How Much Will I Save With Solar? (California)

Every solar company will tell you solar “eliminates your electricity bill.” Under California’s current NEM 3.0 policy, that’s almost always an exaggeration. For many homeowners, the real savings are still large enough to make solar genuinely compelling. The problem is that the savings vary enormously based on your specific situation, and most calculators are designed to make the numbers look good rather than be accurate.

Here’s how to actually evaluate it.

The 30-Second Version

For a typical California homeowner paying $200–$350/month in electricity:

• A properly-sized solar system will reduce your bill by 60–85%, not eliminate it (under NEM 3.0)
• Payback is 10–14 years at full installed cost (the 30% federal tax credit expired December 31, 2025)
• Lifetime net savings over 25 years: $30,000–$70,000 depending on your utility and rate trajectory

Not ready for rooftop? Balcony solar vs rooftop compares a $700 plug-in kit against a full array. The federal tax credit expiration hit rooftop harder than balcony.

Those ranges are wide because what matters most is your utility (SDG&E customers have the fastest payback), your roof orientation (south/west is meaningful), and whether you add battery storage — the battery backup calculator runs that economics for your usage.

What Does a System Cost?

A 7-10 kW system, the typical size for a California 3-4BR home, costs:

System Size	Installed Cost (2026)
6 kW	~$19,000
8 kW	~$25,000
10 kW	~$31,000

The 30% federal Investment Tax Credit (Section 25D) expired December 31, 2025. Systems placed in service in 2026 pay full price. That adds roughly 3–4 years to payback vs. 2024–2025 pricing. Details: federal solar tax credit 2026.

These are all-in installed costs. Per-watt prices have come down substantially; $2.50–$3.20/W installed is a reasonable range for a competitive California market in 2026.

How NEM 3.0 Changed the Calculation

This is the most important thing to understand if you’re evaluating solar in California right now. NEM 3.0 (effective April 2023) changed how surplus generation is credited:

Under NEM 2.0: Excess electricity you exported to the grid was credited at the full retail rate, roughly $0.30-$0.45/kWh. A sufficiently large system could nearly zero out your bill.

Under NEM 3.0: Excess exports are credited at the wholesale “avoided cost” rate, about $0.03-$0.08/kWh during most hours. When you buy that electricity back in the evening, you pay full retail: $0.28–$0.52/kWh.

The practical effect: a solar-only system that generates more than you can use during the day is essentially donating surplus electricity to PG&E at pennies, then buying it back at dollars in the evening.

This is why battery storage has become much more important under NEM 3.0. A battery lets you store midday solar surplus and use it during the 4-9pm peak period, effectively buying power at your own generation cost (about $0.05-$0.08/kWh amortized) instead of at peak retail prices.

If you installed under NEM 1.0 or NEM 2.0, this isn’t just a concern for new buyers. Legacy export rates only last 20 years from your interconnection date, and what happens when that contract expires is worth checking well before it does.

The Math on Battery Storage

A Tesla Powerwall 3 runs about $10,000 installed. No federal credit applies to 2026 purchases.

Annual savings from using it to shift solar to evening peak:

• 13.5 kWh capacity × daily cycling
• Shifting at $0.45/kWh peak vs. $0.05/kWh self-storage cost
• Annual savings from the battery alone: $1,800–$2,400/year

Payback on the battery: 3–4 years. That’s a genuinely good investment at current California peak rates.

The implication: for PG&E, SCE, and SDG&E customers evaluating solar in 2026, solar + storage is usually the right answer, not solar alone.

Realistic Scenarios

Scenario: 3BR Sacramento home, PG&E, 10,000 kWh/year, 8kW solar + Powerwall

• System cost: ~$25,000 + $10,000 battery = $35,000
• Annual savings: ~$2,800–$3,400
• Simple payback: 10–12 years

Scenario: 3BR San Diego home, SDG&E, 9,000 kWh/year, 8kW solar + Powerwall

• System cost: ~$25,000 + $10,000 battery = $35,000
• Annual savings: ~$3,400–$4,200 (SDG&E’s rates are higher)
• Simple payback: 8–10 years

Scenario: 3BR LA home, SCE, 9,000 kWh/year, solar only (no battery)

• System cost: ~$25,000
• Annual savings: ~$1,600–$2,200 (limited by NEM 3.0 export credits)
• Simple payback: 11–15 years

What to Be Skeptical Of in Solar Quotes

“We’ll eliminate your electric bill.” Almost never true under NEM 3.0 without a battery. Expect to still pay the statewide Base Services Charge (about $24.15/month, less if you qualify for CARE or FERA) plus usage charges for evening consumption that exceeds battery capacity. And if you’re comparing quotes outside California, ask whether your utility has a fee that applies specifically to solar owners on top of normal rates. Several do.

Savings projections using 6–8% annual rate increases. California rates have increased this fast recently, but projecting it forward 25 years inflates the NPV numbers substantially. A 3–4% projection is more conservative and more defensible.

Leases. A solar lease means you don’t own the panels, you don’t get the tax credit, and the lease transfers with the home at resale, which complicates the sale. If you can finance a purchase (cash or solar loan), ownership is usually better.

Oversized systems. Under NEM 3.0, there’s less reason to oversize a system, because surplus exports earn very little. Right-sizing to your actual consumption + battery capacity is smarter than the installer’s instinct to sell more panels.

The Quick Test for Whether Solar Makes Sense

Solar makes financial sense when:

• Your monthly bill consistently exceeds $150 (the higher, the faster the payback)
• You own the home and plan to stay at least 7 years
• Your roof has south, southwest, or west-facing sections with minimal shading
• You’re on PG&E, SCE, or SDG&E, the rate structures that reward generation most

At SMUD or LADWP rates (~$0.12–$0.18/kWh), the economics are less compelling and payback extends to 12–15 years.