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Why Is Solar Still Growing in California 2026 After the 30% Tax Credit Ended?

  • May 15
  • 16 min read

Updated: May 16

By James Ree | ElecGuys | May 2026 8 years in LA solar & electrical wholesale — supplying installers across Southern California



In October 2025, I got a call from a Glendale homeowner who had been tracking her SCE bill for three years straight. She'd been waiting to go solar — always one reason or another to hold off. When the One Big Beautiful Bill Act passed in July 2025 and ended the 30% federal tax credit for homeowners, she called me half-resigned: "I guess I missed my window. Solar's probably over now anyway."


Six months later, I was helping coordinate equipment for three jobs on her block.


That conversation is playing out in living rooms across California right now. The 30% Residential Clean Energy Credit (Section 25D) expired December 31, 2025. For the average Southern California system, that credit was worth $6,000 to $9,000. Real money, gone. And yet the installers I supply equipment to aren't shutting down. They're adapting — and in many cases, booking more jobs than they expected heading into 2026.


So what's actually happening? Why is solar — especially here in California — still expanding after the single biggest financial incentive in the industry's history disappeared overnight?


The answer isn't one thing. It's five structural forces that were always doing most of the heavy lifting, and the tax credit was always just the icing on top.



Quick Answer: 



Solar is still growing because the fundamental math was never primarily about the tax credit. 

Five forces are holding the market up: California's electricity rates are among the highest in the country and keep rising; panel costs have dropped 60%+ since 2010 regardless of policy; leases and PPAs still qualify for a federal tax credit through 2027; utility-scale solar is hitting record-breaking new capacity; and energy independence demand from wildfires and outages is driving installs the government never tracked. 

The tax credit made solar easier to sell. These five forces are what make solar actually work.


Table of Contents






Reason 1: California's Electricity Rates Are Doing What the Tax Credit Used to Do


Here's the number that matters more than any federal policy: what you're paying SCE or PG&E every month — and what you'll be paying three years from now.


SCE's average residential rate jumped to $0.353/kWh in October 2025 — a 12.9% spike in a single adjustment, triggered by wildfire liability recovery, grid hardening costs, and infrastructure upgrades (CPUC Decision 25-12-028). SDG&E customers are now paying up to $0.397/kWh, among the highest residential electricity rates in the United States. PG&E, while lower, carries CPUC-approved increase trajectories through 2028.


Here's the math that makes California different from every other state. A homeowner using 800 kWh per month in Los Angeles pays roughly $2,800 to $3,200 per year to SCE at current rates. In Ohio, paying $0.13/kWh for the same usage, that bill is $1,248. The solar system that offsets those bills is roughly the same price in both states — but the California homeowner recovers the investment in half the time.


Think of it this way: the federal tax credit was essentially a coupon that made an already-good deal slightly better. When the coupon expired, the deal didn't disappear. The deal is the fact that California electricity is expensive and getting more expensive every year. When rates were $0.18/kWh a decade ago, the tax credit was load-bearing. At $0.35–$0.40/kWh today, solar math holds up without it.


The CPUC's own 2025 rate planning documents signal 6–7% average annual increases through 2028. That means every year a homeowner delays solar, the electricity they're paying for costs more — and the solar system they eventually install offsets a higher dollar amount. Rising rates are the rocket fuel. The tax credit was just the spark.


Why is solar still growing in California in 2026 while other states are pulling back? This is reason number one: the electricity is simply too expensive to ignore, credit or no credit. For more on why California electricity bills keep rising and what solar can do about it, see our full rate breakdown.



California homeowner checking high electricity rates and solar savings in 2026



Reason 2: Panel Costs Have Dropped 60% Since 2010 — Policy Didn't Drive That


This one gets lost in the policy conversation, but it's the most important long-term force in the solar market.


In 2010, NREL documented that residential solar installations cost $8.70 per watt installed. The average 6 kW system cost over $52,000 before incentives. In 2026, that same system costs roughly $15,000–$19,000 — a 60–64% reduction, per NREL benchmarking. The federal tax credit brought the net cost down further, but it didn't cause the cost reduction. Technological improvement, manufacturing scale, and competition among installers did.


Let's be specific about what drove it: Module efficiency rose from around 15% in 2010 to 20–23% today, meaning fewer panels needed per kilowatt. Manufacturing automation, especially in cell production, pushed module wholesale prices from roughly $2.50/watt in the early 2010s to $0.28–$0.35/watt today. Supply chains matured. Installer labor processes got faster and more standardized. Permitting in markets like Los Angeles and San Jose streamlined significantly.


None of that stops when the tax credit ends.


What this means practically for California homeowners in 2026: a 9 kW system at $2.50/watt installed costs $22,500 before any incentives. At SCE's $0.345/kWh average rate, that system offsets roughly $3,000–$3,500 in annual electricity costs. Payback period is 7–8 years, followed by 17–18 years of near-free electricity. The math still closes — it just takes two more years than it did with the credit. On a 25-year system life, that's still a very strong return.


The underlying technology story is also pointing forward. NREL projects continued installed cost declines of 2–4% annually through the end of the decade, driven by larger wafer sizes, higher cell efficiency, and manufacturing automation. By 2030, the median installed cost may reach $2.50/watt or below. The tax credit's absence slows nothing on the technology side.


For a full comparison of the best solar panels available for US homes in 2026, including efficiency ratings and cost-per-watt by brand, see our panel guide.




Reason 3: Leases and PPAs Still Have the 30% Credit — and the Market Shifted Fast


Here's the part of the 2026 solar story that surprises most homeowners: the federal tax credit isn't entirely gone. It just moved.


When a homeowner buys solar with cash or a loan, they own the system — and for new installs after December 31, 2025, the Section 25D credit no longer applies. But when a solar company owns the panels on your roof through a lease or PPA (Power Purchase Agreement — a contract where you pay per kilowatt-hour for the solar power your panels generate, instead of buying the panels), that company can still claim the commercial Section 48E Investment Tax Credit through end of 2027. They typically pass some of that savings to the homeowner through lower monthly payments or discounted upfront costs.


The industry pivoted to this model faster than almost anyone predicted. NPR reported in February 2026 that installers who once refused to offer leasing are now embracing it as a core product. Wood Mackenzie solar analyst Zoë Gaston told NPR she's heard many companies "really changing their tune" on third-party ownership since the OBBBA passed. EnergySage marketplace data showed a 205% surge in homeowners actively working with solar installers in the second half of 2025 — and a significant portion of 2026 demand is flowing into lease and PPA structures rather than cash purchases.


For California homeowners, this means a real option with no upfront cost: a lease typically runs $80–$130/month, compared to a $250–$300 SCE bill. The homeowner doesn't own the panels, but they pay less for electricity starting day one. For the many Californians who can't or don't want to pay $22,000 upfront, or don't want to take on a solar loan, the lease market is keeping installations moving.


The key deadline to know: the 48E credit requires construction to begin before July 4, 2026, or the system to be placed in service by December 31, 2027. That means the lease window is real but time-limited. Companies are actively working to safe harbor projects ahead of that deadline.


This lease-driven pivot is a direct answer to why solar is still growing in California in 2026 after the 30% tax credit ended — the credit didn't disappear, it shifted channels. For a full comparison of zero-down solar financing options in California in 2026 — leases, PPAs, prepaid leases, and solar loans — see our financing guide.




Reason 4: Utility-Scale Solar Is Breaking Records — and That's a California Story Too


Residential solar is one segment of the market. The bigger story in 2026 is what's happening at the utility scale — and it's directly connected to why California's grid, its electricity rates, and its solar future look the way they do.


The EIA projects 43.4 GW of new utility-scale solar capacity coming online in the United States in 2026 — a 60% increase over 2025 additions and the largest single-year utility solar build in history. Solar alone makes up 51% of all planned new US power capacity in 2026. The largest project coming online is the 837 MW Tehuacana Creek Solar + Battery storage system in Texas. Battery storage additions are on track for 24 GW in 2026 — a record.


What does utility-scale solar have to do with California homeowners?


First, it validates the economics. When utilities are deploying tens of billions of dollars into solar with no residential tax credit involved, they're confirming that solar's cost of generation is genuinely competitive. The LCOE (Levelized Cost of Energy — the all-in lifetime cost per kilowatt-hour generated) for utility solar is now below $0.04/kWh in many markets. The same fundamental cost curve applies at the residential level.


Second, it shifts the grid. As California's grid absorbs more solar generation, the NEM 3.0 net billing rate structure becomes more important to understand. The grid already has significant solar supply during midday hours — which is why export credits are low ($0.05–$0.08/kWh). But evening peak demand, when grid power costs $0.55–$0.70/kWh, is exactly where home batteries paired with rooftop solar deliver maximum savings.


California's solar generation in February 2026 hit 5,743 thousand MWh — 43.9% of the state's total electricity production, the highest solar penetration of any state in the country (Choose Energy, May 2026 Solar Generation Report). That dominance was built over decades, and it doesn't stop when one incentive program expires.


For a breakdown of how NEM 3.0 affects your solar savings and battery value in California, see our full NEM guide.




Reason 5: Wildfires, Outages, and Energy Independence — Demand the Government Never Measured


This is the force that doesn't show up cleanly in industry statistics — but I see it every week when I'm coordinating equipment deliveries across LA and the Inland Empire.


A significant and growing number of California homeowners are installing solar and batteries not because of the financial return calculation, but because of what happened during the last PSPS event (Public Safety Power Shutoff — planned grid outages utilities execute to reduce wildfire ignition risk during high-wind conditions) in their neighborhood. When SCE or PG&E cuts power for 2–4 days as a wildfire safety measure, a solar-plus-battery system is the only thing that keeps the lights on.


This demand didn't exist at scale five years ago. It's structural now. In 2024 and 2025, PSPS events affected hundreds of thousands of California households, particularly in the foothills and eastern portions of LA, San Bernardino, and Riverside counties. Each event created a new cohort of homeowners who decided they'd had enough of grid dependency. The 30% tax credit was irrelevant to many of them — they were solving a reliability problem, not primarily a financial one.


The SEIA's 2025 Year in Review report notes that "increasing electricity bills and power outages have led to sustained interest in residential solar throughout the country." This is one of the clearest answers to why solar is still growing in California: the wildfire-driven demand for energy independence operates entirely outside the incentive calculation. For a household spending $300/month on SCE and losing power twice a year, a $35,000 solar-plus-battery system isn't primarily an investment — it's a solution.


For information on solar and battery backup during PSPS events and California wildfire season, including which battery systems qualify for SGIP rebates, see our battery guide.




What the Numbers Actually Show: Why Solar Is Still Growing in California 2026 — Growth and Contraction at the Same Time


Here's the honest version of the 2026 solar market, because the picture is more nuanced than "it's booming" or "it's collapsing."


Residential solar installations are projected to fall roughly 18–25% in 2026 compared to 2025, per SEIA Q4 2025 outlook and Ohm Analytics forecasts. That's real. The loss of the 30% consumer credit created a demand hangover after the late-2025 rush. Homeowners who were only buying because of the tax credit largely did — before the deadline.


Utility-scale solar, meanwhile, is hitting records. SEIA projects total US solar installations to increase 12% in 2026 compared to 2025, driven by the utility pipeline. The US has now installed 262 GWdc of solar capacity cumulative — enough to power 45 million homes. Solar accounted for 54% of all new electricity-generating capacity added to the US grid in 2025, and that figure will hold or increase in 2026.


For California specifically, the residential contraction is real but offset by a structural shift rather than a collapse. More installs are flowing into lease and PPA structures. Battery-only retrofits on existing solar systems are growing as NEM 3.0 makes storage more valuable. Commercial solar in California — under the Section 48E credit with its 2027 deadline — is still moving at pace.


The solar industry is restructuring, not retreating. And in California, with the highest electricity rates and highest solar penetration in the country, that restructuring is happening faster and more decisively than anywhere else.




The Honest Comparison: 2025 vs. 2026 Solar Math in California


Understanding why growth continues requires seeing the before-and-after numbers clearly.



2025 (with 30% credit)

2026 (no credit, cash purchase)

2026 (lease/PPA)

Typical system (9 kW) gross cost

$22,500

$22,500

$0 upfront

Federal tax credit value

−$6,750

$0

Claimed by company

Net cost to homeowner

$15,750

$22,500

$80–$130/mo

Payback period

~5 years

~7–8 years

N/A (monthly savings)

25-year savings estimate

~$85,000

~$75,000

~$25,000–$35,000

SCE annual offset at $0.345/kWh

$3,000+/yr

$3,000+/yr

$100–$150/mo savings


Source: EnergySage California marketplace data May 2026; SCE Rate Advisory Jan 2026; James Ree analysis


The credit's absence extended payback by roughly 2 years on a cash purchase. It didn't eliminate the savings. Over 25 years — the warranty life of most solar panels — the financial case is still compelling for homeowners with high utility bills and plans to stay in their home.


For a full solar payback period calculation for California in 2026, including step-by-step math for your specific SCE or PG&E rate plan, see our payback guide.




Three Homeowner Scenarios: Who Solar Still Makes Sense For in 2026



Scenario A: Monthly bill $200–$300, SCE TOU plan, own the home, planning to stay 10+ years


Profile: Culver City homeowner, $250/month SCE bills, 1,100 kWh/month usage, possible EV in the next 2 years.


What works: 9–10 kW solar + battery storage, cash purchase or loan. Even without the federal credit, payback runs 7–8 years. After that, 17+ years of drastically reduced bills. EV charging load makes the system work harder and saves more.


Best option: Cash purchase if available. Solar loan (under 7% APR) if not — monthly payment should come in below current SCE bill.



Scenario B: Monthly bill $150–$200, renting or short ownership horizon


Profile: Torrance homeowner, $175/month SCE, thinking about selling in 4–5 years, or renter in a condo.


What works: Lease or PPA with no upfront cost. Monthly payment of $90–$110 versus $175 current bill means immediate savings. The homeowner doesn't own the panels, but doesn't need to. Renters should look into California's SB 868 balcony solar option — balcony solar for California renters in 2026 is a growing option that doesn't require roof access or landlord permission.

Best option: Lease or PPA (still backed by Section 48E credit through 2027).



Scenario C: Monthly bill under $120, roof issues, short timeline


Profile: Pasadena homeowner, $110/month SCE, roof needs replacement in 3 years, uncertain about moving.


What works: Probably nothing yet. Solar on an aging roof means paying $3,000–$6,000 for panel removal and reinstall when the roof needs work. At a $120/month bill, payback on a 7 kW system is 10+ years even at current rates. Better move: replace the roof first, reassess solar timing afterward.


Best option: Wait. Review again in 2027 when the roof situation is resolved.




FAQ



Q: Why is solar still growing if the tax credit ended?


A: Because the tax credit was never the primary driver of solar economics — California's electricity rates were. At $0.35–$0.40/kWh, solar's cost savings are compelling without any federal incentive. Utility-scale solar is also hitting record additions in 2026, driven by long-term energy demand growth and the economics of solar generation at scale, independent of residential incentives.

Q: Did solar installations actually drop in 2026?


A: Residential installations are projected to fall 18–25% in 2026 compared to 2025, per SEIA and Ohm Analytics data. This is a real contraction in one segment. But utility-scale solar is increasing, total US solar capacity is growing, and California's overall solar generation is at record highs. The market is restructuring, not collapsing.

Q: Is there still any federal tax credit for solar in 2026? 


A: Not for homeowners who buy systems directly. But solar leases and PPAs — where a company owns the panels — still qualify for the commercial Section 48E Investment Tax Credit through end of 2027, assuming construction begins before July 4, 2026. Companies may pass some of that value through as lower monthly rates.

Q: How much has solar panel cost dropped over time?


A: NREL benchmarking documents a 64% reduction in residential solar installed costs from 2010 to 2020. Since 2010, costs have fallen from roughly $8.70/watt to $2.50–$3.10/watt in 2026. Module wholesale prices have fallen from $2.50/watt in the early 2010s to $0.28–$0.35/watt today. That decline is technology-driven and continues regardless of federal policy.

Q: Why is solar still growing in California when other states are pulling back more? 


A: California has the highest electricity rates of any major state ($0.30–$0.40/kWh versus a national average of about $0.18/kWh), the highest existing solar penetration (43.9% of electricity from solar in February 2026), the most mature installer market, and wildfire/PSPS-driven energy independence demand that doesn't exist at scale elsewhere. All of these forces remain active regardless of federal incentive status.

Q: Does rising utility-scale solar affect homeowners?


A: Yes, in two ways. First, it validates that solar economics work without subsidies at scale — utilities wouldn't be deploying 43 GW in a single year if the math didn't work. Second, it shapes the grid structure that determines your NEM 3.0 export credit value and the peak/off-peak rate spread that determines how much your home battery saves you.

Q: Is the lease or PPA option worth it if I can afford to buy outright? 


A: For most California homeowners who can afford a cash purchase, buying outright still wins over 25 years — you keep all the savings rather than sharing them with the leasing company. But the lease option can make sense for homeowners with shorter time horizons, those who prefer no upfront cost, or those who want someone else responsible for maintenance.


Zero-down solar financing options in California breaks down the comparison in detail.

Q: What incentives are still available in California for solar in 2026? 


A: California's property tax exclusion (solar system value excluded from property tax reassessment, through January 1, 2027 per SB 710), NEM 3.0 net billing export credits ($0.05–$0.08/kWh average), and SGIP battery rebates for income-qualifying households ($150–$250/kWh of storage). Some community choice aggregators offer additional local battery or EV charger rebates. No statewide cash rebate or sales tax exemption exists for most homeowners in 2026.

Q: Should I wait to see if the federal credit comes back?


A: Building a financial decision around a hypothetical future incentive is risky. Some lawmakers have introduced legislation to restore clean energy credits (American Energy Dominance Act, May 2026), but its passage is uncertain in the current Congress. Meanwhile, every month you pay SCE or PG&E at $0.345/kWh or higher is electricity your solar system would have offset. At $3,000/year in potential savings, a 12-month wait costs you $3,000 — plus whatever rate increases occur.




Conclusion


The Glendale homeowner who called me in October 2025 thinking she'd missed her window? She installed a 10 kW system with a Tesla Powerwall 3 in March 2026. No federal tax credit. Full price.


Her monthly SCE bill dropped from $290 to under $40. During the February wind event that knocked out her neighbors' power for 18 hours, her house stayed on. She's not getting a $9,000 tax credit. She's getting energy independence and a bill that barely registers.


Solar is still growing in California after the tax credit ended because it was never really about the tax credit. The credit was valuable — it made the decision easier for millions of homeowners and helped the industry scale. But the five forces underneath it — rising utility rates, falling panel costs, a shifted lease market, record utility buildout, and wildfire-driven independence demand — those didn't expire on December 31, 2025.


If you're a California homeowner considering solar in 2026, here's where to start:


  1. Pull your last 12 months of electric bills. Calculate your total annual kWh usage and what you paid. If that number is above $1,800/year, run the solar numbers seriously — the math likely closes even without the federal credit.

  2. Get at least 3 quotes from licensed, CSLB-verified installers. Ask specifically for the annual production estimate in kWh, the net cost after all current incentives, and the payback period calculated at your actual rate plan — not a blended average.

  3. Ask about both purchase and lease options. In 2026, the right structure depends on your timeline, tax situation, and upfront capital — not just which one sounds better.




Related Posts



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If you're a renter or EV owner:






Data sources:


SEIA US Solar Market Insight 2025 Year in Review; SEIA Q4 2025 Market Insight; EIA Short-Term Energy Outlook May 2026; EnergySage California marketplace data May 2026; SCE Rate Advisory October 2025 and January 2026 (CPUC Decision 25-12-028); NREL Residential Solar Cost Benchmarking; Choose Energy Solar Generation Report May 2026; Ohm Analytics 2026 residential solar forecast; Wood Mackenzie Power & Renewables; IRS Section 25D and 48E guidance February 2026.

 



About the Author


James Ree has eight years of experience in electrical, HVAC, and solar wholesale in Los Angeles, supplying equipment to residential and commercial installers. He now writes practical guides on solar, EV charging, battery storage, and home electrical systems for U.S. homeowners and outdoor enthusiasts.

 


 

Disclaimer


Product prices and specifications change frequently. Verify current pricing and specs on manufacturer websites and major retailers before purchasing. Prices listed are 2026 reference ranges and may differ from current retail pricing.



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