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If you've been researching solar, you may have seen Section 48E described as a deadline you need to beat. That's not quite right. Section 48E is a business-side tax credit your installer, not you, may claim on a PPA or lease system. Whether and how it affects your specific quote is a question for your installer - this article explains the mechanism so you can ask an informed question, not so you can feel rushed.
This post explains what it is, how it works in California under NEM 3.0, and what it means for homeowners in Temecula, Murrieta, Menifee, Lake Elsinore, and Wildomar.
1. What Is Section 48E?
Section 48E is the commercial clean energy investment tax credit written into the federal tax code. It allows solar companies that own and operate solar systems on your roof to claim a 30% tax credit on the cost of installing your system.
You might be thinking: I thought the solar tax credit expired.
You're half right. The residential tax credit, called Section 25D, expired on December 31, 2025. As of January 2026, homeowners who buy or finance a solar system directly can no longer claim any federal tax credit.
- 1.The solar company installs and owns the system on your roof.
- 2.Because they own the system, they claim the 30% Section 48E commercial credit.
- 3.That credit reduces their cost basis, allowing them to offer you a below-market electricity rate.
- 4.You pay an example rate near 22¢/kWh (ask your installer for your actual quoted rate) instead of SCE's 34.5¢/kWh - the credit is baked into your rate.
Section 48E is still alive. Projects that began construction on or before July 4, 2026 got a longer runway to be placed in service. Projects that begin construction now, after that date, must be placed in service by December 31, 2027 to qualify.
2. The Section 48E Deadline Explained
The “One Big Beautiful Bill Act,” signed into law on July 4, 2025, set a construction-start test for projects to qualify for the Section 48E commercial ITC on the old, longer timeline. Projects that began construction on or before July 4, 2026 got the full credit and a continuity window of roughly four years to be placed into service, out to around 2030.
Projects that start construction after July 4, 2026, which includes any new PPA or lease signed today, face a tighter window: the system must be placed in service, meaning installed, inspected, and turned on, by December 31, 2027. That compressed timeline adds installation pressure and cost, but it does not eliminate the credit.
PPA providers are racing to get projects installed and placed in service before December 31, 2027. The savings they're able to offer homeowners today - specifically the locked PPA rate around an example rate near 22 cents per kWh (ask your installer for your actual quoted rate) - are possible because the commercial ITC reduces their project costs. Once a provider can no longer meet that in-service deadline on new projects, the economics change, and rates will likely go up.
3. What “Construction Start” Actually Means (Most Homeowners Don't Know This)
This is the part that catches people off guard.
“Construction start” in federal tax law does not mean the day workers show up on your roof. It means the date a project meets either of two IRS tests: a physical work test (meaningful construction activity has begun) or a 5% safe harbor test (at least 5% of the total project cost has been incurred).
For residential solar PPAs, this typically means the project needs to be permitted, contracted, and have materials ordered or work initiated. From the time a homeowner signs a PPA agreement, permitting alone takes 4 to 8 weeks depending on the city and county.
The July 4, 2026 construction-start test has already passed. That does not shut a new project out, it just means your project falls into the shorter placed-in-service window. To qualify for Section 48E, a new PPA or lease system needs to be installed, inspected, and turned on by December 31, 2027. Ask your installer how their permitting and build timeline lines up with that date before you sign.
4. How Section 48E Applies to PPA and Lease vs. Buying Solar in California
In 2023 and 2024, the calculation was more balanced. Homeowners who bought solar outright could claim the 30% residential tax credit themselves. That changed everything.
In 2026, the math is different.
There's another reason the PPA is the right call for most California homeowners in 2026: NEM 3.0.
Under California's current net metering rules, if you own solar panels and send extra power back to the grid during the day, SCE only credits you around 5 to 8 cents per kWh for that power. But you're buying your evening power from SCE at 34.5 cents. The gap makes solar-only ownership a poor financial decision without battery storage. A PPA sidesteps this entirely. The solar company manages the grid relationship. You're simply buying power at a locked lower rate. See the full breakdown of why PPA wins in 2026 under current California rules.
5. The Rate Context: Why Locking In Now Matters
SCE residential rates have increased approximately 83% from January 2015 to April 2025 (CPUC Public Advocates Office data). SCE's current average residential rate is 34.5 cents per kWh, per its rate advisory effective October 1, 2026 - the most recent one on record. The full picture of ongoing SCE rate increases through 2028 shows how the trajectory compounds.
- Current average residential rate (October 1, 2026 advisory): 34.5 cents/kWh
- CPUC has authorized further increases through 2028
- At the decade average rate of increase, SCE could reach 48 cents/kWh by 2031
A PPA at an example rate near 22 cents per kWh (ask your installer for your actual quoted rate) today locks in your rate against all of that. The solar company eats future rate increases, not you.
If PPA providers broadly lose access to Section 48E on new projects, industry commentary suggests starting PPA rates could rise, though the exact figure isn't something this site can verify or promise. Ask your installer directly what their current rate is and whether Section 48E factors into it.
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Calculate My Solar Savings6. What Temecula and Riverside County Homeowners Should Do Right Now
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2 minutesIf you're paying more than $150 per month, a PPA is almost certainly going to save you money from day one. If you're paying more than $200 per month, the savings add up to real money over a 20-year agreement.
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This weekGiven permitting and installation timelines that can run several months in cities like Temecula, Murrieta, Menifee, Lake Elsinore, and Wildomar, starting the process with time to spare gives your installer room to get the system placed in service before December 31, 2027.
Understand what you're signing
Before signingA PPA is a long-term agreement, typically 20 to 25 years. Understand the rate structure, any escalation clauses, and how the agreement transfers if you sell your home. Ask your provider whether the PPA is transferable on sale and whether the base rate carries an escalation clause.
Ask directly about 48E eligibility
During consultationAny reputable solar company should be able to tell you whether a specific installation will meet the construction-start requirement. If they can't answer that question clearly, that's a red flag.
Ask your installer about their timeline
Before signingAs the December 31, 2027 placed-in-service deadline gets closer, installers have less buffer to absorb delays, which is one factor (among several) that can affect the PPA rate a given installer offers on a new contract. Ask directly how their schedule lines up with that date.
The Short Version
Section 25D, the residential solar tax credit, expired December 31, 2025. Section 48E, the commercial ITC used by PPA providers, is still alive. For a project starting construction now, after July 4, 2026, the system must be placed in service by December 31, 2027 to qualify.
PPA providers operating in California are still installing projects that qualify under Section 48E. The current rate of an example rate near 22 cents per kWh (ask your installer for your actual quoted rate) sits well below SCE's current billing rate of 34.5 cents. As the December 31, 2027 placed-in-service deadline approaches, expect that rate to rise for new customers. If you're in Temecula, Murrieta, Menifee, Lake Elsinore, or Wildomar, getting your project started now gives your installer the most room to hit that date.
This article is general information, not tax advice. The Section 48E rules are evolving, and the specific impact on any individual project depends on factors including Treasury guidance and project-specific details. Consult a CPA or tax professional for advice specific to your situation.
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Frequently Asked Questions
Section 25D was the residential energy tax credit that homeowners claimed when they purchased their own solar system. It expired December 31, 2025. Section 48E is the commercial investment tax credit that applies to businesses and organizations that own solar systems - including companies that install solar under PPA and lease agreements. The two credits are separate laws applying to different types of solar ownership.
Only indirectly. Section 48E is your installer's business tax credit, not a homeowner deadline. Any project that did not begin construction by July 4, 2026 (a date that has already passed) must be placed in service by December 31, 2027 to keep the credit, which covers most PPAs and leases signed today - and the underlying construction-start safe-harbor rule was still being contested in federal court as of mid-2026 (a June 2026 ruling restored it for solar projects above 1.5 MW, well beyond a typical home system, and that ruling itself was not final). If your installer's pricing depends on this credit, ask them directly how it affects your specific quote.
Permitting timelines vary by city. Temecula typically runs 3 to 5 weeks, Murrieta 3 to 6 weeks, and Menifee 4 to 8 weeks. Riverside County unincorporated areas may take longer. Since the system needs to be placed in service by December 31, 2027 to qualify for Section 48E, those timelines matter more the closer you get to that date.
With Section 25D expired, homeowners who buy or finance their own solar system receive no federal tax credit - they pay full price and take on maintenance and ownership risk. A PPA offers $0 down, immediate monthly savings from day one, no maintenance responsibility, and a locked rate that the installer's Section 48E credit makes possible. Under NEM 3.0, PPA customers also avoid the low grid export compensation rates that make solar-only ownership less economical without battery storage.
If PPA providers broadly lose access to Section 48E on new projects, their cost basis could rise, which can put upward pressure on starting PPA rates - but this site can't verify or promise a specific number. Ask your installer for their current quote and whether the credit factors into it.
Under IRS rules, construction start requires meeting either a physical work test (meaningful on-site construction activity has begun) or a 5% safe harbor test (at least 5% of total project cost has been incurred). For residential PPAs, this means the project must be under contract, permitted, and physically initiated - not just scheduled. A signed PPA agreement alone does not satisfy the construction-start test.