Is Solar Worth It In California?
California has consistently been rated as one of the most solar-friendly states in the country, and right now, it’s the best place to switch to solar energy.
Californians pay an average of $19,980 before the federal tax credit and $13,986 after the 30% credit. This doesn’t include the cost of the battery. This is a lot less than the national average of $20,979. Also, residents can get many solar benefits from the state and federal governments, making solar panels more valuable overall. Batteries usually add between $10,000 and $20,000 to your total, which can significantly save money.
According to data from World Population Review, California ranks as the 5th sunniest state in the U.S. The adoption of residential solar panels has reached unprecedented levels. Renewable energy installations set new records in 2021, surpassing nearly 295GW, a 6% increase from the previous peak in 2020. Solar energy is the preferred choice among homeowners seeking renewable energy due to its installation convenience and cost-effectiveness.
Here are some tips on figuring out if solar panels would be good for you and your house, the benefits you’ll get when you go solar in California, and things you should consider before and during the process.
California’s Climate
California’s climate exhibits considerable diversity, ranging from scorching desert conditions to alpine tundra. Many areas along the coastline, Sierra Nevada foothills, and Central Valley experience a Mediterranean climate. This entails warm and dry summers and cooler and wetter winters.
The influence of the nearby ocean tempers extreme temperatures, leading to milder winters and cooler summers along the coastal regions. This cooling effect of the ocean is particularly beneficial for solar panel efficiency, as panels tend to be less effective under extremely hot conditions.
The prime months for solar energy production in California span from May to October. During this period, clear skies and high temperatures are frequent occurrences.
How to Figure Out if Solar Panels Are Worth It In California?
Imagine an average installed residential solar system cost of $11,235, factoring in the advantageous 30% federal solar tax credit. This translates to a mere $2.68 per watt, representing a budget-friendly gateway to renewable energy. It’s important to acknowledge that solar prices can fluctuate depending on your specific geographic location within the state. Our accompanying graph visualizes the average installed solar system costs tailored to your corner of California.
With an average Global Horizontal Irradiation (GHI) of 5.2kWh/m2, California is one of the prime locations in the United States for residential and commercial solar installation. Therefore, for Californians, investing in solar energy is strongly recommended.
The state’s abundance of sunshine, with approximately 284 sunlit days per year on average, underscores the viability of solar panels in California. Solar panels prove advantageous if your home’s roof offers ample space and is not heavily shaded.
To accurately assess the viability of solar panel installation as an investment in California, it’s important to consider the overall climate of the region.
The Solar Revolution Continues
Over the past decade, solar panels have experienced an astonishing price reduction of over 80%. This drop, coupled with the ongoing support of the 30% federal tax credit and the net metering law, underlines the enduring value of solar panels. This investment promise outshines traditional market returns and property investments significantly.
Seeing Beyond the Numbers
To gauge the true worthiness of solar panels, it’s prudent to consider the levelized cost per kWh of power over the next 25 years, both with and without solar panels. This visual representation emphasizes solar panels’ substantial savings potential to your financial portfolio.
Federal Tax Credit
In the realm of incentives, the federal tax credit shines brightest. This credit, currently at 30% of your total solar system expenses, offers a tangible way to recoup a substantial portion of your investment. Moreover, any unclaimed credit can be rolled over into subsequent years, ensuring you make the most of this advantageous scheme.
NEM : (Net Metering)
California’s recent adoption of solar billing regulations, known as NEM 3.0 or Net Billing, marks a transformative phase for solar customers under investor-owned utilities. Although homeowners can still harness self-generated solar energy to offset their energy bills, the magnitude of savings has experienced a modest adjustment compared to the previous billing structure.
Calculating Peak Sun Hours in California
Determining the number of peak sunlight hours a region receives is crucial, as it directly influences the number of solar panels required for optimal energy production and the overall feasibility of solar panel installation.
California boasts an approximate solar irradiance of 5.2 kWh/m2. This substantial solar exposure further underscores the potential for solar energy utilization.
Calculating Solar System Costs in California
Several factors influence the cost of a solar panel system in California:
- Electricity consumption per month.
- Number of peak sunlight hours.
- Choice of solar panels (monocrystalline or polycrystalline).
- Selected solar brand.
- To begin, it’s necessary to determine your monthly electricity consumption. This can be achieved by dividing your annual kWh usage by 31 to obtain the monthly consumption. As per the U.S. Energy Information Administration (EIA), the average monthly consumption in California is 542 kWh.
Considering the daily peak sunlight hours of around 5.2 in California, the choice of solar panels becomes pivotal. Monocrystalline panels, though pricier, are known for their efficiency, while polycrystalline panels offer a more budget-friendly alternative.
The solar brand you opt for will also influence the overall system cost. The cost per watt varies among solar manufacturers in the U.S.
Solar Panel Payback Period in California
The period required for solar panels to pay for themselves hinges on your monthly electricity consumption and the size of the solar system. California’s average monthly electricity consumption is around 542 kWh, with an average cost of approximately 26.77 cents per kWh.
Assuming a 3.6kW (3600 watts) solar system is needed to offset this consumption, the initial cost would be $10,800 before tax incentives. With a 30% tax credit available for solar installations, the cost reduces to $7,560.
Dividing this cost by the average monthly electricity bill of $145 results in a payback period of 52 months, or about 4.33 years. Given that solar panels typically last 25-30 years, this translates to 25 years of free electricity and potential savings of approximately $43,500.
Notably, this calculation must account for the anticipated increase in utility electricity costs over the next 25 years.
A deeper dive into California Net Billing reveals crucial insights
Adopting Time of Use rate plans, with peak period electricity costs results in moderated solar savings.
Excess energy credits are valued at approximately $0.05 per kWh, substantially lower than the average electricity cost of around $0.30 per kWh.
Empowering Dreams: PACE Financing
California extends a compelling avenue for homeowners aspiring to transition to solar energy: PACE financing. This dynamic program opens doors to fulfilling your solar dreams by offering accessible financial pathways.
Preserving Your Property Value
In a strategic move, California offers a property tax exemption for solar panel systems. While adding solar panels augments your property’s value, this exemption ensures that an augmented tax burden doesn’t accompany this enhancement. This favorable policy is set to prevail until 2026.
A Tapestry of Incentives
California‘s solar incentives, each illuminating a unique pathway toward sustainability:
- Residential Clean Energy Tax Credit (Federal)
- Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) program (Residential)
- LADWP – Net Metering (Utility)
- Self-Generation Incentive Program (State)
- Property Tax Exclusion for Solar Energy Systems (State)
- City of San Francisco – Low-Income Solar Inverter Replacement Program (City)
- Net Billing (NEM 3.0) (State)
- Western Riverside Council of Governments – HERO Financing Program (Local)
- Sonoma County – Energy Independence Program (Local)
- Silicon Valley Power – Low Income Solar Grant Program (Utility)
Customized Solar Panel Installation Costs
Here’s a glimpse into the average cost of solar panel installation in California, tailored to your system size:
System Size | Cash Purchase (After Tax Credit) | Financed Purchase (After Tax Credit) |
4kW | $11,624 | $12,438 |
5kW | $14,040 | $15,023 |
6kW | $16,050 | $17,174 |
7kW | $18,599 | $19,901 |
8kW | $21,464 | $22,966 |
9kW | $23,364 | $24,999 |
10kW | $25,780 | $27,585 |
Why Solar is Still Worth it in California: Rising Electricity Costs
- Despite lower compensation rates, solar adoption remains viable due to increased electricity prices.
- Time-of-Use (TOU) rates encourage energy consumption during low-cost periods and reduce usage during high-cost hours.
Time-of-Use Rates for California’s IOUs
Pacific Gas and Electric (PG&E)
Rate Plan | Time Period | Rate (¢/kWh) | 2022 Rates | 2023 Rates | Percent Increase |
Summer Peak | 4 pm – 9 pm | 54.6 | 52.9 | 54.6 | 3% |
Summer Partial-Peak | 3 pm – 4 pm, 9 pm – 12 am | 38.5 | 36.8 | 38.5 | 5% |
Summer Off-Peak | All other hours | 32.8 | 31.1 | 32.8 | 5% |
Winter Peak | 4 pm – 9 pm | 31.5 | 29.4 | 31.5 | 7% |
Winter Partial-Peak | 4 pm – 9 pm (weekends in summer, every day in winter) | 29.3 | 27.2 | 29.3 | 8% |
Winter Off-Peak | All other hours | 27.9 | 25.8 | 27.9 | 8% |
- PG&E raised electricity prices by 3% to 8% in 2023, depending on the time of day.
Southern California Edison (SCE)
Rate Plan | Time Period | Rate (¢/kWh) | 2022 Rates | 2023 Rates | Percent Increase |
Summer Peak | 4 pm – 9 pm (weekdays) | 62.3 | 53.9 | 62.3 | 16% |
Summer Mid-Peak | 4 pm – 9 pm (weekends in summer, every day in winter) | 36.5 | 34.4 | 36.5 | 6% |
Summer Off-Peak | 8 am – 4 pm, 9 pm – 8 am | 24.3 | 23.2 | 24.3 | 5% |
Winter Mid-Peak | 4 pm – 9 pm (every day) | 56.6 | 49.4 | 56.6 | 15% |
Winter Off-Peak | 8 am – 4 pm | 22.3 | 21.4 | 22.3 | 4% |
Winter Super Off-Peak | 8 am – 4 pm (winter) | 22.3 | 21.4 | 22.3 | 4% |
- SCE raised electricity prices by 4% to 16% in 2023, depending on the time of day.
San Diego Gas & Electric (SDG&E)
Rate Plan | Time Period | Rate (¢/kWh) | 2022 Rates | 2023 Rates | Percent Increase |
Summer Peak | 4 pm – 9 pm | 81.6 | 63.9 | 81.6 | 28% |
Summer Mid-Peak | 10 am – 2 pm (March & April, weekdays), 12 am – 2 pm (weekends & holidays) | 48.1 | 39.1 | 48.1 | 23% |
Summer Off-Peak | All other hours | 15.4 | 10.2 | 15.4 | 51% |
Winter Mid-Peak | 4 pm – 9 pm (every day) | 51.1 | 41.3 | 51.1 | 24% |
Winter Off-Peak | All other hours | 44.8 | 36.6 | 44.8 | 22% |
Winter Super Off-Peak | 12 am – 6 am (weekdays), 10 am – 2 pm (March & April, weekdays), 12 am – 2 pm (weekends & holidays) | 14.5 | 9.6 | 14.5 | 51% |
- SDG&E raised electricity prices by 22% to 51% in 2023, depending on the time of day.
California’s Self-Generation Incentive Program (SGIP)
- NEM 3 aims to boost battery adoption; CPUC allocates $900 million to SGIP.
- SGIP offers rebates based on utility company, battery size, and income status.
SGIP Rebate Values for Residential Electricity Customers
PG&E | SCE | SDG&E | SCG (Not An IOU) | |
Small Residential Storage | $150/kWh | $150/kWh | $150/kWh | $200/kWh |
Residential Storage Equity (low-income) | $850/kWh | $850/kWh | $850/kWh | $850/kWh |
Equity Resiliency (low income + high fire risk) | $1,000/kWh | $1,000/kWh | $1,000/kWh | $1,000/kWh |
- Rebate values may decrease over time due to a tiered rate structure.
Maximizing Savings with Solar-Plus-Battery Systems under NEM 3
- Batteries add $10K to $20K to solar system cost but significantly increase savings.
- Solar-plus-battery systems yield higher savings during peak electricity cost hours.
- Potential 20-year savings and payback period examples provided for PG&E, SCE, and SDG&E customers.
Savings with PG&E (Example)
Solar-plus-battery | Solar-only | |
Solar cost (before incentives) | $26,000 | $26,400 |
Storage cost (before incentives) | $13,000 | N/A |
Federal ITC value | $11,820 | $7,920 |
SGIP rebate value | $1,500 | N/A |
Net investment | $26,080 | $18,480 |
Avoided 20-year electricity costs | $73,080 | $43,880 |
Net 20-year electricity cost savings | $47,000 | $25,400 |
Payback period | 9 years | 10 years |
Savings with SCE (Example)
Solar-plus-battery | Solar-only | |
Solar cost (before incentives) | $26,000 | $26,400 |
Storage cost (before incentives) | $13,000 | N/A |
Federal ITC value | $11,820 | $7,920 |
SGIP rebate value | $1,500 | N/A |
Net investment | $26,080 | $18,480 |
Avoided 20-year electricity costs | $80,880 | $39,980 |
Net 20-year electricity cost savings | $54,800 | $21,500 |
Payback period | 8 years | 10 years |
Savings with SDG&E (Example)
Solar-plus-battery | Solar-only | |
Solar cost (before incentives) | $26,000 | $26,400 |
Storage cost (before incentives) | $13,000 | N/A |
Federal ITC value | $11,820 | $7,920 |
SGIP rebate value | $1,500 | N/A |
Net investment | $26,080 | $18,480 |
Avoided 20-year electricity costs | $102,780 | $51,280 |
Net 20-year electricity cost savings | $76,700 | $32,800 |
Payback period | 7 years | 9 years |
Timing Considerations for Solar Adoption
- Lock in higher export rates and potential adders by connecting solar systems to the grid by 2023.
- Deadline until 2025 to lock in current export rates; afterward, rates adjust every two years.
- Adders available until 2028, with rates decreasing each year.
Billing under NEM 3
- NEM 3 requires monthly electric bill payments; true-up annually.
- Lower export credits; compensate based on Net Surplus Compensation Rate for leftover credits.
- Optimal interconnection in late winter/early spring to build credits for summer use.
By understanding the evolving rates, incentives, and timing considerations, Californians can make informed decisions to maximize their solar savings under NEM 3.
Assessing the Investment
In a strategic move, California offers a property tax exemption for solar panel systems. While adding solar panels augments your property’s value, this exemption ensures that an augmented tax burden doesn’t accompany this enhancement.
Ultimately, deciding to invest in solar panels depends on individual circumstances, including financial considerations and lifestyle preferences. However, considering California’s sunny climate, investing in solar panels is a smart and forward-thinking choice.