⚠️ 2026 update on the federal tax credit
The 30% federal residential solar tax credit (Section 25D) expired on December 31, 2025 for systems you buy with cash or a loan. Cost and savings figures on this page that assume that credit may be out of date. Two things still apply: Nevada's sales-tax and property-tax exemptions and NV Energy net metering, and systems on a lease or PPA may still qualify for a federal incentive through the end of 2027. For numbers that reflect today's incentives, book a free review and talk to a tax professional about your situation.
A Los Angeles homeowner served by LADWP installed an 8 kW solar system paired with a 13.5 kWh battery. Cash cost: $40,600 (the 30% federal credit expired December 31, 2025 for purchased systems, so there's nothing to subtract on a 2026 cash buy). Monthly savings: $234 (versus $389 before solar). Under CPUC NEM 3.0, panels-only would have been the wrong choice. Battery-first is the right one. This case is about making California solar work in 2026 — which requires unlearning everything you knew about California solar from 2020.
Why California Is Different
California has stripped most of the value out of exporting solar back to the grid. Under NEM 2.0 (the old rules), exports paid roughly retail rate. Under NEM 3.0, exports pay an "Avoided Cost Calculator" rate that's typically 75–80% lower than retail. So the old play — oversize the panels and bank credits — doesn't pencil anymore. The right play under NEM 3.0 is: size the panels to your daytime consumption, and store the rest in a battery for evening use.
Note: LADWP is a municipal utility and runs its own program separate from the investor-owned utilities (PG&E, SCE, SDG&E). LADWP's net metering rules are different from CPUC's NEM 3.0 — generally more favorable. But the battery-first logic still applies because of LADWP’s time-of-use rates and the way evening peak pricing works. Details on LADWP’s solar program page.
The Starting Point
Single-family home in the LADWP service area, 2,400 sqft, two adults, one teenager, no EV (yet). Twelve-month average: 1,140 kWh/month. The bill ran $389/month average, peaking at $520 in August because of evening AC usage during heat waves. The roof was clean, south and west exposures, no shade. The household ran most of their high-load activities (laundry, cooking, dishwasher) in the evening — which is exactly when LADWP rates are highest and solar production is lowest.
That mismatch is the central design problem in California. The grid is short on power in the evening, the utility prices that hour aggressively, and rooftop solar produces almost nothing in that window. A battery bridges the gap.
What We Designed
An 8 kW solar system + a 13.5 kWh battery. The panels cover daytime load and charge the battery during peak production hours (10am–2pm). The battery discharges in the late afternoon and evening (4pm–9pm) when LADWP’s time-of-use rates are highest. The home almost never exports to the grid — which is exactly the design goal under any NEM 3.0-style tariff.
This is what "battery-first" means: design to keep your generation behind the meter, where it offsets retail-priced consumption, rather than exporting it for compensated-but-low export rates. Some California installers still pitch panels-only systems with the old "you’ll save $300/month and bank credits" pitch. That pitch is years out of date and the customer ends up disappointed when the credits don’t materialize.
The Numbers
| Item | Before | After |
|---|---|---|
| Monthly LADWP bill | $389 | $155 |
| Annual electric cost | $4,668 | $1,860 |
| Year-1 savings | $2,808 | |
| Solar (8 kW) gross | $24,000 | |
| Battery (13.5 kWh) gross | $16,600 | |
| Combined cash cost | $40,600 | |
| Federal ITC | $0 — expired 12/31/2025 for purchases | |
| Net cash cost | $40,600 | |
| Simple payback | ~13–15 years (cash, post-credit; faster with SGIP) | |
Heads up on the federal credit: the 30% Residential Clean Energy Credit (Section 25D) — which used to cover both solar and storage — expired December 31, 2025 for systems you buy. On a 2026 cash or financed purchase there's no federal credit to claim, for the panels or the battery. A lease or PPA can still capture a federal incentive through the end of 2027. The California-side incentives are unchanged: SGIP rebates for battery storage and NEM 3.0 net-billing still apply, and those are where the value lives now.
What Surprised the Homeowner
That the bill didn't drop to near zero. Coming from Las Vegas-style messaging ("eliminate your bill!"), they expected to see $20-something on the LADWP statement. California rate structures don't work that way — the basic service charge is higher, the time-of-use rates make evening usage expensive even with a battery, and a 13.5 kWh battery doesn't always cover a full evening of summer AC. They went from $389 to $155, which is a 60% reduction. That’s the realistic California outcome under current rules.
The other surprise: the battery as a backup. They didn’t buy it for outage protection, but Los Angeles has had two PSPS-style outages in their neighborhood in the last three years. The battery carried them through both — about 6 hours each — without anyone in the house noticing the grid was down. They told me afterward that the resilience benefit alone justified the upgrade, separate from the time-of-use math.
What We'd Do Differently
I'd have considered a second battery. The 13.5 kWh runs out around 9–10pm on the hottest summer evenings, and the home pulls grid power for the last few hours before solar kicks back in. A second 13.5 kWh battery would have added ~$11,500 net but eliminated almost all evening grid pull. The breakeven on the second battery is longer — maybe 14 years — so it's a comfort call, not an ROI call. We may add it later if rates climb further.
Permitting
LADWP interconnection took 28 days, which is on the slow side but not unusual for the larger municipal utilities. LADBS permit (City of LA building/safety) took 19 business days. No HOA on this property. The total project from contract signature to PTO ran 58 days, which is normal for the LA basin. SDG&E and SCE territories generally process faster than LADWP because of LADWP’s municipal structure.
The Total Cost Stack
- Panels (20 × 400W): $7,200
- Hybrid inverter (solar + battery): $4,400
- Battery (13.5 kWh): $11,500
- Racking, BOS, conduit: $2,900
- Electrical (main panel, automatic transfer switch): $4,200
- Permits + interconnection: $1,100
- Labor: $7,800
- Margin + overhead: $1,500
- Cash price: $40,600
Why This Isn't Typical (or Why It Is)
This is typical California-under-NEM-3.0 math, with the LADWP twist. If you're in PG&E, SCE, or SDG&E territory, NEM 3.0 applies more directly and your export rates are even lower than LADWP. The battery-first principle is the same. Don't let an installer sell you a panels-only system in California in 2026 — the math is broken without storage.
A point I make to every California customer: the rules will keep changing. NEM 1.0 was replaced by NEM 2.0 was replaced by NEM 3.0. There will be NEM 4.0 or whatever the CPUC names the next tariff, and it is unlikely to be more generous to solar exporters. The hedge against that uncertainty is to design for self-consumption — a system whose value doesn’t depend heavily on export rates is more robust to future rule changes. Battery-first design isn’t just optimal under current rules; it’s also defensive against future ones.
And one more practical note. The federal 30% residential credit is already gone for purchased systems — it expired December 31, 2025. Don't plan around a federal credit that no longer exists for a cash or financed buy; only lease/PPA arrangements can still capture a federal incentive, and only through the end of 2027. The numbers here reflect current law: no federal credit on the purchase, with California's SGIP and NEM 3.0 carrying the incentive side.
If you're in LADWP, SCE, or anywhere in California, see the California solar overview or the Los Angeles page. Or request a quote. Compare with our San Diego SDG&E case for a different California utility’s math.