A teetering U.S. residential solar industry may now be on the brink of collapse. Faced by macroeconomic challenges and shifting sands of state and federal policies, an industry once defined by double-digit growth in installations is experiencing steep declines – and the latest draft of the One Big Beautiful Bill Act makes things far worse.
The latest draft of the bill is bad all-around for clean energy, but it is particularly damaging to residential solar, cutting federal tax credits far sooner than expected.
Residential solar installations declined 31% in 2024. Over the last year, industry titans like SunPower, Sunnova, and Mosaic Solar have filed for bankruptcy.
The industry historically has leaned on the value proposition of lowering customer electricity bills and providing predictable costs for the long-term. However, that value has been increasingly difficult to provide.
Gone are the days of low interest rates enabling attractive terms for loans or leased systems. In many major markets, like California, bill credit rates for sending excess electricity to the grid have been slashed by 75% or more.
Tariffs have posed challenges to the industry as well. Aluminum, used in both solar panel frames and racking systems, are hit with 25% tariffs. Solar cell and module import tariffs from major global suppliers have come in higher-than-expected this year, too.
The residential solar industry is no stranger to highs and lows, often referred to as the “solar coaster” by those who have weathered the storm of hot-and-cold policies that create markets and then take them away at a breakneck pace. But the latest draft of the federal reconciliation bill may represent a crash.
In 2022, the Biden Administration passed the Inflation Reduction Act, extending a tax credit that covers 30% of installed system costs through the mid-2030s. The latest One Big Beautiful Bill Act draft forwarded by the Senate Finance Committee ends this tax credit far ahead of schedule.
First, the bill takes a notably anti-consumer and anti-ownership stance, cutting the 25D residential solar tax credit within 180 days of enactment, which is payable directly to homeowners that purchase solar via a loan or upfront cash purchase.
Second, the bill sunsets the 48E investment tax credit for all eligible technologies to 60% of its value by the end of 2026, 20% of its value by the end of 2027 and all projects beginning construction by 2028 are ineligible for the credit.
In a surprise to the industry, the bill singles out residential solar leases, making the ineligible altogether for the 48E investment tax credit.
This posed a shock to the investment community. Share prices of the largest residential solar provider Sunrun are down over 40% in the trading day following the latest draft of the One Big Beautiful Bill Act.
The bill is next headed to the Senate for a vote, with a simple majority needed to pass. Then, the bill must be reconciled with the House, with both chambers agreeing on an identical version for it to become voted into law.
Looking ahead, if the bill passes as-written, there will surely be a further retraction for U.S. residential solar. The industry will need to find new ways to lower costs to thrive in a harsher regulatory environment.
One pathway is pursuing lower soft costs, or costs not tied to hardware. The Solar Energy Industries Association (SEIA) said over 65% of the cost to install residential solar is related to soft costs like paying sales teams, securing permits, grid connection costs, and more.
The United States may find a path forward by pursuing market conditions like Australia, where over 40% of homes in some regions have rooftop solar. Soft costs are far lower in the nation, and average residential solar installation cost was $0.89 per W, more than $2.00 per W cheaper than both Canada and the United States.
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I wonder that if it passes will solar panel manufacturers need to find ways to improve value, increase efficiency, and lower costs of their systems in order to entice buyers? Will they need to make their systems even more installer friendly or more plug and play (thereby reducing install expense)?
Please stop telling people solar lowers the utility bill. Solar and batteries replaces the need for being hooked up to the power company at all. Like landline home phones… More people will disconnect from the grid for just over the cost of a whole house backup generator and never have an electric or gas bill again. Also, sized right, solar can replace the need for buying gasoline for your vehicle. EV and off grid… It’s available today.
Yes and no. Batteries are still expensive. And disconnecting from the grid takes your SRECs away.
The majority of solar electric systems are grid tied. And that’s what most people prefer. So yes, the article is correct: solar lowers your utility bill.
I’ve gotten 3 estimates over the years and everytime it would take me 2 decades to recoup the costs even with the rebates and incentives.
Then if the company goes out of business good luck finding another company willing to cover your warranty.
Like every other green process the price is out of reach for most
In my case , I was paying 3800 dollars a year for electricity. It cost me 48000 usd to install solar. I would have paid nearly 40000 over ten years to the electric company anyway so why not get solar? At least this way there is light at the end of the tunnel and I have an opportunity to eliminate the cost of electricity that I would have to pay for the rest of my life.
Not sure why people are claiming such long payback periods. You need to factor in tax credits, SRECs, and monthly savings. I guess it depends on your area’s electricity rates. In MA, the 32 panel SunPower system I put up in 2017 paid for itself in just over 6 years. With current rates, and 3 more years of SREC my gains are thousands a year.
If you’re industry needs giant tax incentives to make your product make sense, then your product isn’t any good
You’re right, petroleum would never survive without the huge subsidies they get. It’s no good.
Tell that to the fossil fuel industry.
I respectfully disagree. You can have a great product but might still need incentives to survive a slow adoption period by consumers. Newer technology isn’t always immediately accepted or adopted by consumers. There is a learning curve, so it takes time for even great ideas to spread fully. From the telegraph to video conferencing, what eventually became common and ubiquitous, was at first rejected by many. And in many cases, it was incentives that sustained those great ideas to success, including some ideas that benefit us today. Tax incentives are a fantastic way for a great idea like solar power systems to become the norm. The incentives can be phased out once there is a certain saturation point and as solar systems become the norm in most new construction.
I guess oil and gas aren’t very good based on your statement.
Exactly, this is why all fossil fuel companies should stop receiving the handouts they’ve received from government for decades!
We went solar in 2022.. best decision ever, it only took 6 months for us to see changes in our billing through electricity. For 6 months I had to pay two bills. One to electricity company, and one to solar /loan company. Now I have credits with the electricity company, they actually send a check or reflect credit on electricity account. January 2025 I cashed a check from my electricity company, used that as additional payment to the solar/loan company… I have elected to do this annually so I’m not getting little checks in low generation months… My experience with solar has been awesome. Now I’m only paying for the loan for the solar system.
Without debating “incentives” and applicability to growing industries but just to understand the point better… Are we saying solar should not need incentives or the oil and gas industry should not need incentives?
I have sold lots of solar without any tax incentives. Once people understand that putting solar up is like growing carrots and they see I am not ripping them off in installation costs or marking up the products ridiculously… but I always feel ripped off at the gas pump.
I know there are bad actors on both sides but an “all of the above” energy policy doesn’t favor and an “all of the above, but U.S. Made”, does favor and tax incentives work well for that scheme.
It’s never been feasible for us and more of rip off , especially when you go to sell your house 5 years later ! And if you go to buy a house with a solar that’s not paid off guess what, you have to pay it off , take over payments or the seller has to pay it off. It’s only good for certain people , This is also why I won’t be getting an all electric car anytime in the next 10 years.
also from a google search: “The fossil fuel industry receives significant tax breaks and subsidies from the U.S. government, despite generating substantial profits. These subsidies, which can take the form of tax deductions, credits, and exemptions, lower the cost of fossil fuel production and distort energy markets, potentially hindering the transition to cleaner energy sources. “