The US residential solar industry may now be on the brink of collapse. Facing macroeconomic challenges and shifting state and federal policies, an industry once defined by double-digit growth in installations is now experiencing steep declines – and the latest draft of the One Big Beautiful Bill Act makes conditions even worse.
The latest draft of the bill is broadly negative 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/W, more than $2.00/W cheaper than both Canada and the United States.
