Solar and batteries in Palo Alto

Rooftop solar in Palo Alto works on different rules from most of California. When the state cut payments for exported solar power in 2023, the change applied to PG&E and the other utilities regulated by the California Public Utilities Commission. Palo Alto owns its electric utility, so City of Palo Alto Utilities sets its own terms. Those terms are less generous than the old net metering deals, but they are simple and stable.

The other big change is federal. The 30 percent homeowner tax credit that drove most solar purchases for years ended with 2025. This page explains how the city pays for solar power, what a new system now earns, how permits work and what to know before adding a battery. It draws on the city's solar pages and rate schedules as they read in October 2026. For electric rates and billing in general, start with our utilities guide.

How Palo Alto pays for solar: NEM 2

Every new rooftop solar customer in Palo Alto goes onto the city's NEM 2 program. The city's net energy metering page explains the history. The original program, NEM 1, reached its cap on December 31, 2017. Systems installed before November 2016, or whose owners filed a NEM 1 reservation before January 1, 2018, may still be on it. Everyone after that is on NEM 2.

NEM 2 is a two-way meter with two separate prices:

• Power you import from the grid is billed at your normal retail electric rate.
• Power you export earns a credit at the city's Export Electricity Compensation rate, called EEC-1.

The city installs a meter with two registers, one for imports and one for exports. It reads both each billing cycle. The export credit appears on page 2 of your bill as "EEC-1 Solar Export Credit," shown as a negative number. The city says the EEC-1 rate is built from the local value of energy, avoided capacity and transmission costs, ancillary services and environmental attributes. It is lower than retail because exports do not cover the cost of the wires.

Why NEM 3 does not apply here

The city says plainly that the state's Net Billing Tariff applies only to CPUC-regulated utilities such as PG&E. It adds that CPAU currently has no plans to change its NEM 2 policy. If a sales rep quotes savings based on PG&E rules, ask for a new estimate using Palo Alto's rates.

What the export rate means for a new system

The EEC-1 rate schedule effective July 1, 2026 lists an export rate of $0.0990 per kilowatt hour. That number drives the economics of every new system. Each kilowatt hour you use yourself saves the full retail price. Each one you export earns about ten cents.

So the goal is to use as much of your own solar power as possible during the day. A few habits help:

• Run big loads at midday. Dishwashers, laundry and pool pumps cost less when the panels are producing.
• Charge an electric car in daylight if it sits at home. Our EV charging guide covers public chargers for the rest of the week.
• Add a heat pump water heater. Many models can heat a full tank in the middle of the day and coast through the evening. The city says these units pair well with solar.
• Look at time-of-use rates. The city's time-of-use plan makes midday power cheapest. Ask Customer Service whether it fits a home with solar before you switch.
• Size the system to your use. A system that exports most of its output earns mostly the export rate. A smaller system that covers your daytime load often pays back faster.

Palo Alto's grid power is already carbon neutral, a point the city has made since 2013. Solar here is mainly a bill and resilience decision, not a way to green your supply.

Permits and interconnection

Solar needs two approvals: an interconnection agreement from the utility and a building permit. Most contractors handle both. The city's fastest path is SolarAPP+, an automated review that issues a permit instantly for simple projects.

Who can use SolarAPP+

• Licensed contractors only. Owner-builders use the regular process.
• Single-family homes with roof-mounted systems.
• Solar up to 38.4 kW and paired storage up to 38.4 kW.
• Electric service of 400 amps or less with a 225 amp disconnect and 225 amp busbars.

It does not cover stand-alone batteries, ground-mounted or building-integrated systems, service panel upgrades or homes on the city's historic registry. Those projects go through the conventional building permit route. Our page on owning a historic home explains why listed houses get extra review.

The steps

1. Get the CPAU interconnection agreement approved through the Utilities tab of the city's Accela Citizen Access portal. Interconnection questions go to (650) 566-4500.
2. Run the project through SolarAPP+ at gosolarapp.org and download the approval.
3. Apply for the building permit in the city portal, upload the approval and pay. SolarAPP+ charges a $25 administration fee. City permit fees are separate and vary by system size.
4. Schedule inspections through the city's iRequest app, the portal or (650) 329-2496, option 2.
5. Receive Permission to Operate. Only then should the system be switched on.

Permits expire 12 months after issuance if no inspection is completed. For general permit questions, see our building permits guide.

Adding a battery

With a low export rate, a battery lets you store midday solar for the evening instead of selling it cheaply. It can also keep lights and a refrigerator running during an outage. The city's Consider Solar page adds two cautions:

• A battery gives backup power only if it is wired for it. Many systems back up selected circuits, not the whole house.
• The system needs a manual disconnect switch so utility crews can work safely on the lines.

The city publishes an energy storage permitting checklist. A battery added to an existing solar system, or installed alone, needs the regular permit route because SolarAPP+ does not handle stand-alone storage. Foothills residents who face Public Safety Power Shutoffs have the strongest case for backup. Our power outages guide covers the city's outage map and alerts.

Incentives left in 2026

Federal

The IRS says the Residential Clean Energy Credit, which covered 30 percent of solar and battery costs, is not available for property placed in service after December 31, 2025. The city's solar page says the same. If your system was finished in 2025, ask a tax adviser about claiming it on that year's return. Leased systems and power purchase agreements follow different federal rules for the company that owns the equipment, so ask any leasing company how the change affects its price.

SGIP battery rebates

California's Self-Generation Incentive Program pays for batteries, but most of its budgets are for customers of PG&E, Southern California Edison, SoCalGas and SDG&E. The CPUC's SGIP page says customers of other utilities, including publicly owned ones like Palo Alto's, can apply to the Residential Solar and Storage Equity budget. That budget lists $1,100 per kilowatt hour for storage and has additional eligibility criteria. Several other budgets are marked as available only through 2025. The program's site posts waitlists, so check them before counting on a rebate.

City programs

The city's solar page lists no solar or battery rebate of its own in 2026. It does offer free advice. CPAU energy advisors answer questions about sizing solar and electrification at (650) 713-3411. The city's other rebates, for heat pumps and induction, are on our home electrification rebates page.

Getting bids

The city recommends at least three bids from experienced contractors using the same project specifications. That makes the quotes comparable. When you compare, ask each installer:

1. Did you model savings with Palo Alto's NEM 2 and EEC-1 rates, not PG&E's?
2. How much of the output will I use myself and how much will I export?
3. Does the price include the permit, interconnection and any panel work?
4. Which circuits will the battery back up, if I add one?
5. What warranty covers the panels, inverter, battery and roof penetrations?

Roof age matters. Removing and reinstalling panels to replace a roof later is expensive, so many owners reroof first. If you are buying a home that already has solar, ask whether it is on NEM 1 or NEM 2 and whether the system is owned or leased. Our home buying guide lists other questions for sellers.

Frequently asked questions