San Diego, February 6, 2026
The expiration of a federal tax credit has placed U.S. residential solar companies in a precarious position, prompting layoffs and restructuring throughout the sector. Analysts predict a decline in installations as companies adjust to the market changes. While some firms face significant challenges, others are finding opportunities in alternative financing models. The extended payback period for homeowners complicates the financial landscape, making it crucial for businesses to adapt and advocate for new policies to support renewable energy growth.
San Diego, California
Challenges Mount for U.S. Residential Solar Companies After Tax Credit Expiration
U.S. residential solar companies are navigating turbulent waters following the expiration of a key federal tax credit that fueled over a decade of rapid growth in the industry. The 30% federal income tax credit, which incentivized homeowners to invest in rooftop solar systems, expired at the end of 2025, following changes implemented under the Trump administration. This has resulted in significant layoffs, business restructuring, and even closures throughout the sector.
As companies adjust to this abrupt shift, many are bracing for a lackluster period for solar panel installations. Analysts forecast a potential decline of 20% in installations for 2026, a stark contrast to earlier predictions that anticipated an increase. This downturn is compounded by high interest rates and the reduction of state-level incentives, leading industry leaders to characterize the coming months as a “very meager market.”
Impact on Solar Companies
Numerous prominent solar companies have reacted to the end of the federal tax credit with drastic measures. Enphase, a manufacturer of microinverters, announced plans to reduce its workforce by 160 jobs, equating to about 6% of its personnel. Meanwhile, Freedom Forever, the nation’s second-largest residential solar installer, halted operations in 10 of its 30 markets, resulting in a 20% workforce reduction. Additionally, the Oregon-based solar installer Purelight Power has filed for Chapter 11 bankruptcy, affecting about 200 employees, while Texas-based TriSMART Solar ceased operations at the end of last year.
Market Reactions and Altered Predictions
The expiration of the tax credit has prompted analysts to revise their predictions significantly. One firm now expects residential solar panel installations to sink to their lowest levels since 2020, estimating that recovery may not occur until later in the decade. This contraction raises concerns about the U.S.’s ability to meet escalating power demands, especially with the substantial rise in data centers that require reliable energy supplies. Consequently, these challenges threaten to undermine key goals set by the current administration.
Resilience Among Segments of the Industry
Despite the overall contraction, some areas of the residential solar market are still positioned to thrive. Companies like Sunrun, which utilize a subscription model to sell electricity generated from owned rooftop systems, continue to leverage a distinct federal tax credit, allowing them to maintain cost advantages for customers. Many installers are currently pivoting towards third-party ownership models that enable homeowners to engage with solar technology without upfront costs. This model not only alleviates financial barriers for consumers but also permits companies to retain ownership of the systems and associated tax credits.
Financial Implications for Homeowners
The expiration of the tax credit has also altered the financial landscape for homeowners seeking solar installations. The average payback period for a rooftop system has now increased to roughly 10 years from 7 years, translating to an additional expense of about $8,000 for homeowners. This uptick in cost has prompted solar businesses to explore alternative financing structures, including third-party ownership models, to drive demand and foster renewable energy adoption.
Looking Ahead
The outlook for the solar industry following the expiration of the federal tax credit remains uncertain. Professionals in the field are adjusting to the new market dynamics while assessing how various financing options might cushion the impact of increased system costs on consumer engagement. Policymakers and industry stakeholders are encouraged to evaluate ways to stimulate a recovering residential solar market, ensuring that innovative financing strategies and local entrepreneurship can continue to drive economic growth.
Conclusion
As the U.S. solar industry faces unprecedented challenges, the resilience and adaptability of local companies will be vital to navigate the post-tax credit landscape. Entrepreneurs across California and the nation must leverage creative financing solutions and community support to overcome barriers and promote the continued growth of renewable energy. It’s essential to remain engaged with local businesses and advocate for policies that foster innovation and economic development.
FAQ
Q: What is the federal tax credit for residential solar installations?
A: The federal tax credit, also known as the Investment Tax Credit (ITC), was a 30% federal income tax credit for homeowners who purchased rooftop solar systems. It expired at the end of 2025 under President Donald Trump’s tax overhaul.
Q: How has the expiration of the tax credit affected the solar industry?
A: The expiration has led to significant challenges for the solar industry, including layoffs, restructurings, and company closures. Analysts have revised their forecasts, expecting a decline in residential solar panel installations by 20% in 2026, instead of an increase as previously projected.
Q: Are there any segments of the solar market that remain unaffected?
A: Yes, companies like Sunrun, which own rooftop systems and sell the electricity to homeowners under subscription-style contracts, can still claim a separate federal tax credit and pass savings along to customers. This has led many installers to shift towards third-party ownership models to maintain market demand.
Q: How has the expiration of the tax credit impacted homeowners financially?
A: The expiration has lengthened the typical payback period for rooftop systems to about 10 years from around seven, making systems roughly $8,000 more expensive for homeowners. This has prompted companies to explore alternative financing options to support the transition to renewable energy sources.
Q: What are third-party ownership models in the solar industry?
A: Third-party ownership models involve companies owning the solar systems and selling the electricity to homeowners under subscription-style contracts. This allows homeowners to benefit from solar energy without the upfront costs, while the companies retain ownership of the systems and associated tax credits.
Q: What are the implications of the downturn in the solar industry for the United States?
A: The downturn could pose challenges for the United States in meeting rising power demand, particularly with the proliferation of new data centers, potentially undermining a key policy goal of the administration.
Q: How can homeowners still benefit from solar energy without the federal tax credit?
A: Homeowners can still benefit from solar energy by exploring third-party ownership models, which allow them to access solar energy without the upfront costs, while companies retain ownership of the systems and associated tax credits.
Q: What are the potential long-term effects of the expiration of the tax credit on the solar industry?
A: The long-term effects may include a slowdown in the adoption of residential solar energy, potential challenges in meeting rising power demand, and a shift towards alternative financing models to sustain the industry.
Q: What role do federal tax credits play in the adoption of renewable energy technologies?
A: Federal tax credits have historically played a significant role in making renewable energy technologies more affordable and accessible to consumers, thereby accelerating adoption and supporting industry growth.
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Author: STAFF HERE SAN DIEGO WRITER
The SAN DIEGO STAFF WRITER represents the experienced team at HERESanDiego.com, your go-to source for actionable local news and information in San Diego, San Diego County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Comic-Con International, San Diego County Fair, and San Diego Pride Festival. Our coverage extends to key organizations like the San Diego Regional Chamber of Commerce and United Way of San Diego County, plus leading businesses in biotechnology, healthcare, and technology that power the local economy such as Qualcomm, Illumina, and Scripps Health. As part of the broader HERE network, including HEREAnaheim.com, HEREBeverlyHills.com, HERECostaMesa.com, HERECoronado.com, HEREHollywood.com, HEREHuntingtonBeach.com, HERELongBeach.com, HERELosAngeles.com, HEREMissionViejo.com, and HERESantaAna.com, we provide comprehensive, credible insights into California's dynamic landscape.
