The U.S. solar industry is facing an abrupt downturn as federal tax credits, crucial for driving adoption, are set to expire at the end of 2025. This reversal of policy is causing a “mad rush” among installers and customers eager to take advantage of the current incentives before they vanish, a situation eerily reminiscent of the industry’s near-collapse in 1985 when similar tax breaks were eliminated.
The History of Boom and Bust
The solar sector has historically been deeply dependent on government incentives. President Carter initially championed tax credits to reduce reliance on foreign oil, but those were abruptly ended under President Reagan, decimating the industry. Membership in the California Solar & Storage Association plunged from 670 to just 37 companies almost overnight as businesses failed without support. While the sector rebounded with the reinstatement of credits in 2005 under President Bush, the current situation threatens another sharp contraction.
The Current Crisis
The recent rollback of the Inflation Reduction Act (IRA) by the Trump administration and a Republican-controlled Congress is the primary driver of this crisis. Despite the IRA’s initial expansion of the 30% residential solar tax credit through 2035, the current legislative changes will eliminate these incentives by the end of next year. This has triggered a surge in demand as homeowners scramble to install systems before the deadline.
EnergySage, a solar marketplace, reported a 205% year-over-year increase in customer inquiries after the bill passed in July. Installers like Aztec Solar and Vital Energy Solutions confirm this spike, though they are also struggling with overwhelmed permitting offices and supply chain bottlenecks. Lead times for permits have doubled in some areas, jeopardizing customers’ ability to claim the tax credit.
Supply Chain and Bureaucratic Headaches
The increased demand has exposed deep inefficiencies in permitting processes nationwide. Slow approvals and backlogs in utility connections are delaying installations, potentially costing customers thousands of dollars. Vital Energy Solutions estimates that 120 of its customers in a single congressional district are at risk of missing the tax credit due to bureaucratic delays.
Adding to the chaos, disruptions in supply chains – including tariffs imposed by the Trump administration and factory fires – have made it harder to procure components. Some installers are even resorting to searching local hardware stores for basic electrical fittings.
The Shift to Third-Party Ownership
As the tax credit fades, the industry is bracing for consolidation. Smaller installers may fail, while larger companies are pivoting to alternative models, particularly third-party ownership (TPO). This includes leasing or power purchase agreements (PPAs), where customers pay per kilowatt-hour rather than purchasing systems outright. Sunrun, a major TPO provider, has lobbied successfully to preserve tax credits for commercial projects and is poised to gain market share.
Long-Term Outlook
Despite the immediate turmoil, industry leaders believe demand will remain strong due to rising electricity rates, frequent power outages, and increasing awareness of climate change. The loss of the tax credit is likely to accelerate the shift towards leasing models, though some warn that PPAs can come with escalating costs.
The solar industry’s survival hinges on its ability to adapt to a volatile regulatory landscape. As one veteran installer advises: “Save your money… and hopefully we have a regime change with the midterm and we get some kind of tax credit back.” The future of residential solar is uncertain, but the industry has proven resilient in the past, and its long-term prospects depend on political shifts and technological innovation.
