purchases during selected peak periods
- store midday solar for evening use
- shift exports into higher-credit periods where appropriate
- provide backup electricity when configured for outage support
The CPUC reports that nearly 70% of customers under the newer Net Billing Tariff had paired batteries with their solar systems by the end of 2024.
NationPro USA covers this shift in home battery storage and solar energy .
Solar Is Becoming More About Energy-Cost Management
The homeowner solar conversation has changed.
A few years ago, the discussion often centered heavily on the federal tax credit.
In California today, homeowners need to pay more attention to:
- the cost of electricity from the utility
- how quickly the household uses electricity
- time-of-use rates
- solar production
- battery storage
- system cost
- financing
- expected length of homeownership
The goal is not simply to install as many panels as possible.
The goal is to design a home energy system that can reduce expensive grid purchases in a way that makes financial sense for that household.
PG&E's One-Million-Solar Milestone Shows How Established Rooftop Solar Has Become
California's solar market is not starting from zero.
In 2026, PG&E reported that it had interconnected more than one million customer solar systems.
That does not mean solar is automatically right for every PG&E customer.
It does show that rooftop solar has become a common part of California's residential energy system.
NationPro USA discusses that milestone in what PG&E's one-million-solar milestone means for homeowners .
National Solar Demand Is Going Through a Reset
It is also important not to overstate the current solar market.
Residential solar is not expected to grow nationally in 2026.
Wood Mackenzie projects approximately a 21% decline in residential solar installations for the full year.
The market is adjusting to the end of the Section 25D homeowner credit, financing changes, installer failures and other business pressures.
At the same time, Wood Mackenzie expects residential installations to return to growth beginning in 2027.
Rising retail electricity prices are one of the reasons the firm still sees a longer-term market for residential solar.
That distinction matters.
2026 can be a difficult year for the solar industry while high electricity costs can still make solar worth evaluating for individual California homes.
Higher Rates Do Not Automatically Make Every Solar Proposal a Good Deal
Expensive utility electricity strengthens the reason to compare alternatives, but it does not make every solar contract attractive.
Homeowners should still review the fundamentals.
System Price
Compare the cash price and, if financing is used, the total financed price.
Expected Production
Review how many kilowatt-hours the system is expected to generate each year, not just how many panels are being installed.
Battery Configuration
Understand what the battery is intended to do and whether its capacity fits the household's usage pattern.
Financing
Compare APR, loan term, dealer fees, total payments and any payment escalation.
Roof Condition
A solar installation should account for whether the roof is likely to need replacement during the system's life.
Utility Rate Plan
The analysis should be based on the homeowner's actual utility and rate schedule rather than a generic California electricity price.
NationPro USA's guide to things to know before going solar covers additional items to review before signing a solar agreement.
The Cost of Doing Nothing Belongs in the Comparison
The end of the federal homeowner tax credit makes solar more expensive than it otherwise would have been.
That should be acknowledged directly.
But a homeowner still needs electricity.
Doing nothing does not remove the energy expense. It normally means continuing to purchase electricity from the utility.
The real comparison should therefore look at:
- current annual utility spending
- reasonable future-rate scenarios
- expected solar production
- expected battery use
- remaining grid purchases
- solar system cost
- financing costs
- maintenance and equipment assumptions
- how long the homeowner expects to remain in the property
What California Homeowners Should Take Away From the 2026 Rate Data
California's 2026 electricity data tells two stories at the same time.
First, rates can move down in individual periods. PG&E, SCE and SDG&E have all experienced rate reductions during parts of 2026.
Second, the longer-term cost trend remains difficult to ignore.
From January 2016 through June 2026, average residential rates increased approximately:
- 69% for SCE
- 101% for PG&E
- 97% for SDG&E
That history does not guarantee another decade of similar increases.
It does give homeowners a reason to include future utility costs when deciding whether home-generated electricity is worth considering.
Solar Is Moving From an Incentive Decision to an Energy-Cost Decision
The 30% federal homeowner tax credit made the solar calculation easier.
In 2026, the calculation requires more work.
Homeowners need to compare system pricing, electricity production, storage, financing and utility costs without assuming the former federal incentive will reduce the purchase price.
For California households, high electricity prices remain one of the strongest reasons to run that comparison.
The question is no longer only:
“What incentive can I receive for going solar?”
It is also:
“What could continuing to buy electricity from the utility cost me over the years I expect to own this home?”
That is the comparison California homeowners should focus on in the post-tax-credit market.
California Electricity Rates and Solar FAQs
How much are California residential electricity rates in 2026?
The California Public Advocates Office reported June 2026 average residential rates of approximately 33.7 cents per kWh for Southern California Edison, 34.4 cents per kWh for PG&E and 45.5 cents per kWh for SDG&E. Actual customer rates depend on rate plan, usage, location and other factors.
How much have PG&E electricity rates increased over the last decade?
The Public Advocates Office reports that PG&E's average residential rate increased approximately 101% from January 2016 through June 2026. That historical increase does not mean rates will rise at the same pace over the next decade.
Did PG&E lower electricity rates in 2026?
Yes. PG&E had rate reductions during 2026. The Public Advocates Office reported that its March 1 residential average rate was approximately 3.7% lower than the rate in effect on January 1, 2026. Short-term decreases can occur even within a longer period of rising electricity costs.
Is the 30% federal homeowner solar tax credit available in 2026?
No. The federal Residential Clean Energy Credit under Section 25D is not available for qualifying residential clean-energy expenditures after December 31, 2025.
Is solar still worth considering in California without the tax credit?
It can be for some homeowners. The answer depends on the current utility bill, rate plan, system price, solar production, battery configuration, financing and expected length of homeownership. The former tax credit should not be included in a 2026 homeowner-owned solar calculation.
Why does battery storage matter for California solar?
California's Net Billing Tariff generally credits exported electricity below retail import rates. Battery storage can allow a homeowner to store daytime solar production and use it later, which may reduce grid purchases during selected higher-cost periods.
Will California electricity rates definitely keep increasing?
No. Utility rates can increase or decrease in individual periods based on many factors. Historical rate growth and current utility cost pressures can be used when comparing scenarios, but future electricity prices cannot be guaranteed.
What should I compare before going solar in California?
Compare your current electricity usage, utility rate plan, system price, projected solar production, battery needs, financing terms, remaining utility purchases, roof condition and expected length of homeownership.
See What Rising Electricity Costs Could Mean for Your Home
NationPro USA can compare your current utility usage, rate plan, roof, solar production potential and battery options so you can see whether reducing grid purchases makes financial sense for your home.
Get My Free Solar Savings Estimate