The US household PV market is in a downturn

Recently, the US residential solar industry may now be on the verge of collapse. Facing macroeconomic challenges and changes in state and federal policies, the US residential solar market is experiencing a sharp decline, and the latest draft of the One Big Beautiful Act has made the situation even worse.

The latest draft of the act is unfavorable to clean energy, particularly damaging to household PV, as it cuts federal tax credits much earlier than expected.

In 2024, US residential solar installations dropped by 31%. Over the past year, industry giants such as SunPower, Sunnova, and Mosaic Solar have all filed for bankruptcy.

The industry has always relied on the value proposition of reducing customers' electricity bills and providing predictable long-term costs. However, this value is becoming increasingly difficult to deliver.

The days of low interest rates offering attractive terms for loan or lease systems are gone. In many major markets, such as California, the bill credit rates for sending excess power to the power grid have been reduced by 75% or more.

Tariffs also pose challenges to the industry. Aluminum used in solar panel frames and racking systems is subject to a 25% tariff. This year, import tariffs on solar cells and modules from major global suppliers have also been higher than expected.

The residential solar industry is no stranger to highs and lows. Those who have weathered the storm of hot-and-cold policy changes, often referred to as the "solar coaster," which creates markets and takes them away at breakneck speed, have endured. But the latest draft of the federal reconciliation bill may represent a collapse.

In 2022, the Biden administration passed the Inflation Reduction Act, extending the tax credit covering 30% of the cost of installed systems until the mid-2030s. The latest draft of the One Big Beautiful Act submitted by the Senate Finance Committee ends this tax credit earlier.

Firstly, the act takes a clearly anti-consumer and anti-ownership stance by cutting the 25D residential solar tax credit, which is paid directly to homeowners who purchase solar through loans or cash upfront, within 180 days of enactment.

Secondly, the act reduces the 48E investment tax credit for all eligible technologies to 60% of their value by the end of 2026, to 20% of their value by the end of 2027, and disqualifies all projects that begin construction in 2028 from receiving the credit.

To the industry's surprise, the act singles out residential solar leases, making them completely ineligible for the 48E investment tax credit.

This has shocked the investment community, with the stock price of Sunrun, the largest residential solar provider, dropping by more than 40% on the trading day following the release of the latest draft of the One Big Beautiful Act.

The bill will next be submitted to the Senate for a vote, requiring a majority vote to pass. Then, the bill must be reconciled with the House of Representatives, with both chambers agreeing on the same version before it can be voted into law.

Looking ahead, if the bill passes as scheduled, residential solar in the US is expected to pull back further. The industry needs to find new ways to reduce costs in order to thrive in a more stringent regulatory environment.

One approach is to pursue lower soft costs. The Solar Energy Industries Association (SEIA) states that over 65% of the cost of installing residential solar is related to soft costs, such as paying sales teams, obtaining permits, and grid connection costs.

The US can find a way forward by pursuing market conditions similar to those in Australia, where over 40% of households in some regions have rooftop solar. The US has significantly lower soft costs, with an average residential solar installation cost of $0.89 per watt, which is more than $2 cheaper per watt than in Canada and the US (Note: The original text seems to have a comparison error here, as it mentions "Canada and the US" but likely means "Canada and other countries" or simply emphasizes the lower cost in the US compared to elsewhere. However, the translation follows the original text's wording. In a real-world scenario, this might need clarification or correction.) (This article is compiled from pv-magazine. Please indicate the source when reprinting.)