Lease It, Buy It, or Skip It? A California Homeowner's Guide to Solar in 2026

If you own a home in California, you've probably had at least one solar sales call. The pitch usually sounds great — "no money down," "lock in your rate," "save thousands." But the honest answer to "should I get solar, and should I lease or buy it?" depends heavily on rules that have changed a lot in the last few years. Here's what's actually true right now, and a framework for figuring out where you land.

The Three Options, in Plain English

1. Buy it (cash or solar loan) — You own the panels outright. You get any tax benefits, the system adds to your home's value, and once it's paid off, your electricity is essentially free (minus maintenance).
2. Lease it or sign a Power Purchase Agreement (PPA) — A third-party company owns the system on your roof. You pay them a fixed monthly fee (lease) or a per-kWh rate (PPA), usually lower than your utility rate, but you never own the equipment.
3. Do nothing — Stay on standard utility service and just pay your electric bill.

Each of these has gotten more complicated because of two big regulatory shifts: NEM 3.0 at the state level and the loss of the federal residential solar tax credit at the national level.

California's NEM 3.0: The Rules That Changed Everything

Since April 15, 2023, new solar customers of the three big investor-owned utilities (PG&E, SCE, and SDG&E) have been on the Net Billing Tariff, commonly called NEM 3.0, instead of the older NEM 2.0 program.

The key change: what you get paid for excess solar power you send back to the grid.

• Under NEM 2.0, exported electricity was credited at close to the retail rate — often 25–40 cents/kWh.
• Under NEM 3.0, exports are credited based on an "Avoided Cost Calculator" that reflects the actual value of that power to the grid at the time it's sent. This value swings by hour and season, and during the sunniest midday hours (when solar exports the most) it's often just 5–10 cents/kWh — a 75%+ cut compared to NEM 2.0.

What this means practically:

• Battery storage went from "nice to have" to "financially essential." Because exporting midday solar is now worth so little, the way to actually capture your system's value is to store your own solar and use it yourself in the evening, when utility rates are highest under time-of-use pricing. Systems paired with a battery generally see much better paybacks than panel-only systems.
• Payback periods stretched out. A cash-purchased, panel-only system that used to pay for itself in 5–6 years under NEM 2.0 now often takes 9–12 years under NEM 3.0. Add a battery and design the system around self-consumption, and paybacks often come back down to roughly 7–9 years.
• Customers who were already on NEM 2.0 or NEM 1.0 were grandfathered for 20 years from their interconnection date, so if you already have solar under the older rules, none of this affects you yet.
• Community Choice Aggregators (CCAs) — the local power providers many cities use instead of the big IOUs — largely followed the same net billing framework, though credit values can differ slightly by CCA.
• The Self-Generation Incentive Program (SGIP) still offers rebates for battery storage, with the largest incentives reserved for low-income households and customers in wildfire high-risk/PSPS areas.

The Federal Tax Credit Just Disappeared for Homeowners

This is the part a lot of homeowners don't know yet. For years, the federal Residential Clean Energy Credit (Section 25D) let anyone who purchased a solar system (cash or loan) deduct 30% of the cost from their federal taxes. That credit was eliminated for residential systems placed in service after December 31, 2025, under the tax legislation signed in mid-2025.

This is a meaningful shift in the buy-vs-lease math:

• If you own the system, there is no longer a federal tax credit to offset the cost. The upfront price of buying just got 30% more expensive in effective terms.
• Leases and PPAs work differently. The third-party company that owns the system may still be able to claim a commercial clean energy credit under separate provisions and pass some of that value to you through your rate — though how much of a discount actually reaches customers depends on the company and market conditions, and this could shift further with future legislation.

Net effect: leasing/PPA became relatively more attractive from a pure cost standpoint compared to a year or two ago, even though ownership still wins on long-term value if you can afford it.

Buy vs. Lease vs. Nothing: The Real Tradeoffs

So — At What Point Does Each Option Actually Make Sense?

Buying makes the most sense when:

• You plan to stay in the home 8–10+ years (long enough to clear the extended NEM 3.0 payback period).
• You have cash or can get a low-interest solar loan.
• You're willing to add a battery — under NEM 3.0, a battery is close to mandatory for a purchase to pencil out well.
• You want the long-term payoff: once the system (and loan, if any) is paid off, your electricity cost drops close to zero for the remaining life of the panels (25–30 years).

Leasing or a PPA makes the most sense when:

• You want savings starting immediately with no upfront cost and don't want to manage ownership, maintenance, or the (now-gone) tax credit paperwork.
• You expect to move within the next several years and the lease can transfer, or you're okay negotiating a buyout at sale.
• Your credit or cash position makes a loan difficult, but you still want to hedge against rising utility rates.
• You're comfortable with the tradeoff of lower total savings in exchange for zero risk and zero upfront investment.

Skipping solar altogether makes sense when:

• You plan to sell or move within the next 3–5 years — most solar arrangements need time to pay off, and a lease can actively complicate a home sale.
• Your electricity usage is genuinely low (small household, efficient home, mild climate) — the savings may not justify any option.
• You live somewhere with significant roof shading, an aging roof that needs replacement soon, or an HOA/structural issue that makes solar impractical.
• You'd rather wait and see how the market responds to the loss of the federal credit — panel prices and financing structures may adjust over the next year or two.

The Bottom Line

Two years ago, the easy advice was "buy if you can, solar pays for itself fast." That's no longer quite true. NEM 3.0 made ownership less lucrative without a battery, and the end of the federal tax credit made buying more expensive up front — while leases and PPAs became comparatively more competitive. But ownership still wins on total lifetime savings and home value for people who can stay put and afford the upfront cost.

The honest answer for most Californians in 2026 is: get 2–3 quotes that include battery storage, ask each installer to model your bill under your actual utility's current Net Billing Tariff rates, and compare the true 20-year cost — not just the monthly payment. Rules and incentive levels do keep shifting, so before signing anything, check the current status of programs through your utility, your CCA (if applicable), and the CPUC's official Net Billing Tariff page for the latest figures, since some of these numbers can change year to year.

This post reflects information available through early 2026. Regulations, tax credit status, and utility rate structures can change — verify current terms with your utility and a licensed solar installer before making a decision.