Is Solar Worth It in California? (2022 Homeowner's Guide)
Here’s a quick overview of solar viability in California:
- California ranks 1st in the country for solar installations.*
- The average cost of electricity is 20.45 cents per kilowatt-hour.**
- The average solar payback period is 8 years.***
- Homeowners are eligible for the Self-Generation Incentive Program (SGIP) and the federal solar investment tax credit (ITC)
- The average homeowner saves $29,734 over the lifetime of their solar system.***
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California consistently ranks among the best states in the country for solar-friendliness, and it’s currently the best place in the nation to convert to solar energy. Californians pay an average of $16,380 before the federal tax credit, or $12,121 after the credit. This is well below the national average, and residents also enjoy a number of solar incentives provided by the state and the federal government that increase the value of solar panels overall. Below, you’ll find information on how to determine if solar panels would benefit you and your home, the benefits you’ll enjoy when you go solar in California and some things to consider leading up to and throughout the conversion process.
How to Figure Out if Solar Panels Are Worth It in California
Even though California is the number one state in the country for solar conversions, going solar won’t be right for every homeowner in the area. Determining if solar will benefit you takes some careful calculations, and there are several things that can influence your decision. We’ll discuss the most significant factors below.
What’s Your Home Electricity Consumption?
Most importantly, you’ll want to consider how much energy your home uses in an average month, as your solar panels will slowly pay for themselves by reducing your electricity costs. Solar panels are generally considered valuable in homes that use more than 500 kilowatt-hours every month. You can determine your average energy usage by looking at your past electric bills. In California, the typical consumption is just 572 kWh. Homeowners who use much less than the average might find that the return on investment is too low to make going solar a worthwhile endeavor. However, the average cost of energy should also be considered. We’ll discuss this in greater depth below, but know that most CA residents will still benefit from solar conversion even if their energy needs are a bit low.
How Much Is It To Go Solar in California?
The average price of solar panels in California is around $16,380 before the federal tax credit or $12,121 after the credit is taken into consideration. This assumes the typical price of $2.73 per watt, which is slightly above the national average of $2.66, and the average system size needed to offset electric consumption, which is 6 kW, well below the national average. Solar panels are more valuable in areas where electricity rates or energy usage is high. Although Californians use far less energy than most residents throughout the country, they pay an average of 20.45 per kilowatt-hour, which is significantly more expensive than the average of 13.15 in the US. Given the very high price of power, most Californians will find solar panels well worth the investment.
What’s the Payback Period for Solar in California?
In most cases, solar panels pay for themselves by providing you with energy savings. The time it takes panels to pay themselves off is referred to as the solar panel payback period. The average payback period in the United States is 12 years, but the high cost of electricity and the small solar system requirements in California allows homeowners to pay off their panels in an average of just 8 years. A payback period anywhere between 5 and 11 years in California is considered normal. If you use a solar calculator to estimate your payback period and find that it will take longer than 11 years, your overall savings will likely be below the state average of $29,734. You’ll still save money in most cases with a longer payback term, but it will take more time to break even.
What Are Average Buy-Back Rates in California?
Most states have energy buy-back programs or net metering policies that allow solar customers to sell any excess energy production back to their local utility company for a credit on their energy bill or for a profit. The California Public Utilities Commission mandates that all utility providers offer net metering, but it doesn’t specify the rate at which you’re credited for the energy you send to the grid. The specific policy available will depend on your utility provider. Luckily, many electric companies in CA will credit customers at the retail rate, which is the best-case scenario. Given the high cost of electricity in the area, it’s crucial to minimize the energy you pay for, so you might want to couple your panels with a battery backup to maximize your savings if your utility company has a sub-optimal net metering policy.
How Much Sun Does Your Roof Receive?
Solar panels are only as efficient as the sunlight they receive, so the amount of sun that normally hits your roof throughout the day is an important thing to consider. California as a whole experiences an incredible 278 days of sunshine a year, which means that solar panels are a great option for most residents. However, there are some property-specific things you’ll need to consider, like shading from trees or nearby buildings and where your roof faces. Solar panels will be much less valuable on properties with heavy shade, and homes with north- or east-facing roofs aren’t ideal for panels. You can have a professional solar panel installer assess your property for solar panel viability if you’re unsure of the amount of sun your roof gets daily.
What’s the Outlook on Solar in California?
California was an early adopter of solar energy, and the industry within the state has only grown since. Residential solar installations have grown consistently over the past decade, and there are no signs of a downturn in the near future. The State of California is environmentally friendly in general, so the current solar incentives make it one of the most solar-friendly places in the country. The policies and incentives are likely to improve, if anything, going forward.
Benefits of Solar Energy in California
Going solar is worthwhile for most homeowners, but many California residents aren’t fully aware of the benefits of going solar in the Golden State. Below, we’ll discuss some of the financial and environmental upsides to installing solar panels in California.
Electricity Bill Savings
Solar panels typically pay for themselves because they provide savings on your electric bills from month to month. This is one of the most significant financial benefits of going solar, especially in an area like California, where monthly electric bills are higher than the national average. Most Californians pay around $116.94 each month for power, so you’ll save just over $1,400 annually if you can eliminate your energy bill. The average lifetime savings enjoyed by California solar customers is around $29,734, and that’s after the upfront costs of going solar are recuperated. Plus, going solar means you’ll be less reliant on your power company, so you’ll essentially lock in electricity rates for the 25+ years your panels are expected to perform.
Lower Taxes & Access to Other Incentives
California is one of the best states for solar incentives, and residents receive them from both the state and the federal government. Perhaps most notable is the federal credit (ITC), which is an incentive offered by the federal government as a credit to your federal income tax liability. The ITC is for 26% of your entire solar power system cost, which, in California, averages out to $4,259. Below are some of the other solar incentives available in California:
- Self-Generation Incentive Program (SGIP): This is a statewide solar incentive that provides solar customers with a rebate for all solar storage installation costs.
- Active Solar Energy System Property Tax Exclusion: This is a property tax exemption that prevents your solar panels from causing your property taxes to go up.
- Single-Family Affordable Solar Homes (SASH) Program: This is an incentive to make solar equipment more affordable and accessible to low-income homes.
Home Resale Value Increase
One of the most significant benefits enjoyed by solar customers is the fact that panels may increase home value. According to a research study done by Zillow, solar panel installation will bump up your home value by an average of 4.1%.3 In California, where the average property costs around $758,360, that’s an expected value increase of approximately $31,093! This bump in value could be even higher in more expensive areas, like Beverly Hills, Los Angeles, San Diego and San Francisco. It’s worth mentioning that this value increase is only expected if you use cash or a loan to acquire your panels. Leases and power purchase agreements (PPAs) will not boost your home value.
Clean, Renewable Energy
Finally, there are some environmental benefits to converting to solar energy as well. Most notably, you’ll reduce your carbon footprint, help reduce pollution and help battle global warming. You’ll also become less reliant on your energy company and fossil fuels as a whole, so you’ll be free from the expected increases in electricity costs in the future.
What to Look Out For When Considering Solar in California
Going solar in California is worth it for most homeowners, but even if you confirm that it makes sense for your home, you’ll still have a few things to think about. Below, we’ll discuss some additional considerations you should make when converting your home to clean energy.
Of course, every homeowner will be concerned with the upfront cost, especially in an area like California, where the average per-watt cost for solar equipment is above the national average. You can keep your initial investment amount down by opting for affordable solar brands, limiting the add-on equipment — like solar batteries and EV chargers — you install and choosing a no-money-down loan option. We do not recommend solar leases or power purchase agreements (PPAs), as these options are rarely as beneficial as financing or buying your panels outright.
As we mentioned above, solar panels typically pay for themselves by reducing or eliminating your electric bills. The estimated time it takes for the panels to recuperate the total system cost — also called the payback period — is a crucial piece of information that can help you estimate how much money your photovoltaic system will save you and when you’ll start to see a return on your investment. If your payback period is longer than the upper average of 11 years in California, the amount of money you’ll get back will be lower and will take longer to realize.
Net Metering Policies in California
Net metering is a policy that lets you sell any excess energy production for a credit to your electric bill — for power pulled from the grid at night or on cloudy days, for example. The State of California mandates that all utility providers offer net metering to customers, but the policy can vary depending on your electric company. We recommend you check with your provider before signing anything, and remember that you can install a solar battery — and take advantage of the SGIP incentive — to help eliminate your utility bills if the net metering policy available isn’t ideal.
Pending Policies & Changes to Incentives
The solar industry is relatively young in the grand scheme of things, and it’s constantly changing throughout the country and especially in solar-friendly states like California. While the policies and incentives make California the number one state for solar conversions, it’s possible that things will improve, making the state even more solar-friendly. It’s not recommended to wait for better incentives to come along because you could start saving money sooner if you install panels now, but it’s worth doing some research to see if rebates or policies have gotten better before you begin the process.
Weather & Climate in California
California residents are spoiled by 278 sunny days per year, which is 135% of the national average. The weather is extremely conducive to solar energy, and with a general lack of extreme weather in most cities, the majority of homeowners don’t have to worry too much about damage to their panels. In some parts of California, cloudy days and rainfall are more common, particularly in the mountainous portions of the state. Solar panels will be less efficient on cloudy days, but even the least sunny parts of California receive more sun than much of the country. Additionally, rainfall can help keep your panels clean, which will increase the amount of sunlight they can absorb when it’s sunny. Overall, the weather is not much of a concern for California solar customers.
Companies Pushing Solar Leases or PPAs
Finally, it’s important to be aware that not all solar panel installation companies are the same, and there are some disingenuous installers out there, especially in places like California, where the demand for solar is so high. You should be keenly aware of companies pushing solar system leases and power purchase agreements (PPAs) or those that promote these purchase options by offering “free panels.” These options are never as beneficial as a cash purchase or finance, as they don’t increase your home value, they don’t let you benefit from the federal tax credit and they provide far fewer solar savings over time. Unfortunately, California has been home to many solar scams, including installers posing as the local government or utility companies, offering unrealistic tax benefits that won’t come to fruition and even massive scams that defrauded investors and homeowners out of millions of dollars. You need to be careful which company you hire to handle your rooftop solar project. We strongly recommend opting for a reputable and vetted solar company with a proven track record for success.
Wrap Up: Is Solar Worth it in California?
Given the high cost of energy in California and the abundant sunlight residents experience throughout much of the year, most CA residents will find that installing solar panels is well worth the investment. However, solar conversion is not ideal for everyone, so it’s best to use a solar calculator to estimate your upfront cost of solar panels, your payback period and your lifetime savings before you commit to anything. In most cases, you’ll need to consider the size of the solar panel system you need, the amount of sunlight your roof gets, your monthly energy needs and more before confirming if solar is a good option for your home. No matter what, we suggest contacting a vetted solar installer to help you figure out if solar will benefit you.
Frequently Asked Questions
Given the immense popularity of solar panel installation in California, we’re not surprised to get questions about the process and the benefits from CA residents daily. Below are some of the questions we see most often, along with our responses.
The answer to this question will depend on quite a few factors specific to you and your home, so there is no universal answer. Your solar panel payback period will depend on your monthly energy consumption, the size of the system you need, shading on your property, the net metering policy offered to you by your utility company, and more. The only way to get an accurate timeline is to have a solar installer assess your home and provide an estimate. With that being said, the average Californian finds that their panels pay for themselves within 8 years, but a period between 5 and 11 years is considered normal for the area.
In almost every case, yes, solar panels will save you money. Figuring out your estimated lifetime savings is one of the crucial things to do before committing to solar conversion, so you can figure this out upfront. The number will be based on the size and cost of your system and how much money the panels will save you on your electric bills monthly. Given the high cost of electricity in California, the average homeowner in the state saves around $116.94 monthly on energy bills, coming out to a total savings of $29,734 after the panels pay for themselves.
Yes! One of the most significant benefits of going solar is the boost in home value panels provide. Zillow estimates that your home value will jump by around 4.1 percent when you go solar, which comes out to an average value increase of $31,093 in California. Coupled with California’s property tax exemption that prevents your property taxes from going up, as a result, this is a massive solar incentive.
Yes, permits are required for solar panels in California. If you use a reputable solar installer, the company will most likely handle the entire permitting process for you to save you time and frustration. Permits help ensure that your system is installed properly and that your structure can safely support the weight of the panels.
You can install your own panels in California, but DIY installation is not recommended. Getting up on your roof is inherently dangerous, and mistakes could be quite costly. You’ll still need an electrician to connect your panels to your electrical system and the grid, so you’ll still need professional help. Overall, it’s best to leave solar panel installation to the professionals.