A lot has happened since we last wrote about solar policy in early 2021. In short: the rules changed significantly. Understanding what changed — and what it means for you — is essential to making a good decision about solar in 2026.
The Federal Tax Credit: The Homeowner ITC Is Gone (For Now)
For nearly two decades, homeowners who purchased a solar system outright — with cash or a loan — received a federal tax credit worth 30% of the system cost. That credit, known as the Section 25D Residential Clean Energy Credit, expired on December 31, 2025 thanks to the Big Anything-but-Beautiful Bill.
If you own your system, there is currently no federal tax credit available in 2026. We won't sugarcoat it: this is a meaningful change.
However, there is an important nuance. Homeowners can capture part of the crediting, generally a 17-20% discount, through a prepaid lease. In this scenario, a commercial financing entity claims the tax credit and passes a portion of the benefit to homeowners who go solar.
PG&E Net Metering: NEM 3.0 / Net Billing Tariff
Back in 2021, we wrote about the coming deliberations over NEM 3.0. Those deliberations concluded, and the California Public Utilities Commission (CPUC) implemented the Net Billing Tariff (NBT) for new solar customers starting in April 2023.
Here is what changed, and it is significant:
Under NEM 2.0, when your solar panels generated more electricity than your home used, PG&E credited you at the full retail rate — the same price they charge you to buy electricity, roughly 35-40 cents per kilowatt-hour.
Under the Net Billing Tariff, excess solar energy you send to the grid is credited at what the CPUC calls an "Avoided Cost Calculator" rate — essentially wholesale market value. In practice, this works out to roughly 5–8 cents per kilowatt-hour, depending on the time of day. That is a reduction of roughly 75–80% in what PG&E pays you for excess solar generation.
The practical implication: Solar-only systems that were sized to overproduce and "bank" credits for winter are now far less economically attractive. Enter energy storage (batteries).
The Good News: Batteries Change the Math
This is the most important thing we can share. Under the Net Billing Tariff, the economics of solar improve dramatically when you add a battery. Instead of exporting your excess solar energy to the grid at 5–8 cents, you store it in a battery (think of it as a reservoir) and use it at night or during peak hours — avoiding the retail rate you'd otherwise pay PG&E, which is now well above 40 cents per kilowatt-hour for most homeowners.
In concrete terms: a solar + battery system today has a shorter payback period and a higher long-term return than a solar-only system under NEM 3.0 rules.
What This Means If You Already Have Solar
Nothing changes for you. If you went solar before April 2023, you are grandfathered into NEM 1.0 or NEM 2.0 for the duration of your 20-year enrollment period. PG&E cannot retroactively change your compensation rate. Your system economics remain intact.
Our Take
Solar still makes sense in Northern California, particularly given PG&E's residential rates have increased roughly 80–100% over the past decade and show no sign of slowing. The breakeven analysis has changed, and the right-sized and configured system looks different than it did three years ago. But the fundamental case — lock in your cost of electricity, reduce your carbon footprint, hedge against a utility that has shown us it cannot be trusted to stay affordable — remains as compelling as it ever was.
We are happy to run the numbers for your specific home, usage patterns, and financial situation. Feel free to contact us today to arrange a no-cost assessment.
