Commercial Solar in Los Angeles: A 2026 Business Guide

The windows matter. On SCE’s TOU-GS-2 rate (demand from 20 to 200 kW) there are two demand charges: a Facilities-Related Demand charge on the month’s highest demand at any hour, and Time-Related Demand charges on the highest demand in the 4–9 p.m. peak window — on-peak in summer, mid-peak in winter (SCE). LADWP measures demand as the highest 15-minute average in the billing period. Its general-service schedules bill a facilities charge based on the highest demand of the past 12 months, and the larger ones (A-2 and A-3) add time-of-use demand charges, the largest in the High Peak window of 1–5 p.m. on weekdays (LADWP rate ordinance). LADWP’s peak window sits inside the solar day; SCE’s starts as solar output fades.

Berkeley Lab and NREL modeled what solar alone does to demand charges across 15 building types in 15 U.S. cities, Los Angeles among them. With solar sized to supply half of a building’s annual use, a basic monthly demand charge fell by 7% in the median case and by less than 15% in about nine cases out of ten. Charges tied to a daytime window did better — a median of 19% for a 12–4 p.m. window, 40% or more in some cases. Schools and small and medium offices in Los Angeles and a few other sunny cities did best (median 18%); hotels and apartment buildings, whose loads peak in the evening, saw a median of zero. Bigger arrays help less and less, because the remaining peak moves later in the day or onto a cloudy day (Berkeley Lab, 2017).

So count on solar for energy savings, and treat demand savings as a bonus to be modeled from your interval data. A late-afternoon or evening peak is a job for a battery or load control. On SCE, TOU-GS-2 also comes as Option D (higher demand charges, lower energy prices) and Option E (the reverse), so the rate option belongs in the model too. More on rate periods in SCE time-of-use plans compared.

The homeowner credit is gone. The residential clean energy credit (Section 25D) ended after 2025 (IRS); see the 30% homeowner credit ended, explained.

The business credit is Section 48E. The clean electricity investment credit is 6% of the qualified investment, or 30% for a facility with a maximum net output under 1 MW (AC) or one that meets prevailing-wage and apprenticeship requirements (26 U.S.C. §48E). Domestic-content and energy-community bonuses can each add up to 10 percentage points. A business without enough tax liability can sell the credit to another taxpayer, and tax-exempt and government entities can take it as a direct payment after pre-filing registration (IRS).

The 2025 law put a clock on solar. For solar facilities whose construction begins after July 4, 2026, the credit does not apply to property placed in service after December 31, 2027. Battery storage is exempt from that cutoff. Facilities beginning construction after December 31, 2025 must also avoid “material assistance” from prohibited foreign entities, a test that reaches into the equipment supply chain (Public Law 119-21, §70513). Projects that began construction by July 4, 2026 are judged under separate beginning-of-construction rules — a question for tax counsel.

Depreciation adds value on top. Property that qualifies for 48E is 5-year MACRS property (§168(e)(3)(B)(viii)), and the 2025 law permanently restored 100% bonus depreciation for property acquired after January 19, 2025 (§70301). Claiming the credit reduces the depreciable basis by half the credit (§50(c)(3)). Solar that does not qualify for 48E may no longer sit in the 5-year class, because the same law removed an older solar category for property whose construction began after 2024 (§70509).

Berkeley Lab’s national data for host-owned systems installed in 2024 put the median at $3.2 per watt for systems up to 100 kW (most between $2.5 and $4.3) and $2.4 per watt above 100 kW (most between $1.9 and $3.3), before any incentive. Across the size range the medians differ by about $2 per watt. Adding a battery raised the median price by about $2.2 per watt of solar on small commercial systems and $0.8 on large ones (Berkeley Lab). These are national figures; a Los Angeles project can land above or below them depending on the roof, carports, service upgrades and the utility’s interconnection requirements.

Because a qualifying business may also claim the credit and depreciation, the net cost can be much lower than the sticker — but only if the project qualifies and the business can use the benefits, which is why the tax questions come first. For per-watt context and how to read a quote, see our Los Angeles solar cost guide. Any payback figure is an estimate built on assumptions about rates and usage — ask to see them.

Ownership is the norm: only 16% of U.S. commercial systems installed in 2024 were third-party owned, against 40% at tax-exempt sites such as schools and churches (Berkeley Lab). Tax-exempt owners can take the 48E credit as a direct payment, which can change that comparison for them.

1) Assessment and design — interval-data and rate analysis, roof and structural review, system design. 2) Proposal and agreement — scope, financing and expected production. 3) Engineering and permitting — structural and electrical plans to the building department (LADBS in the City of Los Angeles, or your city). 4) Utility interconnection — an application to SCE or LADWP; larger systems can require additional study. 5) Installation and inspection. 6) Permission to operate (PTO) — until the utility grants it, the system should not run in parallel with the grid. On the tax side, remember that the 48E deadline for new solar counts from the date the system is placed in service, not the contract date, so a project aiming for 2027 needs slack at every step.

SCE is regulated by the CPUC and assigns business rates by size: TOU-GS-1 for demand of about 20 kW or less, TOU-GS-2 for 20–200 kW, TOU-GS-3 for 200–500 kW, and TOU-8, mandatory above 500 kW (SCE). New business solar goes on the Net Billing Tariff, which requires a time-of-use rate; exports earn credits based on the CPUC’s avoided-cost values, usually well below the retail price, and those export prices are locked for nine years for systems that receive permission to operate by December 31, 2027. The extra “ACC Plus” adder is for residential customers only (SCE Schedule NBT). The structure rewards self-consumption and storage.

LADWP is a municipal utility and not under the CPUC’s net billing rules. Its net metering covers solar systems up to 1 MW AC; larger systems go on a parallel-generation rate (Schedule CG-2 or CG-3) (LADWP NEM guidelines). It also runs a Feed-in Tariff, under which property owners sell the output of eligible local projects to LADWP, and virtual net metering for solar at multifamily sites (LADWP). See LADWP net metering in 2026 for how the credits settle.

Figures on this page come from the primary sources below and, where noted, from Cali Energy calculations using the stated assumptions. Rates, incentives, and program terms change; each was verified September 30, 2026.

1. U.S. Code — 26 U.S.C. §48E, Clean electricity investment credit (Office of the Law Revision Counsel)
2. Public Law 119-21 (2025) — §§70301, 70509, 70513
3. U.S. Code — 26 U.S.C. §168, Accelerated cost recovery system
4. U.S. Code — 26 U.S.C. §50, Basis adjustment for investment credits
5. IRS — Clean Electricity Investment Credit
6. IRS — Residential Clean Energy Credit
7. Berkeley Lab & NREL — Exploring Demand Charge Savings from Commercial Solar (2017)
8. Berkeley Lab — Distributed Solar & Storage: 2025 Data Update
9. EIA — Electric Power Monthly, Table 5.6.A (average price by state and sector)
10. SCE — Rates by business size
11. SCE — Rate Schedule TOU-GS-2 fact sheet
12. SCE — Schedule NBT (Net Billing Tariff)
13. LADWP — Commercial Solar Programs
14. LADWP — Net Energy Metering Guidelines
15. LADWP — Electric rate ordinance (rating periods, demand and facilities charges)