Texas is the second-largest solar market in the United States and is on track to surpass California in total solar capacity by 2028. The state has exceptional sun, low installation costs relative to many other states, and a unique electricity market structure that gives homeowners more control over their solar economics than almost anywhere else in the country.
The catch is complexity. There is no simple statewide answer to whether solar makes sense in Texas, because the incentives, buyback rates, and rebate programs vary dramatically by city, utility, and (uniquely to Texas) by which retail electricity provider you choose. This guide cuts through that complexity.
The Texas electricity market: regulated vs. deregulated
Understanding your solar options in Texas starts with understanding how electricity works here, because it is genuinely different from every other state.
About 85% of Texans live in the deregulated ERCOT (Electric Reliability Council of Texas) market, covering most major cities including Houston, Dallas-Fort Worth, and Corpus Christi. In these areas, the physical delivery of electricity is handled by a Transmission and Distribution Utility (TDU): Oncor in Dallas-Fort Worth, CenterPoint Energy in Houston, AEP Texas in South and West Texas. The the actual sale of electricity and your billing relationship is with a Retail Electric Provider (REP) of your choosing. There are over 100 licensed REPs in Texas.
The remaining 15% of Texans are served by regulated municipal utilities or electric cooperatives: Austin Energy, CPS Energy in San Antonio, El Paso Electric, and various co-ops. In regulated territory, you have no choice of provider and must use whatever solar program your utility offers.
This distinction matters enormously for solar. In deregulated areas, your solar buyback rate (what you earn for excess power sent to the grid) depends on which REP plan you select. In regulated areas, it is set by the utility and typically does not involve net metering at full retail.
Solar buyback plans in deregulated Texas
A quick primer on the terminology before diving in. When your solar panels produce more electricity than your home is using at that moment, the surplus flows out to the grid. This is called exporting. The rate your provider credits you for that exported power is called the buyback rate. In states with true net metering, that credit equals the full retail rate you pay for electricity, so each kilowatt-hour you export offsets one you would otherwise buy. When the buyback rate is lower than retail, as it is in most Texas programs, the strategy shifts toward self-consumption: using your solar power directly in your home (or storing it in a battery for use at night or during outages) rather than sending it to the grid, so you capture the full retail value of every kilowatt-hour your panels produce instead of selling it cheap and buying it back expensive.
Texas has no statewide net metering mandate. Instead, homeowners in deregulated areas choose a REP that offers a solar buyback plan alongside their regular electricity rate. There are three main structures:
- Full retail buyback. Some REPs, most notably Green Mountain Energy's Renewable Rewards program, credit excess solar at the full retail rate, the same price you pay to buy electricity. This is functionally equivalent to net metering and produces the best solar economics. These plans are worth seeking out.
- Avoided-cost buyback. Many REPs including TXU Energy and AEP Texas credit excess solar at the avoided-cost rate: what the utility would otherwise pay for wholesale power. This is typically $0.04 to $0.08/kWh, well below retail. Similar to net billing in Arizona and California, this makes self-consumption more valuable than exporting.
- Real-time wholesale plans. Some plans tie your export credit to ERCOT's real-time wholesale price, which can be lucrative during Texas summer peak demand events but volatile and low during winter months.
The practical implication: before going solar in deregulated Texas, research which REPs serve your TDU territory and what solar buyback rates they offer. Power to Choose is the Public Utility Commission of Texas (PUCT)'s official comparison tool and lists all available plans. This step can meaningfully change your payback period compared to defaulting to whatever plan your installer recommends.
Solar programs in regulated Texas cities
Homeowners in regulated utility territory have a defined set of programs to work with:
- Austin Energy. Uses a Value of Solar (VoS) tariff rather than net metering. Your solar system's total generation is credited at approximately $0.0991/kWh, applied to your total output and not just your excess. Austin Energy also offers a $2,500 cash rebate for residential systems of at least 3 kW, contingent on completing their free Solar Education Course. An additional $2,500 rebate is available for paired battery storage systems.
- CPS Energy (San Antonio). Offers net metering with buyback at the avoided-cost rate. CPS Energy's solar page has current program details. System sizing rules apply: you generally cannot oversize relative to your prior year consumption.
- El Paso Electric. Offers net metering for residential systems up to 50 kW, credited at retail rate, with a minimum monthly charge of $30.25. Sizing is based on prior year consumption.
Texas solar incentives in 2026
Texas has no state income tax, which means there is no state solar tax credit. Not because Texas chose not to offer one, but because there is no state income tax structure to credit against. The incentive stack looks like this:
- Property tax exemption. Texas law exempts the added value of a solar or wind energy device from property tax assessment. Under Texas Tax Code Section 11.27, the increase in your home's appraised value from solar is not taxable. File Form 50-123 with your county appraisal district to claim it. Keep your final invoice and system documentation handy.
- Oncor Residential Solar Program (Dallas-Fort Worth). Oncor offers rebates up to $9,000 for solar installations in its service territory, but as of 2026 the program requires battery storage to qualify. Solar-only systems largely no longer receive direct cash incentives. Details and application at takealoadofftexas.com.
- CenterPoint Energy (Houston). A standard offer rebate of approximately $135 per installed kilowatt exists but is subject to fund availability. Verify current status before planning around it.
- Austin Energy. $2,500 rebate for systems 3 kW or larger (after completing Solar Education Course) plus $2,500 for paired battery storage.
- AEP Texas SMART Source Solar PV Program. Rebates up to $3,000 for qualifying residential installations in AEP territory (South and West Texas). System must be new and meet minimum performance requirements.
- Denton Municipal Electric. One of the more generous programs in Texas: $0.40 to $1.50 per watt with a maximum rebate of $30,000. Homeowners in Denton should contact DME directly to confirm current program availability and rates.
- Sales tax exemption. Solar energy equipment is exempt from Texas sales tax, reducing your upfront cost.
None of these rebates are statewide. Always verify current program status directly with your utility or the program administrator before signing a solar contract, as funding availability changes.
The grid resilience case for battery storage
Texas has a unique and compelling argument for battery storage beyond the financial one. Winter Storm Uri in February 2021 caused widespread grid failures across ERCOT, leaving millions of homes without power for days in subfreezing temperatures. The storm cost an estimated $195 billion in damages and exposed the vulnerability of the Texas grid to extreme cold. Since then, Texas has seen additional grid stress events during summer peak demand.
A solar-only system provides no backup power during a grid outage. Panels stop producing the moment the grid goes down, for safety reasons. A solar plus battery system can island your home and keep essential loads running for one to two days. For many Texas families, particularly those with medical equipment, young children, or elderly family members, this resilience argument has become the primary reason to add storage.
Battery storage also improves financial returns for homeowners on avoided-cost buyback plans, for the same reasons discussed in the Arizona and California guides: storing your own production and using it instead of exporting at low rates captures more value per kilowatt-hour.
System costs and payback
Texas solar installation costs run around $3.00 per watt as of 2026, slightly above the national average of around $2.50 to $2.80. A typical 7 kW residential system costs approximately $21,000 before incentives. After applicable local rebates (which vary considerably by location), your net cost will depend heavily on which programs you qualify for.
Average electricity rates in Texas sit at around $0.16/kWh statewide, below the national average of $0.18. However, Texas households use significantly more electricity than the national average, around 1,144 kWh per month versus 886 nationally, driven by long hot summers and heavy air conditioning loads. The result is that Texas electricity bills are above the national average despite lower per-kWh rates, which improves the case for solar.
Payback ranges depending on location and program:
- Austin Energy territory: The VoS tariff at $0.0991/kWh combined with the $2,500 rebate and strong sun typically produces payback in 8 to 11 years for systems sized appropriately.
- Oncor (DFW) with battery and rebate: With up to $9,000 in rebates for a qualifying solar plus storage system, payback can reach 7 to 10 years for well-designed systems. Solar-only without the Oncor rebate has a longer payback.
- CenterPoint (Houston) on full retail buyback plan: Choosing a REP with full retail credit and Houston's strong sun can produce payback in 9 to 12 years.
- Deregulated areas on avoided-cost buyback: Without a favorable REP plan, payback can stretch to 12 to 15 years. Switching to a full retail buyback REP plan before interconnecting is one of the highest-leverage decisions a Texas solar homeowner can make.
Over 25 years, a well-designed Texas solar system typically avoids $40,000 to $77,000 in electricity costs, with higher returns for larger homes with heavy summer AC loads.
What your installer should handle versus what you need to do yourself
Texas requires more pre-purchase homework than most states, and some of that homework falls on you rather than your installer. Here is how to think about the division of responsibility.
What a good installer should do for you
A reputable Texas solar installer should identify your TDU territory and confirm whether you are in regulated or deregulated service. They should model your production and savings projections under your specific rate plan, not a generic Texas average. They should know which local utility rebate programs apply in your service territory, whether your system needs to be paired with a battery to qualify, and what the application process involves. For programs like the Oncor Residential Solar Program, an experienced installer will have done these applications many times and should be able to handle the paperwork. They should also handle interconnection permitting and coordination with your TDU, which in Texas involves a standardized process but still requires documentation and timelines you should understand upfront.
If an installer gives you a quote without asking about your current electricity plan or TDU territory, or cannot tell you which rebate programs you qualify for, that is a red flag. The economics in Texas are too location-specific for a one-size-fits-all proposal to be meaningful.
What you need to do yourself
The one thing your installer cannot do for you is choose your REP buyback plan. This is a decision you make as an electricity customer, independent of the solar installation itself. Before you sign a solar contract, use Power to Choose to compare solar buyback plans available in your area and select one before your system is interconnected. Once your system is live under a specific plan, switching REPs is possible but can involve a waiting period and potential complications with your interconnection agreement.
You will also need to file for the property tax exemption yourself. File Form 50-123 with your county appraisal district after installation. Keep your final invoice and system documentation. Your installer will not do this for you, and the exemption is not automatic.
For Austin Energy customers, the $2,500 rebate requires completing the Solar Education Course before your application is approved. Your installer can point you to it, but you need to complete it.
Getting at least three quotes and asking each installer to model your specific TDU territory, REP plan, and rebate eligibility side by side is the most useful thing you can do. A quote that assumes avoided-cost buyback will look very different from one assuming full retail credit, so make sure you are comparing the same assumptions across installers.
Bottom line: Is solar worth it in Texas in 2026?
Yes, but the degree to which it is depends more on decisions you make before installation than on your roof or location. Texas homeowners who choose the right REP buyback plan, take advantage of available local rebates, and size their system to their actual consumption can achieve payback periods competitive with any state in the country.
The grid resilience argument has become genuinely compelling post-Uri, particularly for families who cannot afford multi-day power outages. Battery storage adds cost but is increasingly required for major rebates in the DFW market and provides real insurance against ERCOT grid events.
The main risk in Texas is going in without doing the REP research and ending up on an avoided-cost buyback plan when a full retail plan was available. That single decision can be worth thousands of dollars over the life of the system.