1. The 30% Federal Tax Credit Is Gone for Purchased Systems
P.L. 119-21, the FY2025 reconciliation law commonly known as the One Big Beautiful Bill Act, repealed the Residential Clean Energy Credit (RCEC) for expenditures made after calendar year 2025. Unlike past versions of the law, there is no phase-down period or gradual reduction.
The cutoff is strict and tied to physical completion. If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025, which will prevent the taxpayer from claiming the Section 25D credit.
Taxpayers who made qualifying expenditures before the end of 2025 may carry forward any unused RCEC amounts to future tax years — but this is to allow taxpayers carrying forward credits from earlier installations to benefit even after the credit for new installations has expired.
In dollar terms: under this new law, homeowners who purchase their systems with cash or a loan will no longer be eligible for the 30% federal tax credit after December 31, 2025. Previously, this solar tax credit was available through 2034.
2. SDG&E's Rates Are Still Exceptional — and Rising
The loss of the federal credit doesn't change the fundamental reason San Diego has long been an attractive solar market.
SDG&E's bundled residential average rate increased to about 45.7¢/kWh as of January 2026 (delivery + generation for customers who buy both from SDG&E). If you are with a CCA (like San Diego Community Power), SDG&E still delivers the electricity and you pay SDG&E delivery charges plus CCA generation charges.
SDG&E's January 2026 Electric Rate Change Alert states that residential average electric delivery rates increased by about 2.9 cents per kWh (an 11.6% increase) from 25.2 cents/kWh to 28.2 cents/kWh. On top of that, SDG&E explains that the Base Services Charge began appearing on bills in October 2025, shown as approximately $0.79343 per day for standard service — about $24 per month — a fixed daily amount that does not care whether you used 1 kWh or 40 kWh that day.
At the peak end of the rate schedule, on TOU-DR1, the summer on-peak total rate is listed as $0.69654/kWh (with off-peak at $0.47560 and super off-peak at $0.38818).
SDG&E cites wildfire mitigation, grid modernization, and compliance with California's clean energy mandates as key drivers — investments that include undergrounding power lines and upgrading infrastructure. According to the CPUC, SDG&E residential customers saw their rates increase by 4.5% to 9.7% starting in June 2025.
For reference, this significantly exceeds the national average, which hovers around $130 per month according to the U.S. Energy Information Administration (EIA), and SDG&E's per-kilowatt-hour rates are among the highest in the United States — compared to the U.S. national average of ~$0.16/kWh.
3. NEM 3.0 — and Why a Battery Now Matters
NEM 3.0, officially known as the Net Billing Tariff (NBT), is California's third iteration of net energy metering policy that took effect on April 15, 2023. Unlike traditional net metering that credited solar exports at retail rates, NEM 3.0 compensates homeowners based on "avoided costs" — essentially what utilities would pay for electricity elsewhere.
NEM 3.0 features a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems), thereby reducing the overall savings and increasing the payback period of home solar. For SDG&E customers specifically, average export credits under NEM 3.0 run approximately $0.05–$0.08/kWh for IOU customers, per the CPUC Net Billing Tariff, utility rate schedules (last verified at CPUC.ca.gov, April 2026).
The legal challenge is settled for now. In March 2026, the California Court of Appeals upheld the NEM 3.0 framework, meaning the current rules remain firmly in place.
What this means in practice: you produce power cheaply at midday, but if you export it you earn only ~$0.05–$0.08/kWh. Then you buy back power in the evening at up to ~$0.70/kWh. Under NEM 3.0 rules, exporting power to SDG&E during the day yields very low credits (~$0.05/kWh), while buying power in the evening can cost $0.50–$0.80+/kWh. Because SDG&E electricity rates are among the highest in the nation, switching to solar offers a faster payback than almost anywhere else in the U.S.
The battery solution: SDG&E's May 2026 expansion of super off-peak hours to include 10 a.m.–2 p.m. weekdays year-round makes one thing clear: the value of intelligent solar-plus-storage in San Diego just went up. Customers who can charge a battery during the cheapest hours and discharge during the most expensive hours of the evening will save more than ever, while solar-only households without storage will see export credits eroded during their best production window.
Modeling by EnergySage and CPUC analysis indicates that under NEM 3.0, solar-only systems may reduce electricity bills by approximately 45–50%, while solar-plus-battery systems can reduce bills by 70–80% for the same home — depending on usage, rate plan, and system design.
A battery adds cost. Adding a Tesla Powerwall or Enphase IQ Battery to your system adds $10,000–$15,000 to the total cost — but under NEM 3.0, battery storage is essentially required for good solar economics in San Diego.
4. Lease/PPA vs. Cash/Loan in 2026
On July 4, 2025, the One Big Beautiful Bill was signed into law, officially ending the Section 25D federal solar tax credit for homeowners on December 31, 2025. However, the business-claimed 48E tax credit for residential solar leases, PPAs, and prepaid solar products remains in effect through the end of 2027. In TPO (third-party ownership) arrangements — such as leases and Power Purchase Agreements — the leasing company claims the tax credit and the homeowner benefits from lower payments for their system.
Timing caveat: the begin-construction deadline for the commercial/third-party ITC (Section 48E) is July 4, 2026. Solar leases and PPAs that begin construction on or before this date can lock in the 30% credit under the construction safe harbor. Confirm current eligibility with your installer before signing.
For purchased systems, before 2026, many solar loans were structured around the assumption that the homeowner would use their tax credit refund to make a lump-sum principal reduction in year one. Without the Section 25D credit, this loan structure no longer works for new installations.
5. Remaining California Incentives
California Property Tax Exclusion (§73): California's property tax exclusion (Revenue and Taxation Code §73, extended by SB 710, Chapter 328, Statutes of 2025) is active with an install deadline of December 31, 2026 under current law. Solar installations are excluded from property reassessment, meaning your property taxes won't increase due to solar. This isn't a tax credit, but it prevents ongoing tax increases that could otherwise erode your savings. If you want to guarantee the property tax exclusion under current law, your system needs to be completed — not just permitted or started — before January 1, 2027. Given that a typical residential solar installation in Southern California takes 10 to 16 weeks from signed contract to final inspection, homeowners targeting this benefit should sign contracts by late summer or early fall 2026 at the latest.
SGIP Battery Rebate: The Residential Solar and Storage Equity (RSSE) budget is a $280M state-funded SGIP pathway for income-qualified households offering up to $1,100/kWh for battery storage and $3,100/kW for paired solar. The budget is currently fully reserved with a waitlist and no confirmed timeline. All ratepayer-funded budgets — General Market, Equity, and Equity Resiliency — closed December 31, 2025. The only remaining pathway is the RSSE AB 209 budget for households earning under 80% AMI.
No California state solar tax credit: The bottom line is that there is no state solar tax credit in California, and the federal credit is no longer available for new residential installations in 2026. California's solar incentive value now comes primarily from high electricity rates, battery rebates for qualifying households, and the property tax exclusion.
6. Realistic Payback Range in San Diego 2026
In states like California, the 30% credit meant a payback period of around 7 years; without it, that extends to approximately 9 years as a baseline — though rising electricity prices under the new law could help offset that impact, especially in states with higher utility rates. San Diego's particularly high rates relative to the rest of California mean payback here is on the favorable end of the spectrum, but the loss of the credit still matters.
For a typical 2026 cash-purchased system in San Diego:
| Scenario | Est. System Cost | Est. Annual Bill Savings | Est. Payback Range |
|---|---|---|---|
| Solar only, ~7 kW, no credit | $17,000–$22,000 | ~$1,400–$1,900/yr | ~10–13 years |
| Solar + 1 battery, no credit | $27,000–$35,000+ | ~$2,000–$2,800/yr | ~11–15 years |
| Lease/PPA (48E savings passed through) | $0 upfront | Varies (typically 10–20% vs. SDG&E bill) | Immediate monthly savings; no ownership |
Illustrative ranges based on 2026 San Diego system pricing, SDG&E rate data, and NEM 3.0 export economics. Individual results vary significantly. Get site-specific quotes.
As of May 2026, the average solar panel system costs $2.48/W including installation in San Diego, CA. For a 6.67 kW system (the average system size), this comes out to about $16,536 before any available incentives, though prices range from $14,056 to $19,016.
Over the long run, homeowners in San Diego are expected to save an average of $100,059 over 25 years on electricity costs, after accounting for the upfront cost of an average-sized solar system — though this estimate is based on recent quote data factoring in system costs, electricity prices, available incentives, and inflation rates, and actual results will vary.
FAQ
Did the 30% federal solar tax credit really expire? Yes — definitively. The Section 25D Residential Clean Energy Credit, which covered 30% of residential solar installation costs, expired on December 31, 2025. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, eliminated this credit with no phase-down period and no extension. Systems placed in service on or after January 1, 2026 receive no direct federal tax benefit.
Can I still get the 30% credit through a lease/PPA? Homeowners using leases or PPAs — where a third party owns the system — can still benefit from the commercial tax credit through the end of 2027. Additionally, commercial entities (businesses, schools, churches, etc.) also remain eligible for the tax credits, though these systems will need to meet increasing U.S. manufacturing content requirements starting in 2026.
Is NEM 3.0 going away? Not imminently. In August 2025, the California Supreme Court ordered the Court of Appeal to reconsider the legality of NEM 3.0, but the policy remains in effect during this process. The Supreme Court did not overturn NEM 3.0 — it remains the law. As of early 2026, a ruling was expected by mid-year, and in March 2026 the Court of Appeals upheld the NEM 3.0 framework.
Are there any California incentives still available? California offers a property tax exclusion — solar installations are excluded from property reassessment, meaning property taxes won't increase due to solar. Install deadline is December 31, 2026 under current law (California Revenue & Taxation Code §73). The SGIP RSSE battery rebate offers up to $1,100/kWh for income-qualified households (waitlisted as of early 2026). The DAC-SASH program offers up to $3/watt for income-qualified homeowners in disadvantaged communities, active through 2030.
The file has been saved to /mnt/session/outputs/san-diego-solar-worth-it-2026.html with the JSON metadata header and full clean semantic HTML. A few editorial notes on choices made:
- Tax credit expiration: Confirmed via IRS.gov official FAQs, CRS Insight IN12611, and the bill text itself — not just installer marketing claims.
- SDG&E rates: Used the ~$0.457/kWh bundled average (NRG Clean Power analysis of CPUC filings, January 2026) and SDG&E's own published TOU-DR1 rate tables; I did not round up to $0.46 on the metadata without qualification.
- NEM 3.0 export rates: Cited as $0.05–$0.08/kWh (CPUC ACC documentation, verified April 2026) rather than a vaguer claim.
- Payback ranges: I did not use sources still citing 5–8 year paybacks that assume the 30% credit or NEM 2.0 — those figures are outdated. The 10–13 year range for purchased systems without the credit is calibrated against Enphase's own statement that the credit was worth ~2 years of payback in California.
- SGIP status: General market budgets are confirmed closed (Dec 31, 2025); only the RSSE income-qualified waitlist remains — this is a crucial distinction many 2026 solar guides are getting wrong.