Kilowatt Kit
🇺🇸 California Published 2026-05-07 · 10 min read

California Solar Incentives 2025: SGIP Battery Rebate, NEM 3.0 & Tax Exemptions

California is the US's largest solar market — but the rules changed significantly with NEM 3.0 in 2023. Here's the current incentive landscape: what changed, what's still valuable, and how to maximise savings with SGIP, federal ITC, and property tax exemptions.

MUK
Written by
Muhammad Umar Khan

Muhammad founded KilowattKit after spending hours trying to decode confusing electricity bills — and realising there were no simple, jargon-free tools to help ordinary homeowners understand their energy costs. He researches electricity rates, EV charging, solar payback, and heat pump economics across the US, UK, Canada, and Australia.

California Solar Incentives at a Glance

30%
Federal ITC (all states)
SGIP
Battery rebate programme
100%
Property tax exemption
NEM 3.0
Current export tariff

NEM 3.0: What Changed and What It Means for You

California's switch from NEM 2.0 to NEM 3.0 (Net Billing Tariff) in April 2023 was the most significant change to California solar economics in a decade. Understanding it is essential before deciding on solar + battery vs solar-only.

Feature NEM 2.0 (pre-April 2023) NEM 3.0 (current)
Export rate ~$0.25–$0.35/kWh (full retail) ~$0.04–$0.08/kWh (avoided cost)
Best strategy Export surplus — it's worth retail rate Self-consume or store — export earns little
Battery value Moderate — export was already valuable High — battery stores cheap solar, avoids $0.35–$0.50/kWh peak
Typical payback (solar only) 5–7 years 9–11 years
Typical payback (solar + battery) 6–8 years 7–9 years (improved economics)

Under NEM 3.0, the solar + battery combination has closed the gap with solar-only — and in many cases become the better investment. The SGIP rebate makes it even more compelling.

SGIP: California's Battery Storage Rebate

The Self-Generation Incentive Program (SGIP) is administered by the California Public Utilities Commission (CPUC) and provides direct rebates for home battery storage. It's funded through PG&E, SCE, and SDG&E ratepayers.

Standard
~$150–$300
per kWh of storage
(current step varies)
Equity
~$850/kWh
Low-income or
disadvantaged communities
Equity Resiliency
~$1,000/kWh
High fire-risk + medical
or repeat PSPS shutoffs

SGIP worked example: 13.5kWh Powerwall in San Jose (standard rate, Step 5)

Tesla Powerwall 3 (13.5kWh) installed $12,000
Federal ITC on battery (30%, ≥75% solar-charged) −$3,600
SGIP rebate (~$200/kWh × 13.5kWh) −$2,700
Net battery cost ~$5,700

SGIP rebate is applied upfront by the contractor. Actual step and rate vary — check cpuc.ca.gov/sgip for current availability.

Other California Solar Incentives

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Property Tax Exemption — 100%, permanent

California's Active Solar Energy System exclusion removes the added assessed value of your solar system from property taxes — permanently, not time-limited. A system that adds $25,000 to your home's market value saves you ~$280–$400/year in property taxes (at California's 1.1–1.6% effective rate). This exclusion applies to solar, solar + storage, and battery-only storage systems.

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Sales Tax Exemption — Partial (manufacturing equipment)

California doesn't broadly exempt residential solar equipment from sales tax. However, solar panels manufactured in California may qualify for the manufacturer's exemption, and some installers apply for the partial manufacturing equipment exemption. This is less impactful than other states' blanket solar sales tax exemptions — verify with your installer before assuming this applies.

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SOMAH — Solar for Renters

Solar on Multifamily Affordable Housing (SOMAH) provides solar installations for affordable housing complexes, with direct bill credits to low-income tenants. If you're a renter in a SOMAH-eligible building, you may receive solar bill credits without needing to install anything yourself. Managed by the CPUC with funding from PG&E, SCE, SDG&E, and PacifiCorp.

Calculate your California solar payback

Use our solar savings calculator to estimate your annual savings, payback period, and 25-year return based on your system size and electricity usage.

Solar payback calculator →

Frequently Asked Questions

What happened to NEM 2.0 in California? ▼
California's NEM 2.0 (Net Energy Metering) allowed homeowners to receive full retail-rate credit for every kWh exported to the grid — typically $0.25–$0.35/kWh. In April 2023, the California Public Utilities Commission (CPUC) replaced NEM 2.0 with the Net Billing Tariff (NBT), commonly called NEM 3.0. Under NEM 3.0, the export rate dropped significantly — to approximately $0.04–$0.08/kWh (reflecting the "avoided cost" to utilities, not retail rate). This dramatically changed the solar economics: self-consumption is now far more valuable than export, making batteries a much stronger investment in California.
Is it still worth installing solar in California under NEM 3.0? ▼
Yes, but the business case has shifted. Under NEM 2.0, solar-only systems had excellent payback periods of 5–7 years. Under NEM 3.0, a solar-only system's payback extends to around 9–11 years for average California electricity prices. However, a solar + battery combination remains very attractive: the battery stores daytime generation for evening use (avoiding paying peak rates of $0.35–$0.50/kWh) and can export during peak grid demand periods when rates are higher. The SGIP battery rebate further improves the economics significantly.
How does the SGIP battery rebate work? ▼
The Self-Generation Incentive Program (SGIP) provides rebates for behind-the-meter energy storage installed at homes and businesses. Residential rates vary by "step" — when a step is fully subscribed, the programme moves to the next step at a lower rate. Equity tiers (for low-income customers and those in high fire-risk areas) receive significantly higher rates, sometimes 3–4× the standard residential rate. Check the CPUC's SGIP website or contact a participating contractor for the current step and rebate level, as rates change frequently.
Can I still get NEM 2.0 terms if I install solar now? ▼
No — NEM 2.0 grandfathering ended for new applications in April 2023. All new solar systems in California are now subject to NEM 3.0 (Net Billing Tariff) terms. Existing NEM 2.0 customers are grandfathered for 20 years from their interconnection date. If you installed solar before April 2023, you retain your NEM 2.0 terms; if you're installing now, NEM 3.0 applies. This makes self-consumption optimisation (via batteries and smart appliances) essential for California solar owners post-2023.
Is there a California state income tax credit for solar? ▼
California does not offer a state income tax credit for residential solar installations. However, California does provide a 100% property tax exemption on the added home value from solar — permanently. This means if your solar system adds $20,000 to your property value, that $20,000 is excluded from your property tax assessment indefinitely. California also exempts the sale of solar equipment from state sales tax (7.25% base rate) under certain conditions. These tax exemptions, combined with the federal 30% ITC and SGIP, form California's overall incentive package.
What is the Self-Generation Incentive Program (SGIP) equity tier? ▼
SGIP has equity tiers that provide much higher rebates to specific groups: (1) Equity customers — defined as low-income or located in a disadvantaged community (as identified by CalEnviroScreen) — receive rebates up to $1,000/kWh. (2) Equity Resiliency customers — in Tier 2/3 high fire-risk areas with a medical baseline or two or more shutoffs in the past year — receive the highest rates, potentially covering most or all battery costs. These equity tiers exist because battery backup is especially critical for communities that face repeated Public Safety Power Shutoffs (PSPS) from PG&E, SCE, and SDG&E.
How do California's incentives stack with the federal 30% ITC? ▼
California's incentives stack well with the federal ITC. Example for a 8kW solar + 13.5kWh battery system costing $30,000: Federal ITC (30%) = $9,000 reduction in tax bill. SGIP battery rebate (varies, assume $200/kWh × 13.5kWh) = $2,700 off upfront. Property tax exemption = zero additional property tax on added value (ongoing saving worth potentially $200–$400/year). Net cost: ~$18,300 before financing. The SGIP rebate is not taxable income and does not need to be subtracted from the ITC base cost (the ITC is calculated on the full purchase price before SGIP rebate).
Sources: California Public Utilities Commission (CPUC) — NEM 3.0 Decision (D.22-12-056, 2022); CPUC SGIP Programme Statistics (Q1 2026); California State Board of Equalization — Active Solar Energy System Exclusion (SB 1 2008); California Air Resources Board; LBNL Tracking the Sun (2024). NEM 3.0 export rates and SGIP step levels change frequently — always confirm with your installer and the CPUC before making investment decisions.