Why Solar Looks Different in 2026 Than It Did Just a Few Years Ago

If you have been paying attention to solar over the last few years, you have probably felt the shift. The conversations sound different. The numbers look different. The recommendations are no longer as simple as they once were. That does not mean solar stopped making sense. It means the environment around it changed, and homeowners are now navigating a very different set of rules, incentives, and tradeoffs than they were even three or four years ago.

As of today, we are officially past the first month of 2026. The federal solar landscape has moved into a new phase, utilities continue to operate under Net Energy Metering 3.0 for most Californians, and financing structures that were once secondary are now becoming primary for many households. Understanding why solar feels different today starts with understanding what actually changed and what did not.

The End of the 30 Percent Federal Tax Credit

For more than a decade, the federal Investment Tax Credit played a major role in shaping how homeowners evaluated solar. Cash purchases and traditional loans were often framed around that 30 percent credit. It reduced effective system cost, lowered loan payments, and made long-term ownership easier to justify on paper.

That incentive officially expired on December 31, 2025.

As of January 2026, homeowners purchasing solar systems directly no longer receive a federal tax credit to offset upfront cost or reduce monthly loan payments. This is one of the biggest reasons solar conversations feel different today. It is not that systems became worse. It is that one of the financial levers that supported ownership-based models is no longer there.

Loans still exist. Cash purchases are still available. But neither option benefits from a federal subsidy the way they did in the past. That alone has shifted how many homeowners evaluate value, risk, and timing.

Why PPAs Are Seeing a Resurgence in 2026

At the same time that homeowner tax credits expired, Power Purchase Agreements and lease-based models became more attractive again. That is not accidental.

Many third-party ownership providers are currently eligible for a higher federal incentive, in some cases up to 40 percent, through extended commercial and bonus credit pathways. Providers such as EnFin, GoodLeap, LightReach, and others are able to use that incentive to subsidize system cost on their side, which directly lowers the monthly payment offered to homeowners.

The result is simple. Monthly payments under a PPA today can be significantly lower than what many homeowners would see with a loan at current interest rates, especially now that there is no tax credit applied to loan structures.

For many households, particularly those focused on cash flow, PPAs are no longer a fallback option. They are becoming the first option considered.

This does not make PPAs inherently better or worse. It simply reflects how incentives and ownership structures interact. When the subsidy lives with the provider instead of the homeowner, the payment math changes.

The Return of Prepaid Leases

Another trend that is beginning to re-emerge in early 2026 is the prepaid lease. This model was popular years ago, then faded as cash purchases and loans dominated the conversation. It is now coming back for a very practical reason.

A prepaid lease allows a homeowner to pay a single, upfront amount for long-term solar usage without monthly payments. In return, they typically receive full equipment warranties, performance guarantees, and service coverage for the duration of the agreement. Because the system is still owned by a third party, the provider can apply their available tax incentives to reduce the prepaid cost.

In many cases, prepaid leases are coming in at a total cost that is lower than a cash purchase would be today, while removing performance risk and maintenance responsibility from the homeowner.

For homeowners who have available capital but want predictability and fewer long-term obligations, this structure is once again making sense.

Financing Is Still Available, But the Math Is Different

Solar loans have not disappeared, but they look very different in 2026. Interest rates have come down slightly from their recent highs, but many lenders are still offering rates around 7.99 percent or higher depending on term length, fees, and structure.

What matters most is not the rate itself. It is the absence of a tax credit to offset principal or monthly cost.

In the past, a loan paired with a tax credit could produce a payment that looked competitive with a PPA while still offering ownership. Today, that offset is gone. The monthly payment you see is largely the payment you live with.

For some homeowners, especially those prioritizing ownership and long-term asset value, loans can still make sense. But it is important to evaluate them honestly, without assuming savings that no longer exist.

Net Energy Metering 3.0 Is Still the Reality for Most Californians

For homeowners served by major investor-owned utilities such as Southern California Edison, San Diego Gas and Electric, and Pacific Gas and Electric, Net Energy Metering 3.0 remains firmly in place.

Under NEM 3.0, exporting excess solar energy to the grid provides far less value than it once did. This fundamentally changes how systems should be designed and how savings are realized. Oversizing solar arrays without storage no longer produces the same economic return. Timing, self-consumption, and load shifting matter far more than raw production.

This is why batteries have moved from being optional add-ons to central design components in many cases. They are not just about backup. They are about control.

Municipal Utilities Are Different, For Now

Not every homeowner in California is under NEM 3.0. Customers served by Los Angeles Department of Water and Power, Riverside Public Utilities, and other smaller municipal utilities often still receive meaningful credit for exported energy.

For these homeowners, batteries may not be strictly necessary from a financial standpoint today. Solar-only systems can still pencil out reasonably well in many cases.

That said, these utilities are not immune to change. As grid conditions evolve and statewide policy continues to shift, it is likely that export compensation structures will tighten over time. Homeowners in these territories should be aware that what works today may not remain unchanged indefinitely.

Why Batteries Are Central to Modern Solar Design

In 2026, batteries are less about emergency backup and more about energy strategy. They allow homeowners to store solar production for use during peak pricing hours, reduce reliance on the grid when rates are highest, and regain control over how and when their energy is used.

This is especially important under NEM 3.0, but it also matters for households concerned about resilience, time-of-use exposure, and future grid uncertainty.

The good news is that battery technology has matured significantly. Systems are more modular, more efficient, and easier to integrate than they were just a few years ago.

State Incentives Are Becoming More Important

While the federal tax credit for homeowners has expired, state-level incentives are stepping into a larger role. In California, the Self Generation Incentive Program continues to be one of the most impactful tools available for reducing battery cost.

SGIP incentives vary by utility territory, income qualification, medical baseline eligibility, and resilience needs. In some cases, they can cover a meaningful portion of battery cost, making storage far more accessible than it would otherwise be.

As more state funding is allocated and programs evolve, homeowners considering solar and storage should factor these incentives into their planning. They do not replace federal credits, but they can meaningfully change the economics of a system.

What This Means If You Already Have Solar

If you installed solar years ago under older net metering rules, your system may still be performing exactly as designed. However, adding a battery or re-evaluating how your system interacts with current rate structures may unlock additional value that was not necessary before.

The goal is not to replace what works. It is to adapt intelligently to a changed environment.

What This Means If You Are Considering Solar Now

Solar in 2026 is not about chasing a single best option. It is about aligning the right structure with your goals, risk tolerance, and utility reality.

Cash purchases, loans, PPAs, and prepaid leases all have a place. Batteries are increasingly important, but not universally required. Incentives are more fragmented, but still meaningful.

The biggest mistake homeowners make today is assuming that advice from a few years ago still applies unchanged.

Solar did not stop making sense. The framework around it changed.

Homeowners who take the time to understand those changes, ask better questions, and evaluate options honestly are still finding strong outcomes. The path is simply less one-size-fits-all than it used to be.

If you are feeling uncertain, that is reasonable. The landscape is more complex than it once was. Clarity comes from understanding how the pieces fit together today, not from relying on outdated assumptions.