California Solar Panels 2025: Navigating NEM 3.0 and Still Saving
Let's be honest. NEM 3.0 made solar more complicated in California. When the new rules took effect in April 2023, solar export rates dropped about 75%. Installers warned of doom. Installations briefly plummeted.
Two years later, the picture is clearer. Solar still makes sense in California. The math changed. The strategy changed. But with electricity hitting $0.45-$0.55 per kWh in PG&E territory (and still climbing), the fundamentals remain strong.
You just need a different approach.
The Post-NEM 3.0 Reality
What Changed
Under the old NEM 2.0 rules, California utilities credited solar exports at full retail rates. Send a kWh to the grid at 2 PM, get full credit to use at 8 PM. Simple math.
NEM 3.0 changed that. Export values now vary by time of day and average around $0.05-$0.08 per kWh. That's 75-85% less than retail rates.
In practical terms: a system that would have saved $2,400 annually under NEM 2.0 might save $1,600 under NEM 3.0 without storage. The payback period stretched from 6 years to 9-10 years.
Why Solar Still Works
Here's what the doom predictions missed: California electricity rates kept climbing. PG&E raised rates five times in 2024 alone. The current average is $0.45/kWh, with peak rates exceeding $0.50/kWh.
At those rates, every kWh you use directly from your panels saves you real money. Export values matter less when self-consumption saves so much.
Plus, the 30% federal tax credit still applies. And batteries, which are now essential for optimal savings, also qualify for the credit.
California Solar Costs 2025
| System Size | Before Incentives | After 30% ITC |
|---|---|---|
| 5 kW | $15,750 | $11,025 |
| 7 kW | $22,050 | $15,435 |
| 9 kW | $28,350 | $19,845 |
| 11 kW | $34,650 | $24,255 |
California averages $3.15 per watt, higher than the national average. Blame permitting complexity, high labor costs, fire-safety requirements, and stringent panel specifications. The state mandates rapid shutdown systems and other safety features that add cost.
Adding Battery Storage
For NEM 3.0, batteries aren't optional. They're practically required for good economics.
| Battery | Capacity | Installed Cost | After 30% ITC |
|---|---|---|---|
| Tesla Powerwall 3 | 13.5 kWh | $12,500 | $8,750 |
| Enphase IQ 10T | 10.5 kWh | $10,800 | $7,560 |
| Franklin WholePower | 13.6 kWh | $11,500 | $8,050 |
A typical solar-plus-storage system for a California home runs $30,000-$40,000 before incentives. After the federal credit, you're looking at $21,000-$28,000.
That's real money. But at California electricity rates, the payback still works.
Why Batteries Are Now Mandatory
Self-Consumption Strategy
The NEM 3.0 playbook is simple: use your solar power when you make it instead of exporting it.
Batteries make this possible. Your panels generate most power midday when you're at work. Without storage, that power goes to the grid at $0.06/kWh. With storage, you save it for evening when you're home and rates are $0.50+/kWh.
A 13 kWh battery stores enough to cover evening peak usage for most households.
Time-of-Use Rate Arbitrage
California's mandatory TOU rates charge more during peak hours (4-9 PM) and less during off-peak. Solar panels produce most during off-peak afternoon hours.
With a battery, you store cheap afternoon production and use it during expensive peak hours. The spread between $0.35 (off-peak) and $0.55 (peak) is $0.20 per kWh. Multiply by your evening usage, multiply by 365 days, and the savings add up.
Backup During PSPS Events
California's Public Safety Power Shutoffs have become routine. When fire risk peaks, utilities cut power to prevent ignition. Some areas lose power multiple times per season.
Solar alone doesn't help during PSPS. Grid-tied systems shut down for safety. But solar-plus-battery keeps your home running during shutoffs.
This isn't hypothetical. Homes in fire-prone areas have gone 2-3 days on battery backup while neighbors sat in the dark.
California Incentives Still Available
Federal Investment Tax Credit
30% of your total system cost, including batteries. On a $35,000 solar-plus-storage system, that's $10,500 back on your federal taxes.
Expires December 31, 2025 for residential installations.
SGIP (Self-Generation Incentive Program)
California's SGIP provides battery rebates, with larger amounts for homes in high-fire-risk areas or on medical baseline rates.
Current incentives:
- General market: $150-$200 per kWh of storage
- Equity (low-income): $850+ per kWh
- Equity Resiliency (fire/PSPS zones + low-income): $1,000+ per kWh
For a 13.5 kWh battery, that's $2,000-$13,500 depending on your eligibility category. Check SGIP.energy for current funding levels, as money gets allocated in blocks.
Low-Income Programs
DAC-SASH: Free solar for single-family homes in disadvantaged communities.
SOMAH: Free solar for multifamily affordable housing.
SASH: Low-income single-family program with income requirements.
These programs have waitlists but provide fully-funded installations for qualifying households.
Property Tax Exclusion
California excludes active solar systems from property tax assessment through 2026. Your home value increases, but your property taxes don't rise to reflect the solar addition.
California Solar by Utility
PG&E (Northern/Central California)
Highest rates in the state. Peak TOU rates exceed $0.55/kWh in many rate plans. That makes self-consumption extremely valuable.
PG&E territory also has the most PSPS events. Battery backup is almost a necessity in foothill and mountain areas.
Interconnection timelines run 3-8 weeks. Permitting varies by jurisdiction—some Bay Area cities are notoriously slow.
SCE (Southern California Edison)
Similar rate structure to PG&E with slightly lower peaks. TOU rates still make batteries valuable.
SCE territory has less PSPS exposure than PG&E but still experiences shutoffs in fire-prone areas.
SDG&E (San Diego)
Historically the most expensive California utility. Rates have been astronomical for years. Solar payback was always fast here.
SDG&E was first to implement NEM-like changes, so the solar industry had some warning. Battery attachment rates in SDG&E territory are among the highest in the nation.
Making the Math Work in 2025
Right-Size Your System
Under NEM 2.0, oversizing made sense. Extra production earned full credits. Under NEM 3.0, oversizing just exports power at low rates.
Size your solar to match your actual consumption, plus enough to charge your battery. A home using 700 kWh monthly might only need a 6-7 kW system with storage, not the 10 kW they would have installed under NEM 2.0.
Add Adequate Battery Storage
Minimum 10 kWh for meaningful benefit. 13-15 kWh covers most households. Two batteries (26-30 kWh) provide extended backup and maximum self-consumption.
The cost is significant, but the 30% federal credit plus SGIP incentives bring it down substantially.
Optimize for TOU Rates
Program your battery to charge during afternoon solar production and discharge during evening peak hours. Most modern batteries do this automatically, but verify with your installer.
Consider an EV
If you're thinking about an electric vehicle, factor it into your solar system. An EV adds 3,000-5,000 kWh to annual consumption. Rather than exporting that solar production at $0.06/kWh, charge your car with it.
Driving on solar-generated electricity costs about $0.03 per mile. That's cheaper than any gasoline price in history.
California Installation Timeline
California takes longer than most states due to permitting complexity:
- Contract to permit submission: 1-2 weeks
- Permit review: 3-8 weeks (varies widely by city)
- Installation: 1-2 days
- Inspection: 1-2 weeks
- Utility interconnection: 2-4 weeks
Total: 8-16 weeks. Some jurisdictions are faster, some slower. Los Angeles and San Francisco are notoriously slow. Suburbs often move faster.
For the 2025 federal tax credit deadline, start by early September at the latest.
The Bottom Line for California
NEM 3.0 changed the California solar equation, but it didn't break it. At current electricity rates ($0.45-$0.55/kWh and climbing), solar-plus-storage still provides excellent returns.
The investment is larger than it was. A properly sized system with battery runs $25,000-$35,000 after incentives. Payback takes 8-10 years instead of 5-7.
But consider the alternative. Paying PG&E $300+ monthly, watching rates climb 8-10% annually, and sitting in the dark during every PSPS event. Over 25 years, that's $100,000+ in electricity bills with no asset to show for it.
Solar gives you control. Battery storage gives you backup. Together, they make sense for most California homeowners.
The federal credit expires December 31, 2025. If California solar is on your radar, the time to move is now.
Common NEM 3.0 Mistakes to Avoid
California's new rules require different strategies. Avoid these errors:
Oversizing Without Storage
Under NEM 2.0, bigger systems meant more credits. Under NEM 3.0, excess exports earn pennies on the dollar. Size your system to match consumption plus battery charging—not more. Oversizing wastes money.
Skipping the Battery
Some homeowners try to save money by going solar-only under NEM 3.0. This rarely works well. Without storage, you export cheap power at midday and buy expensive power in the evening. The math barely pencils.
Ignoring TOU Rate Optimization
California's mandatory TOU rates have significant peak/off-peak spreads. Your battery should be programmed to charge during off-peak afternoon hours and discharge during peak evening hours. Verify your installer configures this correctly.
Finding a California Installer
California has no shortage of solar companies. Key questions to ask:
- How do you size systems for NEM 3.0?
- What battery do you recommend and why?
- How long does permitting take in my city?
- What's your SGIP experience for fire-risk zones?
- Can you show production data from NEM 3.0 installations?
Beware of installers still using NEM 2.0 era sizing strategies. The rules changed, and your system design should reflect that. Quality installers will run detailed load analyses, model your TOU rate impacts, and size your battery appropriately for evening peak shaving.