Solar Crisis! 💥 Credits Vanish – Will It Hurt You? ⚡️

Ed Murray, president of the California Solar & Storage Association, has witnessed firsthand the challenges faced by the solar industry, recalling the “bloodbath” of 1985. At that time, President Ronald Reagan eliminated Jimmy Carter-era tax credits designed to reduce U.S. reliance on fossil fuels following the 1970s oil crisis. The organization, then known simply as California Solar, experienced a dramatic decline, shrinking from 670 member companies to just 37 within months as hundreds of businesses shuttered due to the loss of the tax incentive. “I hope that doesn’t happen to us again,” Murray stated. Concurrent with the federal action, then-California Governor George Deukmejian also reduced a state tax credit for solar during this period. Despite these setbacks, the industry has since undergone a significant recovery, largely fueled by Congress’s reinstatement of a federal solar tax credit in 2005. This legislation, signed into law by President George W. Bush, aimed to accelerate the adoption of renewable energy sources like solar, reducing Americans’ dependence on foreign energy and promoting the use of domestically produced energy. “By developing these innovative technologies, we can keep the lights running while protecting the environment and utilizing energy produced right here at home,” Bush said at the time. However, the industry now faces another potential crisis: the impending expiration of the tax credit at the end of 2025, as stipulated in Donald Trump’s One Big Beautiful Bill Act, putting home solar companies on a race against time to complete projects for customers seeking to take advantage of the remaining incentives.

The industry is currently experiencing a “mad rush,” driven by a desire to maximize the benefit of the tax credit before its expiration, despite significant challenges ahead. The 2005 Energy Policy Act initially reestablished the solar federal tax credit in the U.S., and the 2022 Inflation Reduction Act subsequently expanded and extended this credit until 2035, providing residential solar customers with an income tax credit equal to 30 percent of installation costs. However, the Republican-controlled Congress voted in July to wind down the home solar tax credit by the end of the year, triggering a surge in demand. EnergySage, a nationwide solar marketplace, reported a 205 percent year-over-year increase in homeowners contacting installers through its platform following the passage of the spending bill. This sudden influx of interest has created substantial difficulties for solar companies, many of whom are now working alongside local permitting offices and utilities, which are also struggling to manage the overwhelming number of installation applications. For instance, lead times to secure a permit have doubled for Northern California company Vital Energy Solutions, now averaging four to eight weeks.

According to Vital Energy Solutions’ 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 clamoring to get their systems installed before December 31st.” McGuire described a particularly busy city office in Napa, typically known for its efficient permit processing. California, the largest solar market in the U.S., is facing significant delays, though these are not isolated to the state. “Slow permitting processes across the nation have been the biggest barrier” to achieving an industry-wide goal of reducing costs to approximately $2 per watt, according to EnergySage director of insights Emily Walker. These extended wait times are increasing overhead costs for companies, discouraging customers, and now threaten their ability to qualify for the federal tax credit before the year’s end. Vital Energy Solutions issued a pre-release statement in December indicating that 120 of its customers within a single congressional district are at risk of losing the tax credit “through no fault of their own,” citing installer delays. The company is urging policymakers to grant an extension on the year-end deadline. Home solar projects can range from $15,000 to $50,000, depending on whether they include battery storage, according to Murray, while McGuire stated the average cost is approximately $37,000 – a sum that customers risk losing entirely due to the missed opportunity to benefit from the 30 percent federal tax credit. “Every step of the process is overextended,” added Vital Energy Solutions CEO Jason.

Jackson, whose father founded the company in 1971, explained in the release that the company has faced extended wait times with utilities and ongoing supply chain disruptions. Southern California Edison experienced “significant delays” installing meter socket adapters required to connect utility meters to solar and battery components between September and November, a consequence of the recent surge in applications, as Bloomberg reported. Rising costs and difficulties procuring key equipment, including solar panels, further compounded the issue this year due to the Trump administration’s tariffs, according to several installers. Vital Energy Solutions, for example, had to source basic electrical fittings from local hardware stores due to widespread distributor shortages, a particularly problematic situation. Ipsun reported a fourfold increase in customers since June, following news of the impending Republican withdrawal of the home solar tax credit. “We had to temporarily halt new sales to ensure we could adequately bill all of our existing customers,” Keshishian stated. The company is now offering to cover potential losses associated with the tax credit for qualifying customers whose projects were delayed before the year’s end. Recognizing the challenges, installers are exploring diversification strategies, including offering services such as roofing and HVAC installation, as well as heat pump and electric vehicle (EV) installations.

Chargers, Murray and McGuire’s companies, both specialize in commercial installations, and they anticipate that smaller, “mom-and-pop” shops will find the transition more challenging given the commercial tax credits available until 2028. “We expect that many companies, when these incentives expire, will either be absorbed by larger firms or cease operations entirely,” McGuire stated. Despite these concerns, the residential solar industry remains robust, with rising electricity rates—particularly in areas surrounding new data centers—projected to continue driving demand for home solar systems designed to reduce long-term utility costs. Furthermore, more frequent power outages during extreme weather and wildfire seasons are boosting the demand for residential systems incorporating batteries, intended to maintain electricity during extended blackouts. The subscription-based solar industry successfully advocated for these protections within the legislation, asserting that their fleets of solar and battery systems function as a distributed power plant, helping to stabilize the grid as it addresses the nation’s escalating electricity needs. Republicans received criticism for reducing tax credits benefiting developers in several Republican-leaning states. Sunrun’s stock has increased by approximately 75 percent over the past year, which the companies view as a positive development. “We believe these options represent a significant benefit,” they added, while acknowledging a slight overall contraction in the industry.

Next year, Sunrun is projected to gain further market share, according to Paul Dickson, the company’s president and chief revenue officer, who stated this to The Verge. Additionally, Keshishian anticipates Ipsun—which specializes in installing panels for customers who either purchase or lease systems—will significantly increase its sales of TPOs. Prior to his current role, Keshishian served as a vice president at SolarCity, a company previously focused on leasing and Power Purchase Agreements (PPAs) before it was acquired by Tesla in 2016. A key benefit of third-party ownership models is their potential to make solar accessible to customers who might not be able to afford upfront purchases. However, PPAs have faced criticism regarding escalating rates that could potentially exceed inflation and increase costs for consumers. The recent loss of the federal tax credit is fueling the development of new third-party ownership options, including some lease-to-own models, which feature lower rate escalators. “Despite the negative impact of the bill,” Emily Walker of EnergySage noted, “having these options available is a welcome development.” Ed Murray, who advised other installers following the loss of the tax credit in 1985, offered a stark warning: “Save your money,” he told The Verge. “And hopefully, we will see a policy shift with the midterm elections, potentially leading to the reinstatement of a tax credit – it’s a particularly challenging business.”