If you've been thinking about solar but haven't pulled the trigger, there is a real federal deadline coming up that will change what you pay. It's not marketing hype. It's a tax law provision called Section 48E, and it expires for new projects starting construction after July 4, 2026.
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 approximately 22¢/kWh instead of SCE's 34.5¢/kWh - the credit is baked into your rate.
Section 48E is still alive for now, but only for projects that begin construction by July 4, 2026.
2. The July 4, 2026 Deadline Explained
The “One Big Beautiful Bill Act,” signed into law on July 4, 2025, set a hard construction-start deadline for projects to qualify for the Section 48E commercial ITC. Projects that begin construction on or before July 4, 2026 can still claim the full credit and have until the end of 2030 to be placed into service.
Projects that start construction after July 4, 2026 face a tighter window: they must be fully operational by the end of 2027. That compressed timeline adds installation pressure and cost.
Solar companies like Freedom Forever are racing to get projects permitted and under construction before that date. The savings they're able to offer homeowners today - specifically the locked PPA rate around 22 cents per kWh - are possible because the commercial ITC reduces their project costs. Once that credit goes away for new projects, the economics change, and rates will almost certainly 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.
If you want your project to safely meet the July 4, 2026 construction start requirement, you need to sign your agreement by approximately May 1. That's not a lot of runway. April is now.
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.
5. The Rate Context: Why Locking In Now Matters
SCE residential rates have increased 83% over the last decade. In October 2025, SCE raised rates from 31.2 cents to 35.3 cents per kWh in a single adjustment, a 13% jump overnight. The current rate is approximately 34.5 cents per kWh following a January 2026 revision.
- Current rate (April 2026): approximately 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 22 cents per kWh today locks in your rate against all of that. The solar company eats future rate increases, not you.
After the Section 48E deadline passes, if PPA providers lose the commercial tax credit on new projects, the floor for competitive PPA pricing will likely shift upward to 26 to 28 cents per kWh. That's still below SCE, but the savings margin shrinks significantly. The window where you can lock in a 22-cent rate is tied directly to the Section 48E construction-start deadline.
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Calculate My Solar Savings6. What Temecula and Riverside County Homeowners Should Do Right Now
Check your SCE bill
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.
Get your numbers before May
Before May 1Given 4 to 8 weeks of permitting time in cities like Temecula, Murrieta, Menifee, Lake Elsinore, and Wildomar, the window to comfortably qualify under the July 4 construction-start deadline is April and early May 2026.
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. Freedom Forever's PPA is transferable and carries no escalation clause on the base rate.
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.
Don't wait for 'a better deal later'
Act nowAfter July 4, 2026, PPA rates will be set without the ITC subsidy on new projects. The rate you can lock in today is likely the best rate available for the next several years.
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 but requires construction to start by July 4, 2026. “Construction start” means permitted and initiated, not just scheduled, which pushes the effective action deadline to approximately May 1, 2026.
Freedom Forever, headquartered in Temecula, is still installing PPAs that qualify under Section 48E. The current rate of approximately 22 cents per kWh sits well below SCE's current billing rate of 34.5 cents. After the deadline, expect that rate to rise. If you're in Temecula, Murrieta, Menifee, Lake Elsinore, or Wildomar, the next 60 days are the highest-value window for going solar in years.
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.
Indirectly, yes. Your PPA provider - such as Freedom Forever - needs to begin physical construction on your project by July 4, 2026 to claim Section 48E. That credit is what enables them to offer a rate of approximately 22 cents per kWh. If they can no longer claim the commercial credit on new projects, their cost basis rises and PPA rates for new customers are expected to increase to 26 to 28 cents per kWh.
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. To safely meet the July 4 construction-start deadline, most advisors recommend having a signed agreement in place by approximately May 1, 2026.
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 cannot claim Section 48E on new projects after July 4, 2026, their cost basis for new installations increases. Industry projections suggest PPA starting rates could rise from approximately 22 cents per kWh to 26 to 28 cents per kWh. That's still below SCE's current rate, but the monthly savings margin shrinks. The best available rate window is before the deadline.
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.