Once seen as a shining symbol of clean energy progress in the U.S., the residential solar industry is now battling to stay afloat. Just a few years ago, homeowners were installing rooftop panels in record numbers, fueled by generous tax incentives and low-interest financing. But today, things look very different.
The industry is now in the midst of a dramatic slowdown. In 2024 alone, residential solar installations dropped by 31%, marking one of the steepest declines in its history. Household names like SunPower, Sunnova, and Mosaic Solar—once leaders in the space—have filed for bankruptcy, highlighting just how serious the downturn has become.
Now, a newly proposed piece of legislation is threatening to make things even worse. Dubbed the One Big Beautiful Bill Act, the draft law proposes rolling back federal tax credits that have long underpinned the economics of home solar. Without these benefits, many fear that solar will become too expensive or too complicated for the average homeowner to consider.
A Blow to Federal Support
The residential solar market has relied heavily on two federal incentives: the 25D tax credit, which reimburses homeowners for 30% of their solar system’s cost, and the 48E investment tax credit, aimed at developers and companies financing solar installations. Both have been crucial in making solar energy affordable and accessible.
But the new bill would cut the 25D credit entirely within six months of being signed into law. That means homeowners who were considering solar would lose a significant rebate—up to thousands of dollars—if they don’t act fast. The 48E credit would also be phased out. By 2026, its value would drop to 60%, then shrink to 20% by 2027, before being eliminated altogether for projects starting in 2028.
Even more surprising, the bill excludes leased solar systems from any tax incentives, a move that stunned industry insiders. Many solar companies have long depended on lease agreements to help consumers go solar without the high upfront cost. Removing this option could shrink the market even further.
Investor Panic and Market Shock
The impact of the bill’s release was immediate. Sunrun, the largest residential solar installer in the country, saw its stock plummet more than 40% in a single day. Investors were rattled by the sudden and sweeping nature of the proposed changes. Analysts warn that if the bill passes, other companies could follow the same path as SunPower and Mosaic—straight into bankruptcy.
The legislation is now awaiting a vote in the Senate, where only a simple majority is needed to move it forward. If approved, it will head to the House of Representatives for final revisions and potential passage. The outcome could determine whether the solar industry has a future in the U.S. residential market—or if it will fade into a cautionary tale.
Tougher Economics for Homeowners
Outside of federal policy changes, other challenges are making solar less attractive to homeowners. Rising interest rates have made financing harder, driving up the cost of monthly payments for those using loans. Previously, many homeowners opted for solar to save money on energy bills. But with fewer favorable loan options, the cost savings are shrinking.
In states like California, new rules have cut payments to homeowners for the excess power their panels send back to the grid—by more than 75% in some cases. This means the return on investment for installing solar has taken a major hit.
On top of that, the cost of equipment is going up. Tariffs on imported aluminum (used in frames and mounting systems) and solar cells are adding to installation prices. All of these changes are happening at once, squeezing both homeowners and solar companies.
The Long History of Solar Ups and Downs
Industry veterans often refer to the “solar coaster”—a nickname earned from the frequent policy changes and market instability that have defined the sector for years. Back in 2022, the Biden administration tried to bring stability through the Inflation Reduction Act, which extended the 30% tax credit through the mid-2030s. That move was celebrated as a turning point.
But now, with the One Big Beautiful Bill Act potentially undoing that progress, the industry is once again bracing for uncertainty.
Can the Industry Reinvent Itself?
Despite the setbacks, experts say there’s still hope—if the industry can significantly reduce what are known as “soft costs.” These are non-hardware expenses like sales commissions, permitting, grid connection fees, and paperwork, which make up more than 65% of the cost of going solar in the U.S.
There’s evidence this is possible. In Australia, residential solar is thriving. Over 40% of homes in some regions have rooftop systems, and the average cost of installation is just $0.89 per watt—compared to over $2.00 per watt in the U.S. Much of that difference comes from lower soft costs.
