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Why the end of the ITC 30% isn’t the end of solar in California
- Planet Solar
- 19 hours ago
- 4 min read
California homeowners and businesses are hearing the same headlines: utility rates keep climbing, federal tax incentives have been rewritten, and installers are booked out. That combination makes for scary-sounding headlines, but it isn’t the end of the solar story.
In many parts of the state, especially inside the Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and Imperial Irrigation District (IID) territories. Rapidly rising retail electricity costs actually strengthen the financial case for solar, even without the 30% residential tax credit ending December 31, 2025
Below we explain the concrete numbers, the near-term outlook for rates, the practical impact on residential and commercial customers, and the pragmatic steps owners should take now.
What the rates look like today and how fast they’re rising
PG&E: Recent PG&E rate documents show average at 44¢/kWh with them rising to 60¢/kWh for peak pricing.
SCE: Southern California Edison communicates an average residential rate of about 31.2¢/kWh without the climate credit rising to an estimated 35.3¢/kWh
IID (Imperial Irrigation District): IID’s adopted 2025 rate updates show residential rates moving to 19.8¢/kWh in 2025, a very large percent increase from prior years for IID customers.
Many California customers are paying 30-45¢/kWh on average depending on utility and rate plan. The utilities and regulatory filings show authorized/proposed revenue increases to continue in the near term. That makes any kilowatt-hour you can self-generate materially more valuable year after year.
The facts on the tax credit change:
Congress’ July 2025 legislation in the Big Bill ended the 30% residential solar Investment Tax Credit (ITC) effective for expenditures after December 31, 2025. The IRS has updated guidance confirming the residential clean energy credit (section 25D) will terminate for systems placed in service after 12/31/2025. That makes 2025 the last tax year to claim the full 30% residential credit for cash or financed systems.
Two important practical clarifications:
The credit is for the system cost, so it materially reduces upfront net cost for homeowners who qualify.
The ITC ending does not make solar financially hopeless, it changes payback timelines and financing math, but rising retail rates and available state/local incentives often keep the economics positive.
Why solar remains a strong hedge
You’re buying avoided retail electricity which is already extremely expensive. If your utility charges 30-45¢/kWh today, every kWh you offset with rooftop solar avoids that retail cost, not the much lower wholesale cost utilities pay. That delta is the core of residential ROI.
Utility rates are still expected to rise. Utilities are projecting multi-year capital investment and recovery that will keep upward pressure on bills. In other words, the cost of staying grid-dependent is likely to grow, which increases the lifetime value of solar production.
For IID customers, the rates significantly jumped in 2025 from $11.69¢/kWh to 19.8¢/kWh and continued increases through 2027
Commercial rates and demand charges accelerate savings. For commercial customers, demand charges and time-of-use pricing amplify savings potential from properly sized solar + storage systems that shave peak demand and reduce peak-period consumption. Even without the 30% credit, many commercial projects still show attractive multi-year returns because they avoid expensive demand charges.
The realistic tradeoffs customers should expect
Longer payback if you miss the ITC: Yes, a system installed after Dec 31, 2025 will typically have a longer payback than the same system installed earlier with the 30% credit. Expect payback horizons to lengthen by several years depending on system cost and financing.
Lifetime value can still be high: Because retail rates are high and forecasted to grow, lifetime bill savings and protection against future rate spikes compensate for the lost tax credit. In short: you pay more upfront or finance more, but you still reduce future bills dollar-for-dollar at today’s high rates.
What Residential & Commercial customers should do next
Get a site-specific proposal. Ask for tailored proposals with multiple options for savings and ask to include projected utility escalation assumptions. Get multiple proposals from at least 3 companies. Don’t accept a one-size-fits-all ROI.
Compare financing scenarios. Depending on who you work with, you will receive different recommended payment options. Cash, & Financing offers a shorter payback and quicker ROI whereas, loan or PPA is smaller upfront with a longer payback and ROI. Get multiple quotes and options and review what works best for your financial needs.
Batteries are a must have. Batteries increase project cost but can dramatically improve value where TOU/demand charges are high or where customers need backup during outages.
Final note a levelheaded view
Solar is still worth the investment even with the tax credit disappearing. Don't let anyone sell you the end of the year doom and gloom.
Rates will continue to rise and ROI is still there, high and rising retail electricity prices in PG&E, SCE and IID territory mean each kWh you produce yourself is worth more today than it was in the last few years.
For many homeowners and businesses, that means solar paired with batteries, delivers measurable savings and resilience even if payback periods extend modestly without the 30% ITC. Use accurate, site-specific modeling to make the call for your property; blanket headlines don’t capture the nuance that matters for ROI.
If you’d like, we can:
Run a free, no-obligation site analysis showing current and projected savings using your actual utility bill (we’ll model PG&E / SCE / IID rate paths), or prepare a comparison showing “install in 2025 with ITC” vs “install in 2026 without ITC” so you can see the tradeoffs in cashflow and lifetime savings.
Tell us which utility territory you’re in (PG&E, SCE, or IID) and email us a 12-month electricity bill we’ll produce a clear, numbers-based comparison you can act on.
Why the end of the ITC 30% isn’t the end of solar in California
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