8 factors to consider before getting solar panels in California

We’ve talked to hundreds of people who have already gone solar in California. The general consensus is that it’s worth it. “Our system is the greatest thing since sliced bread,” a solar customer in Los Angeles told us. “It's like having a factory on top of your house making energy for you. You have to be brain-damaged not to do it if you can.”

But it doesn’t work out for everyone. Here’s what to consider before you make the switch.

1. Solar panel installation costs
2. Your energy consumption
3. Electricity costs in California
4. California solar incentives
5. Net metering rates
6. How long you stay in your house
7. The solar company you hire
8. How you pay

1. Solar panel installation costs: $10,000 to $30,000

Average solar panel costs in California are relatively low compared to other states. Before the federal solar investment tax credit (ITC), a typical residential system ranges from $12,350 to $24,700. That price drops to $8,645 to $17,290 after considering the full 30% tax credit.

Most installers set the price according to the system's wattage, with a typical cost between $2.50 and $5 per watt. “Cost per watt” is a little like looking at the price per square foot when you buy a house. It helps you compare the value of solar energy systems in different sizes. In California, the average cost per watt is only $2.47.

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. The more efficient your panels are, the more electricity they produce and the less space they take up on your roof.

Average solar panel installation cost by system size in California

2. Your current energy consumption

Look at your most recent utility bills to see how much electricity your house needs each month. This tells you what size and capacity your solar system needs to be. A typical California household needs a 7.33 kW system to offset its electricity needs with solar energy. You might need a larger or smaller system, depending on your current energy consumption.

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.

Solar is an especially good deal if you have a whirlpool bath or run the air conditioner constantly, like Christina in Fontana, California. “Everybody wants solar, but people concentrate on the big dollar amount instead of what they’re saving long-term,” she said. “We used to get a $400 electricity bill in the summer, but we’re not stressing out this summer.”

3. Electricity costs in California

Solar costs are trending down. At the same time, energy costs are trending up: “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,” Dick in Irvine told us.

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.

4. California solar incentives: Tax credits, rebates and more

The federal solar investment tax credit (ITC) is a major incentive that reduces the upfront cost of going solar in California. The ITC provides a 30% tax credit on your total system costs, including equipment, labor and permits. It will drop to 26% in 2033 and 22% in 2034.

The ITC is not a rebate or a refund

Don’t get confused: the ITC is a credit, meaning it directly decreases the amount of taxes you owe. This is different from a deduction, which reduces your taxable income. It only offsets your tax liability; you can't take advantage of the ITC if you don’t owe taxes in the first place. However, the credit rolls over to the next tax year if you don’t use the full amount. California residents can also take advantage of additional tax breaks, rebates and loan programs designed to make going solar more affordable.

» MORE: Solar incentives in California

5. Net metering rates in California

Sometimes, your solar panels generate more electricity than your household can use. Net metering lets you sell that extra to the local power grid when this happens. In late 2022, California moved from net metering (NEM 2.0) to net billing (NEM 3.0). NEM 3.0 reduces the value of credits received for excess solar generation, impacting the financial return on investment for homeowners.

NEM 3.0 still lets you earn credits on your utility bill for the excess energy your panels produce and send to the grid. While not as generous as the previous version, it's still a valuable way to reduce your electricity bills.

However, under NEM 3.0, adding battery storage will provide more savings compared with solar alone. Plus, you can still turn your lights on when panels aren’t generating electricity, like at night or on especially cloudy days. The biggest downside there is that solar storage battery costs can be almost as high as the panels — $7,000 to $18,000.

6. How long you plan to stay in your house

Buying solar equipment is expensive, and it takes five to 10 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.

Solar panels typically last 25 to 30 years.

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. Over 25 years, California homeowners with solar panels avoid $106,870 in utility costs on average.

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.

7. The solar company you hire

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.

One of the most common complaints is related to pushy sales reps who make promises that can’t be delivered. That’s why it’s so important to thoroughly research and verify claims made by sales teams before making a decision. Use NREL’s PVWatts Calculator to estimate how much electricity a solar panel can produce over a year on your house — just type in your address. Project Sunroof is a free solar savings estimator powered by Google Earth imagery.

8. How you pay

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.
• Home equity loans or lines of credit (HELOC): Eligible homeowners can borrow against equity in their house to finance a solar panel system. These often have variable interest rates, meaning monthly payments can increase over time.

Monthly costs: Solar payments vs. savings

Think of going solar in terms of your monthly costs. 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.

Is my house a good candidate for solar panels?

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:

• How old are my appliances? The first step is to ensure that your electrical loads are as small as possible. 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 energy efficiency tips and advice on getting a home energy assessment.
• What is the condition of my roof? If you have to replace your roof, do that before you install solar panels. Solar panels are designed to last up to 30 years, so you want your roof to last just as long. Otherwise, it could cost thousands to remove the panels, fix your roof and reinstall the panels.
• How much sunlight do I get? 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 — like trees or tall buildings above your roof — could make your solar system less efficient.
• What is the size and angle of my roof? 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. For example, 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%.

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.

Benefits of solar panels in California

• Better for the environment: Traditional energy sources like coal and natural gas release carbon dioxide and other harmful pollutants into the air. Solar panels generate electricity from sunlight, a clean and renewable energy source. Installing solar panels on your roof helps the environment primarily by reducing greenhouse gas emissions and dependence on fossil fuels.
• Higher home resale value: Installing solar panels can significantly increase a home's value. According to the study mentioned above, houses with solar panels sell for 4.1% more on average. The exact increase in value varies by location, with homes in active solar markets sometimes seeing even higher boosts.
• Cheaper energy bills: The average homeowner in California uses a lot of power, which adds up to a lot of savings when you switch to solar. Going solar now means that your monthly energy expenses will be more predictable (and very often significantly lower). Solar panels also protect you from future energy cost increases.

Drawbacks of solar panels in California

• Solar equipment is expensive: Even with rebates and other financial incentives, the price typically starts between $10,000 and $30,000. It’s even more expensive if you want a solar battery for energy storage. Solar battery costs are generally between $7,000 and $18,000.
• Potential roof problems: The installation process involves drilling holes into the roof to anchor the panel mounting systems. If not done correctly, this can lead to leaks or structural damage.
• Recent policy changes: In early January 2023, Gov. Gavin Newsom proposed cutting climate-related funding, including incentives for rooftop solar installations. New rules that took effect in California in April 2023 have dramatically reduced the attractiveness of rooftop solar systems for homeowners and residents of multifamily and apartment dwellings. At least for now, industry projections show the current drop-off in installation numbers will continue.

» MORE: Solar energy pros and cons

Find solar companies in California

A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our picks for the top solar companies in California to learn more.

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

Overall, California's solar industry is at a crossroads. While facing challenges from policy changes and external factors, the state's long-term commitment to renewable energy and focus on innovation present exciting opportunities for future growth.

We predict a period of adjustment due to NEM 3.0 with potentially slower growth in the residential market. The industry’s focus will likely continue to shift toward innovation, battery storage and community solar projects.

Solar costs vs. savings in California vs. nearby states