California Solar Spotlight: Navigating the End of the Tax Credit and New Incentives

The solar landscape in California is changing fast. A new federal law signed on July 4 2025 dramatically rewrote clean‑energy tax incentives and has sparked renewed interest in state and local programs. If you’re considering rooftop solar or battery storage for your home, these are the hot topics you should understand—and how My Ally Electric & Solar can help you navigate them.

1 — The federal residential solar tax credit ends after Dec 31 2025

Under the Inflation Reduction Act, homeowners could claim a 30% federal tax credit on the cost of a residential solar system through 2032. But the new One Big Beautiful Bill Act (OBBBA) signed by President Trump in July 2025 repeals the Section 25D Residential Clean Energy Credit after December 31 2025. EnergySage notes that homeowners still installing solar in 2025 can claim the full 30% credit, but there is no phase‑down period—the value falls to 0% on January 1 2026.

What this means:

• Act quickly. Systems installed and operational by December 31 2025 qualify for the 30% credit. If you sign a contract later in the year, supply‑chain delays could jeopardize your eligibility.

• Batteries count. The tax credit also applies to energy‑storage systems installed with solar. My Ally Electric & Solar can design solar‑plus‑storage packages to maximize your incentive before the credit disappears.

2 — Foreign‑entity restrictions may affect equipment choices

The OBBBA also contains Foreign Entity of Concern (FEOC) restrictions. Starting Jan 1 2026, projects using components from certain prohibited foreign entities (notably many Chinese manufacturers) could lose access to credits. While this primarily applies to utility‑scale projects, it underscores the importance of choosing equipment from reputable, domestic‑friendly suppliers. Our team tracks supply‑chain compliance to ensure your system qualifies for available incentives.

3 — State incentives are filling part of the gap

The California Public Utilities Commission’s Self‑Generation Incentive Program (SGIP) launched a Residential Solar and Storage Equity budget on June 2 2025. The program targets low‑income households and offers $3,100 per kW for solar and $1,100 per kWh for storage. More than $280 million in funding is available. These incentives can dramatically reduce upfront costs, especially when coupled with the federal credit before it expires. My Ally Electric & Solar can help determine your eligibility and handle SGIP paperwork.

4 — Net Billing Tariff (NEM 3.0) lowers export compensation

Since April 15 2023, new solar customers in PG&E, SCE and SDG&E territories are enrolled under the Net Billing Tariff (NBT), sometimes called NEM 3.0. Under NBT, exported solar energy is credited at a rate reflecting avoided cost instead of the retail rate, reducing bill savings compared with the earlier NEM 2.0 program. The CPUC notes that customers who interconnect before the end of 2027 receive a small export‑compensation adder for nine years. Homeowners must also switch to special time‑of‑use rates.

Key points:

• Export credits: NBT pays lower rates for excess solar energy, often below retail – encourages self‑consumption and storage.

• Adder: PG&E/SCE customers who interconnect before 2027 get bonus credits for nine years – incentivizes early adoption.

• Battery advantage: Storing energy allows homeowners to use or export it during high‑value hours – maximizes savings under NBT.

My Ally Electric & Solar designs solar‑plus‑battery systems that take advantage of the export adder and reduce reliance on the grid, helping you retain more value under NEM 3.0.

5 — Legal battles over net‑metering cuts

On August 7 2025, the California Supreme Court sided with environmental groups challenging the state’s decision to cut net‑metering payments by about 75%. The justices directed the appeals court to revisit its ruling that had upheld the reduction. They did not overturn the cuts but said the lower court had to consider whether the decision omitted key factors.

Why it matters:

• The court’s decision keeps NEM 3.0 in place for now, but regulators must justify their changes, leaving open the possibility of improved compensation in the future.

• The initial cuts led to an 82% drop in requests for rooftop solar connections and an expected loss of 17,000 jobs. Any reversal could revive demand.

6 — Local permitting and building codes

California’s building code requires solar on most new homes. As electrification policies expand and natural‑gas bans spread across Bay Area cities, new homeowners will need integrated solar, storage and EV charging. My Ally Electric & Solar stays on top of evolving local codes in Walnut Creek and surrounding communities.

7 — How My Ally Electric & Solar can help

As federal incentives sunset and state programs evolve, planning your solar project has never been more complex—or more urgent. Our locally owned company offers:

• Customized solar‑plus‑battery systems that qualify for remaining tax credits and SGIP incentives.

• Compliance with supply‑chain rules to avoid foreign‑entity restrictions.

• Time‑of‑use and rate‑analysis services to optimize savings under NEM 3.0.

• Monitoring of legal developments—including court challenges to net‑metering cuts—so you understand how policy changes affect your investment.

Take action now

With the 30% federal tax credit ending on Dec 31 2025 and state incentives on the table, now is the time to go solar. Contact My Ally Electric & Solar today to schedule a consultation. We’ll help you lock in every available incentive and future‑proof your home’s energy system.

Big Changes to the Solar Tax Credit: What the “One Big Beautiful Bill” Means for You

If you've been thinking about going solar or you're in the solar industry, you’ve probably heard about the sweeping legislation signed on July 4, 2025—the One Big Beautiful Bill (OBBB). This law significantly alters federal clean energy tax credits, including how and when homeowners and commercial entities can qualify for solar incentives.

Here’s a breakdown of what’s changing and how it might affect you.

What changed?

For Homeowners (Section 25D):

• The 30% federal tax credit for residential solar remains in place, but only through December 31, 2025.

• To qualify, the system must be fully installed and paid for by the end of this year.

• There is no longer a “start-of-construction” exception—contracts alone aren’t enough.

For Commercial and Leased Projects (Section 48E / 45Y):

• These credits have shifted to a “technology-neutral” format, available to any clean energy source that meets emissions and labor standards.

• Two ways to qualify:

  • Start construction by July 4, 2026, or

  • Place the project in service by December 31, 2027

• New sourcing requirements apply, disqualifying systems that include components from “foreign entities of concern” (FEOCs)—primarily affecting China-sourced equipment.

What’s new from the White House?

On July 8, 2025, President Trump signed an Executive Order directing the U.S. Treasury to tighten enforcement of the new tax credit timelines. Specifically, the order:

• Calls for revised “start of construction” rules within 45 days of the law’s enactment.

• Aims to prevent developers from using stockpiled equipment or minimal site activity to claim construction has begun.

• Targets safe harbor practices—especially the “5 percent test” and “physical work test”—used by commercial developers to lock in tax credits.

This move is politically significant. While the bill itself set fixed expiration dates, the Treasury has discretion over how eligibility is defined, especially for commercial and leased residential systems. The order does not affect customer-owned residential systems (Section 25D), which still must be completed and paid for by December 31, 2025.

If you’re planning a commercial or leased project, you’ll need to watch for Treasury’s new guidance by August 18, 2025. It’s possible that:

• The 5 percent test (based on spending a minimum on project equipment) could be eliminated.

• The physical work test could be tightened, requiring more substantial and continuous construction activity.

The Administration may skip public comment and issue final rules immediately, though doing so could open the door to legal challenges.

How does this affect me?

If you're a homeowner:

• You still have access to the full 30% tax credit, but only if your system is installed and fully paid by December 31, 2025.

• This is your last guaranteed window to claim the credit.

If you're a developer or business:

• You need to begin real construction by July 2026—or risk losing eligibility.

• You’ll need to follow closely how “construction” is redefined by the Treasury.

• Supply chain scrutiny is now stricter. Equipment from certain foreign manufacturers could disqualify your project.

Final thoughts

The One Big Beautiful Bill puts solar and clean energy tax credits on a tighter schedule, and the executive order adds another layer of urgency and uncertainty—especially for large-scale or leased projects. For homeowners, the message is clear: 2025 is the final year to claim the 30% tax credit. For commercial stakeholders, this is a critical time to evaluate compliance strategies, timelines, and sourcing.

Need help determining where your project stands? Let’s talk—because these new rules are moving fast, and planning ahead is no longer optional.

510-559-7700 or email nsaglam@allyelectricandsolar.com to get started.

Can I Oversize a Battery Compared to Solar Under NEM or NBT in California?

Updated: June 24, 2025
Short answer: Yes—for now. But that could change after August 16, 2025.

What Is the 150% Storage Sizing Limit in NEM/NBT?

California’s Net Energy Metering (NEM) and Net Billing Tariff (NBT) programs have long included a rule that limits battery size to no more than 150% of the paired solar system’s nameplate capacity (kW). The original goal was to prevent oversized battery installs using token solar to access NEM benefits like:

• Grid upgrade cost exemptions

• Avoiding departing load charges

Is This Rule Being Enforced Right Now?

No. The 150% storage cap is on pause — and has been since 2020, when the CPUC suspended it to support wildfire resilience efforts.

• The pause was extended in 2023 for two more years.

• It currently applies to both NEM and NBT systems.

• The rule technically still exists in the tariff but is not being enforced at the moment.

So yes — for now, you can oversize your battery relative to your solar system.

What Happens After August 16, 2025?

The storage sizing cap is scheduled to return on August 16, 2025 unless the CPUC takes further action.

• Any interconnection applications submitted on or after that date will be required to conform to the 150% rule.

• Projects submitted before August 16 that are free of deficiencies (except the building permit) will not be affected.

Can the Rule Still Be Changed?

Yes — and action is already underway.

The California Solar & Storage Association (CALSSA) filed a petition last year to remove the cap permanently. The CPUC denied it, stating the utilities might propose a better path forward. But after no utility follow-through, CALSSA filed a new compromise petition in June 2025.

If approved, it would:

• Eliminate the 150% limit, and

• Add limited oversight for unusually large storage projects.

What Should You Do?

If you're planning a solar + battery project with a large storage system, here’s what we recommend:

1. Submit your interconnection application before August 16, 2025

2. Ensure it is free of deficiencies other than the final building permit

3. Work with an experienced contractor who knows the rules

Why Work with Us?

At Ally Electric & Solar, we’re one of the most experienced solar + storage contractors in the Bay Area when it comes to NEM, SGIP, interconnection rules, and battery sizing strategy. We help homeowners and businesses:

• Navigate policy changes

• Maximize rebates and incentives

• Stay fully compliant while planning for resilience

Have Questions? Let’s Talk.

If you're thinking about adding a battery or increasing your energy independence, we’re happy to walk you through your options. Now is the time to act—before the rules change again.

510-559-7700 or email nsaglam@allyelectricandsolar.com to get started.