Ed Murray has been in the solar business long enough to remember the bloodbath of 1985. That’s when President Ronald Reagan ended Jimmy Carter-era solar tax credits meant to decrease US reliance on fossil fuels following the 1970s oil crisis.
“It was a sad time,” says Murray, who is president of the trade group California Solar & Storage Association. Membership to the organization (which hadn’t yet added “storage” to its name) fell from 670 companies to just 37 “almost overnight,” Murray says, as hundreds of businesses went under without the tax credit. “I hope that that doesn’t happen to us again.” (Then-California Gov. George Deukmejian also cut a state tax credit for solar around the same time.)
The industry has managed to make a remarkable comeback since then, thanks in no small part to Congress reinstating a federal solar tax credit in 2005. Speeding the adoption of renewables like solar was meant to limit Americans’ dependence on foreign energy sources. “By developing these innovative technologies, we can keep the lights running while protecting the environment and using energy produced right here at home,” President George W. Bush, a Republican, said upon signing the measure into law.
“I hope that that doesn’t happen to us again.”
Now, as a result of Donald Trump’s One Big Beautiful Bill Act, the tax credit is set to expire at the end of 2025, and home solar companies face another cliff. Installers are racing to complete projects for customers wanting to take advantage of the tax credit while they still can, even as they face some major headwinds in the process. After that, the industry will have to figure out how to adapt to a very different solar landscape in the coming year.
“It’s a mad rush and it’s crazy,” Murray says.
It wasn’t supposed to be like this; solar companies and their customers thought they’d have the credit for much longer. The 2005 Energy Policy Act reestablished a solar federal tax credit in the US, which the 2022 Inflation Reduction Act (IRA) expanded and extended until 2035. That gave a residential solar customer an income tax credit equal to 30 percent of the cost of installation.
This year, the Trump administration has taken a wrecking ball to the IRA, which was the Biden administration’s signature climate and clean energy bill, as part of President Trump’s pro-fossil-fuel agenda. The Republican-controlled Congress voted in July to wind down the home solar tax credit by the end of the year.
Initially, that led to a spike in customers rushing to install home solar systems before the tax credit goes away. EnergySage, a nationwide solar marketplace in the US, says it saw a 205 percent year-over-year increase in homeowners communicating with installers on their platform after the Republican spending bill passed in July. That trend was echoed by Murray, who is also president of the Northern California-based company Aztec Solar, and other installers The Verge contacted. “It increased sales immensely, and so we have a rush to the end,” Murray says.
The surge in demand, however, has also come with bigger headaches for solar companies who say they now have to work with local permitting offices and utilities similarly scrambling to keep up with the sudden onslaught of installation applications. The lead time to secure a permit has doubled since August to about four to eight weeks for Northern California company Vital Energy Solutions, according to its director of sales and marketing, Kevin McGuire.
“It’s no secret that these permitting offices are just totally overwhelmed because of the flood of customers that are just clamoring to get their systems installed before December 31st,” says McGuire, describing a packed city office in Napa that’s otherwise typically pretty quick to process permits.
“Totally overwhelmed”
California is the biggest solar market in the US, but it’s not the only state where there are delays. Slow permitting processes across the nation have been the “biggest barrier” to reaching an industry-wide goal of driving costs down to about $2 a watt, according to EnergySage director of insights Emily Walker. Long wait times increase overhead costs for companies, turn off customers, and now even jeopardize their ability to qualify for the federal tax credit this year.
Vital Energy Solutions sent out a press release in December saying that 120 of its customers in a single congressional district are at risk of losing the tax credit “through no fault of their own” as installers face delays, and calling on policymakers to grant an extension on the end-of-year deadline. Home project costs can range from $15,000 to $50,000 depending on whether they include batteries, according to Murray, and average about $37,000 according to McGuire — so customers stand to lose thousands of dollars by missing out on the 30 percent tax credit.
“Every step of the process is overextended,” Vital Energy Solutions CEO Jason Jackson, whose father started the company in 1971, says in the release. That includes longer wait times with utilities and supply chain snafus, the company adds.
Southern California Edison has had “significant delays” installing meter socket adapters needed to connect utility meters to solar and battery components between September and November as a result of the recent uptick in applications, Bloomberg reports.
Rising costs and holdups in procuring key equipment including solar panels themselves — exacerbated this year by Trump’s tariff regime — have been another hindrance according to some installers. Vital Energy Solutions has had to resort to scouring local hardware stores for basic electrical fittings as its distributors face shortages, only to find store shelves empty.
Two major solar panel suppliers have also had a tumultuous year. In November, manufacturer QCells furloughed 1,000 workers in Georgia after months of shipments detained by US Customs. Solar components have been under increased scrutiny at ports due to policies barring components suspected of being linked to human rights abuses in Xinjiang province in China. And a fire at manufacturer REC’s Singapore factory in June backed up deliveries to the US.
Virginia-based Ipsun Solar had to redesign and re-permit projects for customers unable to get the REC components they originally planned to use, according to Leon Keshishian, CEO of Ipsun’s parent company, Civic Renewables. The timing couldn’t have been worse. Ipsun saw a fourfold increase in customers since June as news began to spread that Republicans would soon end the home solar tax credit. “We had to kind of turn off new sales at a point because we just didn’t think we’d get them all billed,” Keshishian says. The company is offering to cover the loss of the tax credit for qualifying customers whose projects it couldn’t install before the end of the year due to unforeseen delays, according to Keshishian.
To survive the loss of the tax credit, installers are figuring out how to diversify or lean into other parts of their business. Some are considering offering roofing and HVAC services, or installing heat pumps and EV chargers. Murray and McGuire’s companies both do commercial installations, which they can lean into since those projects are eligible for a commercial tax credit available until 2028. They expect smaller installers, mom-and-pop shops, to face a harder road ahead.
“There’s going to be a lot of people that, when the music stops, they’re not going to have a place to sit,” McGuire says. “Those companies will either get absorbed into other companies, or they’ll go out of business.”
Even so, no one The Verge spoke to is sounding a death knell for the residential solar industry. They expect that rising electricity rates, particularly in communities near new data centers, will still drive demand for home solar systems that can cut down utility bills in the long run. More frequent power outages during extreme weather and explosive wildfire seasons are also increasing demand for residential systems with batteries that can keep a home’s lights on during a larger blackout.
Industry leaders have also come to expect wild swings from shifting regulatory landscapes and have seen the industry pivot in response. This time around, they even see some solar companies benefitting from the loss of tax credits — those that offer “third-party ownership” (TPO) in industry speak. That could be through leasing, or power purchase agreements (PPA) that allow customers to pay per kilowatt hour for solar power from a system the third party owns.
Over the years, the pendulum has swung between customers preferring to purchase solar panels or lease them. “Now it’s going to swing very strongly in the lease direction,” says Brad Heavner, executive director of the California Solar & Storage Association. That’s because the Republican spending bill preserved the solar tax credit for commercial projects for longer and allows third-party ownership to qualify.
Sunrun, a solar company that offers power purchase agreements through subscription plans, managed to successfully lobby for those protections in the bill — arguing that their fleet of solar and battery systems served as a distributed power plant that would help stabilize the power grids as they try to meet the nation’s rising electricity demands. (Republicans also faced flak for slashing tax credits that benefited developers in red states.) Sunrun’s stock is now up about 75 percent year over year.
“Having these as an option is a silver lining.”
“While we do think the industry as a whole will shrink a little bit next year, we foresee Sunrun picking up more market share,” Sunrun president and chief revenue officer Paul Dickson tells The Verge.
Keshishian also expects Ipsun — which installs panels for customers who either purchase or lease their systems — “will absolutely sell more TPOs next year.” Prior to his current venture, he was a vice president at SolarCity, which focused on leasing and PPAs before being acquired by Tesla in 2016.
One of the arguments in favor of third-party ownership is that it can potentially allow customers who might not be able to afford to purchase their own home setup to go solar. But PPAs have also gotten a bad rap for escalating rates that could wind up costing customers more each year — in some cases outpacing inflation for electricity.
The loss of the federal tax credit, however, is driving the creation of new third-party ownership options with lower rate escalators, as well as some lease-to-own models. “Having these as an option is a silver lining,” says EnergySage’s Emily Walker — even though the bill that cut clean energy tax credits “is pretty negative by and large for the solar industry.”
Ed Murray’s advice to other installers after surviving the loss of the tax credit in 1985? “Save your money,” he tells The Verge. “And hopefully we have a regime change with the midterm and we get some kind of tax credit back. It’s a tough business.”
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