Over the past 20 years, over 5 million US households from California to Georgia and Maine have placed solar panels on their roofs, drawing energy from the sun and reducing electricity bills.
But it can quickly become a crash stop.
The domestic policy bill, passed by House Republicans last month, will eliminate tax credits for homeowners and solar leasing companies that have fueled the popularity of rooftop solar by the end of this year. If that were to become law, analysts and companies say, it would lead to an immediate entry for installations.
“This is putting us backwards,” said Ben Airth, policy director for Freedom Forever Forever, one of the nation's largest residential solar installers. “I've been in the industry for 22 years and I remember that the people who installed solar panels on the roof were rich, end-of-life preparations, environmentalists.”
One analysis by energy data company Ohm Analysis estimates that if the House bill becomes law, residential solar installation could drop by half next year. Without a tax credit, it takes an average of 17 years for homeowners to regain their solar investment. A more pessimistic analysis by Morgan Stanley projects that rooftop solar demand could fall by 85% until 2030.
Republicans want to curb tax credits for other renewable energy technologies, such as wind turbines and large solar farms, but the outcomes for rooftop solar could be even more severe. Rooftop solar costs 2-3 times more than power units per power on large solar arrays on farms and deserts, and the housing industry is more vulnerable to changes in subsidies.
The Senate is currently writing a version of the domestic policy bill, with Sun executives appealing to be down to Washington and blown away by the more progressive winds of energy credits. They point out that the solar industry employs around 300,000 workers and that the rooftop system helps homeowners cut their electricity bills.
However, some conservative Republicans have made it clear they are opposed to a recovery in renewable energy tax cuts.
Texas Republican Chip Roy has been killing our energy, killing our energy, killing our grid, destroying our landscape, undermining our freedom, and undermining our freedom. “I don't have that.”
Uncertainty overturns an industry that is already struggling with tariffs and high interest rates. Last week, Solar Mosaic, which provided loans to homeowners to install rooftop panels, declared bankruptcy. On Monday, Sunnova Energy, one of the nation's largest rooftop solar companies, followed suit.
Some experts say that even if rooftop solar is ultimately unsubsidized, electricity prices will continue to rise across the country, making solar economics even more advantageous. However, adjustment periods are likely to be painful, with more bankruptcies and layoffs.
Zoe Gaston, a leading analyst for residential solar at energy research firm Wood Mackenzie, said: “But it will be smaller.”
Major tax changes
For 20 years, Congress has provided tax credits to those who place solar panels on their roofs. But Democrats overwhelmed these subsidies in the 2022 Inflation Reduction Act. This has cultivated hundreds of billions of dollars in technology to combat climate change.
The law extended residential solar credits that allow homeowners to recover 30% of the costs of their solar system until 2032. We have also expanded the investment tax credits for companies that build low-power sources such as solar and batteries.
The latter change has fueled the solar lease boom, where homeowners don't have to pay the upfront costs of rooftop solar systems that can run more than $30,000. Instead, the company owns the panel and holds tax credits. Homeowners leased equipment from the company, ideally saving money through lower energy bills.
Today, more than 50% of home solar systems are funded in this way, and the rise of leases makes rooftop solar and rooftop solar more accessible to schools, hospitals and small businesses.
The House Republican bill will end the solar tax credit for housing by the end of 2025. Additionally, last-minute changes pushed out by fiscal conservatives will soon be subject to investment taxes.
The House bill also prohibits businesses from claiming tax credits when using components from China that control the solar supply chain. The provisions are so widely written that many companies say they cannot use credit effectively.
Gregg Felton, CEO of Altus Power, which develops solar projects on roofs and parking lots, said the House bill “is a fair way to explain the impact on the industry.”
If Congress cuts support for renewable energy significantly, experts said companies will continue to invest in large solar arrays, as these plants are often one of the cheapest ways to generate additional electrons, even without subsidies. Rooftop solar is more expensive, requires more effort and faces greater risks.
Kenny Plannenstiel, chief operating officer of Big Dog Solar, an Idaho-based solar installation company, said rooftop solar has been gaining popularity in new markets such as Montana and Idaho.
“There's a lot of interest from people who want to control their energy future and those who are worried about the grid being available when they need it,” Pfannenstiel said. As tax credits expanded, “the economic debate about these customers installing solar and battery systems has become much stronger,” he said.
If credits go out, some customers may still want the panel, he said, but the market will “should shrink dramatically.”
Rippling effects can be important. If the solar leasing company goes bankrupt, no one remains with the customer to serve the panel. Thousands of installers and electricians will find themselves losing their jobs.
In recent years, more than 30 solar plants have opened in the US, but if demand slows, it could close.
Freedom Forever, a California-based solar installer, says two years ago none of the equipment was sourced from the US. Today, it's about 85%, including inverters made in Texas and Florida. This is part of the provisions of the Inflation Reduction Act, which provided bonus credits for using domestic components.
If the credit is gone, “the industry will simply return to using the cheapest modules normally made overseas,” said Airth, the company's policy director.
Discussions surrounding rooftop solar
The battle for tax credits in Congress is not the only challenge facing rooftop solar. The technology remains popular with homeowners, but some states are beginning to pull back support amid barrage of criticism.
Electrical utility and some analysts say solar users on the roof are increasing costs for everyone else. Because solar power requires less monthly utility bill payments, but relies on a wide grid for backup power. This shifts the cost of keeping the grid in other households. This is often low income. (Solar advocates say utilities ignore many of the benefits of rooftop panels, including avoided transmission costs.)
The fight was particularly intense in California, the country's largest rooftop solar market. In 2022, regulators significantly reduced the compensation new solar households could receive for the electricity they produce. Over the next few months, rooftop installations fell 85% statewide, with tense installers, manufacturers and distributors down.
Even today, some officials are trying to cut further support, including existing homes. “We need to reassess how the current solar grant program affects Californians who may not be able to afford solar panel systems,” said Democratic state legislator Lisa Calderon.
The rising interest rates have further narrowed the rooftop solar system by making it more expensive to borrow money to fund new equipment. The Trump and Biden administrations also increased solar tariffs from China.
Some people in the rooftop solar industry say they have to focus on cutting.
Not only is rooftop systems more expensive than large utility-scale solar farms, but the cost of a US home solar system is three times more expensive than that of an Australian equivalent system. Some analysts have condemned differences in the permissions process.
“At some point, our industry can function without tax credits,” said Chris Hopper, co-founder of Aurora Solar, a software company that designs home solar systems. “I think we can board these credit phase-downs over the appropriate period.
“But the overnight changes will be devastating,” Hopper said. “It's impossible to adapt it quickly.”
Ivan Penn contributed report
