The U.S. residential solar industry knew this year would be tough after President Donald Trump’s One Big Beautiful Bill ended a lucrative homeowner tax break for buying panels.
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So far, it’s looking even worse than feared.
Freedom Forever LLC, one of the nation’s largest solar installers,
“It’s a zero-growth sector,” said Joe Osha, a clean energy analyst for Guggenheim Securities who recently dropped his coverage of Sunrun, the nation’s biggest home solar company.
The industry is shrinking even as utility bills surge across the country. Residential solar companies have long marketed higher power bills as a reason to install their panels for cheaper power and increased energy independence.
The headwinds facing the industry have been building over the last several years. Higher interest rates made it more expensive to borrow to pay for solar systems, which can cost $20,000 or more for homeowners. Tariffs on solar imports from Southeast Asia have raised the costs of equipment and squeezed margins. And California, the biggest home solar market, dialed back state incentives for new solar-only systems starting in 2023.
Against this backdrop, Sunrun’s main national rivals – SunPower Corp. and Sunnova Energy International Inc. – filed for bankruptcy in 2024 and 2025, respectively.
The Trump administration’s law may be the industry’s biggest hurdle yet. Along with ending a homeowner solar tax credit at the end of last year, it also imposed a rapid phaseout of a federal subsidy that can be claimed by companies that lease residential solar systems. New anti-China restrictions on those credits have also made some longtime bank participants hesitant, draining a key source of capital for the sector.
“The market is naturally going through a big disruption,” Enphase Chief Executive Officer Badri Kothandaraman said in an interview. “Residential solar is in the process of being rebuilt, which is happening right now.”
Prospects for the industry aren’t expected to improve soon. Ohm Analytics, which tracks the residential solar market, forecasts second quarter solar interconnections to be down by more than a quarter compared to the same period a year ago, according to Chief Executive Officer Chris Collins.
“Some of the data we are seeing now indicate second quarter numbers coming in slightly softer than expectation,” Collins said. His firm expects the market to decline 22% for the full year.
The glum news has residential solar stocks largely reversing their gains since January. Enphase shares have slid nearly 30% since hitting a year-to-date high in early February. Sunrun dropped close to 40% since reporting fourth-quarter earnings in late February, although shares rebounded as much as 23% on Thursday after the company posted first-quarter earnings and sales above analyst estimates.
SolarEdge Technologies bucked the trend, climbing about 40% so far this year in part on hopes for increased sales in Europe, where power prices have jumped from the war in Iran.
There is some hope for a way through the slump in demand. Executives with residential solar companies view battery storage technology, which has seen a sharp drop in costs, as providing a potential avenue for growth as well as offering some bill relief for consumers. Batteries can also qualify for tax credits through 2033.
Power rates in California now reward homeowners for storing solar in batteries during the day when energy is cheap so it can be used in the evening when grid power becomes expensive. Approximately 90% of solar panels sold in the state now come with a battery, according to Ohm Analytics.
“Long term, if electricity prices continue to rise, solar and batteries will make more and more financial sense,” SolarEdge Chief Executive Officer Shuki Nir said.
States and utilities are also looking for ways to encourage and reward homeowners for installing batteries with solar panels. Texas, California and New York are among the states that have established or are developing policies that reward consumers for participating in programs that can tap into a network of batteries, solar panels and smart home devices to form a distributed power plant.
Sunrun, which says it has created the nation’s biggest home battery network, sees the industry turmoil as an opportunity for the company to gain market share this year. Executives reassured investors it had plenty of access to financing during a first-quarter first-quarter earnings call on Wednesday.
“We believe that the market dislocations occurring around us present opportunities for us to extend our lead and accelerate profitable, high-quality growth,” Sunrun Chief Executive Officer Mary Powell said.
In the meantime, the industry will likely have to navigate more turbulence, SolarEdge’s Nir said. “Short term, there is going to be some hiccups, but in the long term we see the demand is there and is going to be served.”
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