Is solar worth it in California?

5 factors to consider before getting solar panels in California

Going solar ends up being worth it for many homeowners as long as their house is a good candidate to support a solar panel installation. Here’s what to think about before you commit.

1. Solar panel installation costs
2. Potential savings
3. Changing solar policies
4. Roof condition
5. Future goals

1. Solar panel installation costs

Before any incentives, a typical solar energy system in California costs $11,435 to $22,871. That price drops to $8,005 to $16,010 after using the full 30% federal solar investment tax credit (ITC).

Like most things, high-quality panels come with a more expensive price tag, but they often pay off in the long run with better performance and durability. System size is another big solar cost factor. A typical California household needs a 7.2 kW system to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption.

Average solar panel costs by system size in California

What about the tariffs?

Tariffs are broadly expected to increase solar panel prices for homeowners. “While the exact percentage increase will depend on the final tariff rates and the specific panels chosen, any new significant tariff on imported cells or modules will add a noticeable amount to the overall system cost,” Steve Marcou, Vice President of Marketing at SolarTech, a solar installation company headquartered in El Cajon, told us.

2. Potential savings

Look at your most recent utility bills to see how much electricity your house needs each month. Once you know your current energy consumption, you can calculate your potential savings and the time it should take for your solar installation to pay for itself. You can also use Project Sunroof, a free solar savings estimator powered by Google Earth imagery.

Solar panels typically last for 25 years.

Anecdotally, Maggie in Antioch said her power bills went from $350 or more to “under $25 almost every month,” and Jeffrey in Pasadena said he doesn’t pay for electricity at all. Chad in Lake Forest still pays about $110 each month for electricity. “It’s better than an average of $400 a month, but I was expecting zero after getting extra panels,” he told us.

Going solar now also protects you from future energy price increases. Dick in Irvine put it this way: “In the future, electric rates will probably go up steadily. So, it locks me in at a fixed rate for that period of time. But as a consumer, I still have to buy the equipment upfront.”

3. Changing solar policies

The 30% federal solar investment tax credit (ITC) will drop to 26% in 2033 and 22% in 2034. Other solar incentives in California are also subject to change, particularly net metering policies.

Net metering lets you sell excess solar energy to the local power grid. In late 2022, the California Public Utilities Commission moved from net metering (NEM 2.0) to net billing (NEM 3.0). This reduces the value of credits received for excess solar generation and impacts the financial return on solar investments.

With these lower export credits, the best way to save under the new rules is to maximize your use of solar power on-site. SolarTech’s Marcou offered some advice for homeowners going solar in California:

• Consider a battery: Homeowners should now consider solar panels and battery storage as an integrated system to maximize their energy independence and financial returns. The biggest downside is that solar storage battery costs can be almost as high as the panels — $7,000 to $18,000.
• Compare quotes: When getting quotes, insist on a comparative analysis that clearly shows projected savings with and without a battery under the current Net Billing Tariff rules.
• Understand your usage: Knowing your household's energy consumption patterns and potential future changes to those patterns will help determine the optimal battery size to offset the most expensive grid electricity.

Federal solar tax credit expires at the end of 2025

The ITC is now set to expire at the end of the year, much earlier than previously scheduled. This means you have until Dec. 31, 2025, to install and pay for a system to qualify for the 30% credit.

» EXPLORE: Where solar savings go the furthest

4. Condition of your roof

Solar panels need regular exposure to sunlight to produce the most energy possible. California averages 5 to 7.5 peak sun hours each day. However, lots of shading from trees or tall buildings could make your solar energy system less efficient than your neighbor’s.

California (and the rest of the United States) is in the northern hemisphere, so solar panels perform best on south-facing roofs. The worst place to install would be on north-facing roofs, especially if those roofs have a high pitch. If the only place you can install is a north-facing roof with a 30-degree pitch, your costs will likely go up by 30% to 40%.

Another important consideration: If you have to replace your roof, do that before you install solar panels. Otherwise, it could cost thousands to remove the panels, fix your roof and reinstall the panels.

Pro tip

If you have an older refrigerator or air conditioning unit, for instance, it’s smart to upgrade those before investing in solar panels. That way, you can get a smaller system, which will be cheaper overall. Visit Energy Upgrade California for advice on getting a home energy assessment.

5. Future goals

Buying solar equipment is expensive, and it takes Californians about 5.17 years years to recover the initial investment through savings on electric bills. If you sell your house and move before then, you might not fully realize the financial benefits of your solar panels.

One study found that, on average, houses with solar panels sell for 4.1% more. Let’s say you spend $25,000 putting solar panels on a house that costs $400,000. It might sell for $16,400 more in a few years, according to Zillow. But you’ll miss out on some of the $108,915 that California homeowners with solar panels save over 25 years.

In other words, don't get solar panels just because you want to sell your house soon. Instead, consider a home improvement project with a better return on investment, like remodeling the bathroom or kitchen.

Monthly costs: Solar payments vs. savings

Given rising energy costs in California and elsewhere, financing solar panels makes sense as long as your monthly loan payment is less than what you would be paying the utility company anyway. Solar panels essentially generate “free” electricity once the initial installation costs are paid for.

» SOLAR PANELS: Lease vs. buy?

How to pay for solar panels

If you can, it’s often financially strategic to pay for the whole thing upfront. You own the system from day one, get the tax credit benefits and don’t have to pay interest on a loan. Of course, paying cash is not always an option. That’s when loans, leases and other agreements come into play.

• Loan: Solar loans work like any other type of loan. They have relatively low fixed interest rates. Once you pay it off, you own your system outright.
• Lease: Leasing panels is one way to get the benefits of solar energy without the high upfront cost. A solar lease works like a car lease — you get to use the panels but don’t own them. Leasing can be good if you have limited savings. Solar lease agreements typically last 20 to 25 years.
• Power purchase agreement: Similar to leasing, a power purchase agreement (PPA) lets homeowners install solar panels without the upfront costs. You sign a long-term contract with a solar services provider to purchase the electricity generated by the panels at a predetermined rate. The provider owns and maintains the panels throughout the agreement, which usually lasts 10 to 25 years.

Pros and cons of solar panels in California

California is a pro-solar state in terms of both regulations and economics. The sunny climate maximizes the amount of power produced by solar panels. Still, you can expect some seasonal fluctuation in how much energy your panels produce.

» MORE: Solar energy pros and cons

Find solar companies in California

People have had mixed experiences with solar companies. In the best-case scenario, it’s easy to make the switch and you’re happy with the system’s performance. In the worst-case scenario, you end up paying thousands for mid-tier solar equipment from a company with poor customer service and no follow-up or support. Read our guide to the top solar companies in California for more information.

Bottom line: Is going solar in California worth it for you?

The main drawback is the high upfront cost of purchasing and installing the panels and equipment. On the bright side, once that’s paid for, solar panels can significantly reduce or even eliminate your electricity bills. For many, the long-term savings outweigh the upfront costs.

Solar costs vs. savings in California vs. nearby states