Is Solar Worth It in Texas? The Real Math for 2026

Texas gets excellent sun and some of the nation’s highest electricity consumption, which gives solar a large bill to offset. The federal residential solar tax credit (Section 25D) expired at the end of 2025 for cash and loan purchases, and the state has no net metering mandate, so the economics depend heavily on your electricity provider’s buyback policy. At the same time, Texas’s property tax exemption on added home value ($7,600–$9,900 saved over 25 years at typical rates) offsets a meaningful share of that lost credit, and homeowners who lease or use a PPA may still benefit from the commercial credit (Section 48E) through 2027. The good-buyback scenario still shows a ~13.6-year payback on a 25–30 year system.

Here’s what the numbers actually look like.

What Texans pay for electricity

The Texas residential electricity rate has risen to approximately $0.154–$0.162/kWh (EIA Electric Power Monthly, 2025 annual average ~15.4¢; March 2026 ~16.2¢). That is still below the national average of about $0.175–$0.186/kWh (EIA, 2026).

But Texas has a deregulated electricity market for most of the state. If you’re in the ERCOT service area (roughly 85% of Texas), you choose your retail electricity provider and plan. Rates vary widely: some fixed-rate plans run $0.10–$0.11/kWh, while variable plans can spike to $0.20+/kWh during summer demand peaks. Oncor, CenterPoint, and AEP Texas are the major transmission and distribution utilities, but your retail provider sets your actual rate.

Areas outside ERCOT (parts of East Texas served by Entergy, and El Paso served by El Paso Electric) have regulated rates and less consumer choice.

The average Texas household uses about 1,100 kWh per month, nearly double the national average, driven by air conditioning during the state’s long, hot summers. At ~$0.158/kWh (state midpoint, EIA 2026), that works out to roughly $2,085 per year in electricity costs.

Texas solar resource

Texas averages 1,825 peak sun hours per year (NREL PVWatts). That puts it in the top tier nationally, comparable to Colorado and Kansas.

Western Texas (El Paso, Midland, Lubbock) gets the most sun, often exceeding 2,000 peak hours. Central Texas (Austin, San Antonio) averages around 1,800. The Dallas–Fort Worth area sees slightly less, around 1,700. Houston and the Gulf Coast get the least, dropping closer to 1,600 peak hours due to humidity and cloud cover.

A typical 8 kW system in Central Texas produces roughly 11,700 kWh per year. In Houston, that drops to around 10,200 kWh.

Available incentives

Federal Investment Tax Credit (ITC): The residential solar credit (Section 25D) expired December 31, 2025 under the One Big Beautiful Bill Act. If your system was placed in service before January 1, 2026, the 30% credit still applies to that purchase. For 2026 cash or loan purchases, the credit is $0. Lease and PPA customers may still benefit indirectly: the commercial credit (Section 48E) continues through 2027, so financing companies can still claim it and may pass savings through in the form of lower PPA rates (IRS, 2025).

State incentives: Texas has no state solar tax credit, rebate, or performance-based incentive (DSIRE, 2026). With the federal credit now expired for direct purchases, the property and sales tax exemptions below are the primary incentives available to Texas homeowners in 2026.

Property tax exemption: Texas Property Tax Code Section 11.27 exempts 100% of the appraised value added by a solar energy device from property taxes. This is significant in Texas, where property tax rates average 1.6–1.8% of assessed value.

Sales tax exemption: Solar energy devices are exempt from Texas state and local sales tax.

Local utility rebates: Some municipal utilities and co-ops offer their own incentive programs. Austin Energy, CPS Energy (San Antonio), and a handful of co-ops have offered rebates historically, but programs change frequently. Check your specific utility.

The net metering gap

This is where Texas solar economics get complicated. Texas has no statewide net metering law. There is no state mandate requiring utilities or retail providers to credit you for excess solar generation at any specific rate.

What happens to your excess solar depends entirely on your electricity provider and plan:

Municipal utilities like Austin Energy and CPS Energy offer their own buyback programs. Austin Energy’s Value of Solar (VoS) rate is $0.0991/kWh (current; next recalculation November 2026), below retail but higher than wholesale.

REPs (Retail Electricity Providers) in the deregulated market handle it differently. Some offer solar buyback plans that credit excess generation at close to retail. Others credit at wholesale or avoided-cost rates ($0.02–$0.05/kWh), which are dramatically below what you pay to buy electricity. A few offer no buyback at all.

The practical impact: If your provider credits exported solar at $0.03/kWh and you’re buying at $0.158/kWh, every kilowatt-hour you export is worth about 81% less than one you use yourself. This makes self-consumption the priority. Size your system to match your daytime usage rather than your total usage. A battery helps but adds significant cost.

Before signing with a solar installer, know exactly what your electricity provider pays for exported power. This single number changes the payback calculation by years.

Realistic payback period

Let’s run two scenarios for Texas: one with a favorable buyback plan, one with wholesale-rate exports.

Base assumptions: 8 kW system, $22,000 gross cost, no federal ITC (expired for 2026 cash purchases), 1,825 peak sun hours, ~$0.158/kWh retail rate (TX midpoint, EIA 2026), 11,700 kWh annual production.

That 3-year gap comes entirely from the net metering terms. The difference compounds over the system’s lifetime: roughly $7,200 in total value over 25 years.

With electricity rates rising at 2–3% annually, both scenarios improve over time. But even in the best case, Texas payback periods are longer than high-rate states like California or Massachusetts.

Financing options

Cash purchase: Avoids interest entirely, which keeps the lifetime cost the lowest of the financing options. With a 13–17 year payback on a 25–30 year system, the lifetime return is still positive. The upfront commitment is larger now without the ITC, so the decision requires more confidence in long-term residency.

Solar loan: Available at 4–7% APR over 10–25 years. Without the ITC, the full $22,000 gross cost becomes the loan principal. A 10-year loan at 5% on $22,000 runs about $233/month against roughly $100–$135/month in average electricity savings. Monthly cash flow is negative for most of the loan term. That savings figure is not fixed in Texas: with no statewide net metering mandate, your monthly savings hinge on the buyback plan your retail provider offers. A loan sized against a good-buyback plan can turn cash-flow-negative if the only plan you can get pays a low wholesale rate for exported power, so confirm the buyback terms before sizing it.

HELOC: Usually lower rates than dedicated solar loans. Can make sense if you have significant home equity and want a shorter payoff period.

Lease/PPA: Available in Texas but less common than in California. The savings margin is thinner because electricity rates are lower to begin with. Make sure the PPA rate is meaningfully below your current retail rate, and escalator clauses don’t push it above retail within a few years. One notable advantage: financing companies can still claim the commercial credit (Section 48E) through 2027, and may pass some of that value through in the form of lower PPA rates, so lease/PPA customers may still benefit indirectly from roughly 30% in credits even on 2026 installations.

The honest verdict

Solar in Texas is a longer-term play than in high-rate states. With the federal residential ITC expired for cash and loan purchases, paybacks run roughly 13–17 years, compared to 11–14 years when the 30% credit was available. The good-buyback scenario at ~13.6 years still leaves more than a decade of pure savings on a 25–30 year system. Lease and PPA arrangements may still capture the commercial credit (Section 48E) through 2027, narrowing the gap for buyers who prefer not to own the hardware outright. Texas’s property tax exemption adds another $7,600–$9,900 over 25 years that partially offsets the lost federal credit.

The two variables that most affect whether the math works at a given site: the actual electricity rate on a specific plan (not the state average) and what the provider pays for exported solar.

The property tax exemption is an underappreciated benefit. In a state with 1.6–1.8% property tax rates and no state income tax, avoiding property tax on $19,000–$22,000 of added home value saves roughly $304–$396/year indefinitely. Over 25 years that totals $7,600–$9,900 in avoided property tax, which meaningfully offsets the loss of the federal ITC.

FAQ

How much does solar cost in Texas in 2026?

A typical residential system (7–9 kW) costs $19,000–$25,000 gross. The federal residential ITC (Section 25D) expired December 31, 2025 for cash and loan purchases, so there is no federal tax credit to reduce that cost for 2026 installations. Texas property and sales tax exemptions still apply.

Does Texas have a state solar tax credit?

No. Texas has no state-level solar tax credit, rebate, or performance-based incentive (DSIRE, 2026). The federal Section 25D credit expired for residential cash and loan purchases after December 31, 2025. Texas property tax and sales tax exemptions remain in effect.

Does Texas have net metering?

There is no statewide net metering mandate. What your utility or retail provider pays for excess solar varies enormously, from near-retail buyback rates to wholesale rates as low as $0.02–$0.03/kWh. Some providers offer no buyback at all. This is the single most important variable to research before going solar in Texas.

Is solar worth it with cheap Texas electricity?

Texas residential rates have risen to approximately $0.154–$0.162/kWh (EIA, 2026), up from the $0.13/kWh figure often cited for 2025. Without the federal ITC, payback periods at these rates are roughly 13–17 years depending on your provider’s export policy. The math still works over a 25–30 year system life, but requires patience.

Should I add a battery with solar in Texas?

A battery makes the most sense if your provider offers poor export rates. Storing solar production for evening use avoids the loss of exporting at $0.03/kWh and buying back at $0.158/kWh. But batteries add $8,000–$14,000 to system cost (no Texas state battery incentive exists). At current prices, a battery improves total savings only if the export/retail rate gap is large. Batteries also provide backup power during grid outages, which has real value in Texas given ERCOT reliability concerns.

Comparing other states

Solar math shifts with each state’s electricity rates, sun hours, and net metering rules. See the state-by-state solar comparison to weigh your options side by side.

Data sources: electricity rates (EIA Electric Power Monthly, 2026; current as of June 2026), federal tax credit status (IRS; One Big Beautiful Bill Act, signed July 4, 2025), incentives and net metering (DSIRE, 2026; Austin Energy rate page, 2026), sun hours (NREL PVWatts). Energy rates, incentive programs, and tax law change over time; verify current figures for your utility and tax situation before deciding.