Solar power works in three places. On your roof, panels turn sunlight into direct current (DC) electricity. In your home, an inverter changes it into the alternating current (AC) your outlets use, and whatever is running uses it first. On your bill, your meter tracks the extra you send to the grid, and your utility decides what it is worth. Most guides stop at the roof. In California today, the bill is where the value of solar is decided.
The Three Places Solar Power Works
| Where | What happens | The part doing it | What it decides for you |
|---|---|---|---|
| Roof | Sunlight becomes DC electricity | Solar panels | How many kWh you make in a year |
| Home | DC becomes AC, then runs whatever is on right now | Inverter and main electrical panel | How much of your solar you use yourself |
| Bill | Extra power goes to the grid and earns a credit; shortfalls are bought back | Two-way utility meter and your rate plan | What each kWh is actually worth |
A system can be excellent on the roof and still disappoint on the bill if it was sized or timed wrong for your household.
On the Roof: Sunlight Becomes DC Power
Each panel is a grid of silicon cells. When light hits a cell, it knocks electrons loose, and the cell’s layered design pushes them in one direction. That one-way flow is direct current. The U.S. Energy Information Administration notes that commercial panels have gone from under 10% efficiency in the mid-1980s to close to 25% for today’s best modules, which is why a modern roof makes far more power from the same space.
For the physics in more depth, see this step-by-step guide to how solar panels work. For a homeowner, two facts matter more: production follows the sun every day, and it fades slowly over decades. NREL puts the median degradation rate for silicon panels at about 0.5% per year, so a panel still makes roughly 88% of its original output after 25 years. Your panel warranty guarantees a floor for that.
In Your Home: The Inverter and Your Electrical Panel
Your home runs on AC, so the inverter converts the DC from the roof. There are three common setups:
- String inverter: one wall unit for a whole row of panels. Cheapest, but shade on one panel drags down the row.
- String inverter with optimizers: a small device on each panel limits that shade loss.
- Microinverters: a tiny inverter under each panel, so each panel works on its own.
From the inverter, AC power flows into your main electrical panel. Here is the part most people miss: your home uses solar first, automatically. Whatever is running at that moment uses solar power before anything leaves the house, with nothing to switch. Only the surplus moves on, into a battery or out through the meter.
Your inverter also has two safety jobs. It shuts down within seconds if the grid goes down, and rooftop systems include rapid shutdown so firefighters can de-energize the panels. Both are required by electrical and utility safety rules, and both explain why solar alone does not keep your lights on in an outage.
One Day With a Solar System, Hour by Hour
Here is a sunny summer weekday for a Southern California home with a 7 kW system and no battery. The kW figures are rounded and illustrative, but the pattern is what every monitoring app shows.
| Time | Panels making | Home using | Where the power comes from and goes |
|---|---|---|---|
| 6 a.m. | About 0 kW | About 1 kW | All from the grid. Panels are not producing yet. |
| 9 a.m. | About 3 kW | About 1 kW | Solar covers the house. About 2 kW spills to the grid. |
| Noon | About 5.5 kW | About 1 kW | Peak production, almost all exported. This is the biggest surplus of the day. |
| 4 p.m. | About 3 kW | About 3 kW | The family is home and the AC is on. Solar and use roughly match, and peak pricing starts. |
| 7 p.m. | About 0 kW | About 2.5 kW | Cooking, AC, TV. All bought from the grid at the day’s highest price. |
| Midnight | 0 kW | About 0.7 kW | Fridge and standby loads, all from the grid at a lower overnight price. |
Illustrative, not a measured household. Peak pricing on the time-of-use plans that PG&E and SCE solar customers are required to use runs from 4 p.m. to 9 p.m.
Notice the mismatch: most power arrives around noon, when the house needs little, and none in the evening, when it needs the most. Every home solar system lives with this. What changes by state and utility is how much it costs you.
On Your Bill: Why One kWh Has Two Prices
Your utility meter runs in both directions. It counts the power you buy and the power you send out, and your rate plan decides what each is worth.
California under NEM 3.0
Since April 15, 2023, new PG&E, SCE, and SDG&E solar customers have been on the Net Billing Tariff, usually called NEM 3.0. Power you export is credited at hourly values from the state’s Avoided Cost Calculator, not at the price you pay. For 2025 and 2026 sign-ups, those export credits average about 3.9 cents (PG&E), 4.6 cents (SCE), and 3.7 cents (SDG&E) per kWh. Buying power costs about ten times that: PG&E’s average residential rate was 39.25 cents per kWh in March 2026, and SCE’s was 35.3 cents in January 2026, and evening peak prices run higher still. The details are on the CPUC’s net billing page.
So the same kilowatt-hour from your roof has two prices: about 39 cents if your home uses it, about 4 cents if it leaves.
Worked example: the same day, three ways
Take the home above on PG&E. It uses 30 kWh over the day, but only 12 kWh while the sun is strong. The system makes 32 kWh.
| Setup | Bought from grid | Exported | Net cost for the day | Saved vs no solar |
|---|---|---|---|---|
| No solar | 30 kWh | 0 | $11.78 | None |
| Solar, no battery | 18 kWh | 20 kWh | $7.07 minus $0.78 credit = $6.29 | $5.49 |
| Solar plus a battery that stores 13 kWh of the surplus | 6.3 kWh | 7 kWh | $2.47 minus $0.27 credit = $2.20 | $9.58 |
Our arithmetic uses PG&E’s 39.25-cent average rate and 3.9-cent average export credit, 90% battery round-trip efficiency, and no fixed monthly charges. Real-time-of-use prices make evening power more expensive than the average, which makes the battery row worth somewhat more.
In the no-battery case, the 12 kWh the home used directly saved $4.71, while the 20 kWh it exported earned 78 cents. That is why a California estimate should be built around when you use power, not just how much. Shifting the dishwasher, laundry, or EV charging to midday helps, and our guide to time-of-use rate periods shows when each hour is priced. Whether a battery pays off for your home is its own question, covered in Is battery storage worth it.
Outside California
Rules vary widely. Some utilities in Texas, Florida, and Illinois still credit exports at or near the retail rate, which narrows the gap. Others pay much less, or nothing. Ask your installer what your utility pays per exported kWh, then confirm it on the utility’s website.
Night, Clouds and Power Outages
At night
Panels produce nothing after sunset. Your home runs on the grid, or on a battery charged during the day. Daytime export credits help pay for part of what you buy at night.
On cloudy days
Output drops but does not stop, because panels still use diffuse light. A good production estimate is built on years of local weather, so normal cloudy days are already counted. Cold is not the problem many people assume; see why solar panels work fine in cold weather.
During a power outage
A standard grid-tied system shuts off when the grid goes down, even in full sun, so it cannot send power onto lines that crews are repairing. To keep running, you need a battery with backup equipment. How much of the house that covers is a separate decision, explained in whole-home vs partial battery backup.
What This Means When You Get a Solar Estimate
A quote that only talks about panels tells you a third of the story. Ask for these four things in writing:
- Annual production in kWh, and the weather data and shade assumptions behind it.
- Self-consumption: what share of that production the estimate assumes your home uses directly. If the savings math treats every kWh as if it were worth the retail rate, it is overstated under NEM 3.0.
- The export credit value the estimate uses per kWh, and which rate plan you will be moved to.
- What happens in an outage with the exact equipment quoted, and which circuits, if any, stay on.
To line up several bids, see how to compare solar quotes. For prices, see what a solar system costs in California. For what happens after you sign, see how a California solar installation gets built.
Frequently Asked Questions
How does solar power work in simple terms?
Panels turn sunlight into DC electricity, an inverter changes it to AC, and your home uses it first. Extra power charges a battery or goes to the grid for a bill credit.
Where does solar power go when my home is not using it?
Into a battery if you have one; otherwise, to the grid for a bill credit. Under California’s NEM 3.0, that credit averages about 3.7 to 4.6 cents per kWh for 2025 and 2026 sign-ups.
Does solar power work at night?
No. Production stops at sunset, so your home runs on grid power or on a battery charged during the day.
Does solar power work during a power outage?
Not on its own. A grid-tied system shuts down with the grid for safety. You need a battery with backup equipment to keep power on.
Is it better to use solar power or send it to the grid?
In California, using it is usually worth about ten times more: roughly 35 to 39 cents per kWh avoided versus about 4 cents earned for exporting. In states with full retail net metering, the gap is much smaller.
See How Solar Would Work on Your Roof and Your Bill
Send us your last 12 months of electric bills and your address. A person on our team (not an instant calculator) will estimate your yearly production, how much of it your household would use directly, what the rest would earn on your utility’s current plan, and whether a battery changes the math. No hard close. Request a human-reviewed solar estimate or call (818) 650-8010.