Overview
The 30% federal residential solar tax credit died at midnight on December 31, 2025. For twenty years, Section 25D let homeowners slash $9,000 off a typical $30,000 solar installation. The Inflation Reduction Act had extended it through 2032. Then Trump's 'One Big Beautiful Bill' accelerated the sunset by seven years, sparking a desperate year-end rush as installers sold out months in advance and homeowners scrambled to beat the deadline.
The stakes: Starting January 1, 2026, Americans buying rooftop solar pay full price. Payback periods jump from 7 years to 11. Industry analysts project residential installations will crater 25% in 2026. Solar financiers Sunnova and Mosaic both filed bankruptcy in 2025 amid policy chaos. The residential solar market—valued at $7.5 billion and responsible for half of new U.S. grid capacity in 2025—faces its biggest policy shock since the credit's creation.
Key Indicators
People Involved
Organizations Involved
National trade organization representing America's $70 billion solar and storage industries.
Global energy research firm providing market intelligence and forecasting for the solar industry.
One of America's largest residential solar financiers before accumulating $8.5 billion in debt.
One of the largest U.S. residential solar loan providers before filing bankruptcy.
Timeline
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Federal Residential Solar Tax Credit Expires
PolicySection 25D expires after 20 years. Starting Jan 1, 2026, no federal residential solar tax credit exists.
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Final Rush: Permitting Offices Overwhelmed
MarketInstallers report utility interconnection backlogs, permitting delays. Offices 'totally overwhelmed' by deadline flood.
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PosiGen Files Bankruptcy
MarketNew Orleans-based residential installer serving 40,000 customers files Chapter 11 amid industry turmoil.
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Wood Mackenzie Forecasts 25% Drop
AnalysisIndustry analysts project residential installations will crater 25% in 2026 without federal incentive.
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Solar Installers Report Selling Out
MarketCompanies report booking through year-end. Waitlists extend months as homeowners rush to beat deadline.
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One Big Beautiful Bill Becomes Law
LegislationTrump signs Public Law 119-21 on Independence Day. Residential solar credit (25D) expires Dec 31, 2025.
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Major Solar Financiers Collapse
MarketSunnova Energy and Mosaic Inc. both file Chapter 11 bankruptcy, deepening industry crisis.
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House Passes One Big Beautiful Bill
LegislationHouse narrowly passes reconciliation bill. SEIA calls legislation 'unworkable,' warns of 330,000 job losses.
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Trump Returns, Declares Energy Emergency
PoliticalTrump's second term begins with day-one order boosting fossil fuel production, reviewing clean energy policies.
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Inflation Reduction Act Signed
LegislationBiden signs IRA restoring 30% credit through 2032, then phasing down through 2034. $369 billion climate package.
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Trump Extends Solar Credit
LegislationPresident Trump signs bill extending 26% credit through 2022 during first term.
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Solar Tax Credit Created
LegislationPresident George W. Bush signs Energy Policy Act creating Section 25D residential solar credit at 30%.
Scenarios
Residential Solar Market Contracts 25-50%, Third-Party Models Dominate
Discussed by: Wood Mackenzie, Ohm Analytics, industry analysts
The most likely near-term outcome. Customer-owned residential installations drop 25% in 2026 (Wood Mackenzie estimate), potentially up to 50% (Ohm Analytics initial model). Solar leases and PPAs—still eligible for the Section 48E business credit through 2027—capture growing market share as the only way homeowners can access tax incentives. Prepaid PPA products surge. States with strong local incentives (California, New York, Massachusetts) maintain healthier markets. By 2028, after business credits also expire, the residential solar market stabilizes at a smaller size, concentrated in high-electricity-cost states where economics work without subsidies. Total U.S. solar installations slow but utility-scale solar continues growing.
Industry Consolidation Accelerates, Major Installers Survive Through Scale
Discussed by: Solar industry observers, financial analysts tracking bankruptcies
The bankruptcies of Sunnova, Mosaic, and PosiGen in 2025 prove canaries in the coal mine. As residential demand drops 25-50% in 2026-2027, hundreds more solar installers—particularly smaller regional players—fold. The California Solar & Storage Association already reported 75% of California rooftop companies at high bankruptcy risk. Large, diversified players with utility-scale businesses and access to capital weather the storm. The market that emerges in 2027-2028 is more consolidated, with 3-5 dominant national installers controlling most residential installations. This mirrors what happened after previous subsidy eliminations in the 1980s and 1990s.
Political Backlash Forces Partial Credit Restoration by 2027
Discussed by: Clean energy advocates, Democratic lawmakers
As job losses mount—SEIA warned of 330,000 jobs at risk—and electricity prices continue rising while solar becomes unaffordable for middle-class homeowners, political pressure builds. If Democrats retake Congress in 2026 midterms or the presidency in 2028, they could restore a modified residential credit through reconciliation. Historical precedent exists: Congress repeatedly let the solar credit expire in the 1990s and 2010s, then restored it. However, this scenario faces headwinds—the credit already lasted 20 years (longer than most tax incentives), and solar is now cost-competitive in high-electricity states without subsidies. Restoration more likely if framed around energy security or manufacturing rather than climate.
State-Level Programs Partially Fill Federal Void, Regional Divergence Deepens
Discussed by: State energy agencies, local solar industry groups
Blue states with climate commitments and high electricity costs rush to create or expand state-level solar incentives to offset the federal credit loss. California, New York, Massachusetts, and Colorado already have programs in place. By 2027, a patchwork emerges: residential solar thrives in perhaps 10-15 states with strong state credits plus high electricity rates, while dying almost completely in low-electricity-cost red states. This creates stark regional inequality in clean energy access and accelerates the existing divide between states moving toward decarbonization and those doubling down on fossil fuels. Total U.S. residential solar market stabilizes around 60-70% of 2025 levels rather than the 25-50% drop scenario.
Historical Context
Solar Tax Credit Expirations and Renewals (1985-2013)
1985-2013What Happened
The original residential solar credit created in 1978 expired in 1985. Congress recreated it in 2005, then let it expire again in 1990 for a month and in 1992 for four months before renewals. The production tax credit (PTC) for renewables expired and was renewed repeatedly through the 2000s and 2010s, creating chronic uncertainty. Each time, the solar industry contracted during expiration periods, then rebounded when credits were restored. The pattern became: credit set to expire, industry lobbies furiously, Congress extends at the last minute.
Outcome
Short term: Each expiration caused installation declines of 20-40% and industry layoffs.
Long term: The on-again, off-again cycle forced solar companies to develop more resilient business models less dependent on subsidies. By 2020, solar costs had dropped 90% from 2005 levels, making the industry less reliant on tax support.
Why It's Relevant
The current expiration fits a four-decade pattern of boom-bust subsidy cycles. Unlike previous expirations, though, this one was accelerated seven years ahead of schedule rather than simply letting the credit sunset as planned.
German Feed-in Tariff Cuts (2010-2012)
2010-2012What Happened
Germany pioneered aggressive solar subsidies through feed-in tariffs that guaranteed above-market rates for solar electricity. By 2010, the program's success created a solar boom that threatened to overwhelm the budget. The government cut tariff rates by 30% in 2010 and imposed additional cuts in 2012. The German solar industry—then the world's largest—contracted sharply. Major manufacturers like Q-Cells and Conergy went bankrupt. Installations dropped from 7.5 GW in 2011 to 3.3 GW in 2013.
Outcome
Short term: German solar manufacturing collapsed. Installations fell 56% from 2011 to 2013. Thousands of jobs lost.
Long term: The manufacturing base shifted to China. Germany's solar market stabilized at lower levels but remained significant. By 2020, cumulative installed capacity exceeded 50 GW despite subsidy cuts.
Why It's Relevant
Shows what happens when major solar subsidies end abruptly in a mature market. Unlike gradual phase-downs, sudden eliminations cause sharp contractions and industry shakeouts before stabilization at a new, lower equilibrium.
Ontario Feed-in Tariff Cancellation (2016-2018)
2016-2018What Happened
Ontario launched North America's first comprehensive feed-in tariff program in 2009, creating a solar boom. By 2016, the program had achieved its goals but faced political backlash over electricity cost increases. The newly elected government cancelled the program in 2016 and later cancelled 758 renewable energy contracts in 2018. Ontario's solar market—which had grown to become Canada's largest—virtually disappeared overnight. Major developers sued the government. The province paid $230 million to settle cancellation claims.
Outcome
Short term: Ontario solar installations dropped from 442 MW in 2016 to under 50 MW in 2018. Industry essentially ceased to exist.
Long term: By 2025, Ontario still had minimal solar development compared to 2016 peak. The abrupt cancellation deterred future investment and damaged investor confidence in Canadian renewable energy policy.
Why It's Relevant
Demonstrates the risk of abrupt subsidy elimination without transition periods. When governments accelerate subsidy sunsets for political reasons—as the One Big Beautiful Bill did—markets don't adjust smoothly. They crash.