Residential Solar Installers Prepare for Market Transition

The U.S. residential solar industry has grown rapidly in recent years, driven by federal tax incentives that reduced the cost of adopting solar PV technology. Extended credits and bonus incentives have helped more homeowners invest in renewable energy systems.

However, upcoming policy changes will soon reshape the market. Under current legislation, the federal residential investment tax credit will expire for most homeowner-owned solar and battery storage projects on December 31, 2025. To secure the 30% tax credit, installations must be completed before this date. Third-party-owned residential solar systems, such as those under leases or power purchase agreements (PPAs), will remain eligible into 2026, though these arrangements are not available in every state.

The end of these incentives could slow the recent surge in solar PV installations. Yet industry history shows that solar adoption existed before federal subsidies and will likely continue afterward. The key challenge will be for contractors to adapt their business models to remain competitive in a post-incentive market.

Learning from Past Policy Shifts

The solar market has endured sudden policy changes before. Several state-level rebate programs have ended abruptly, creating market turbulence. In those cases, the companies that adapted quickly—by diversifying services and targeting new opportunities—were the ones that endured.

As the 2025 deadline approaches, many installers are experiencing a temporary increase in demand from customers eager to take advantage of the tax credit. Rising electricity prices—driven by inflation, infrastructure upgrades, growing demand from data centers, and shifts in energy sourcing—are adding urgency for homeowners considering residential solar and energy storage systems.

Some industry experts note that a healthy long-term goal is a self-sustaining market where solar can compete without subsidies, avoiding the boom-and-bust cycles tied to incentive changes.

Opportunities Beyond New Installations

While new system installations may slow after federal incentives end, maintenance demand for existing residential solar arrays will remain strong. Previous downturns have left many solar systems without their original installers, creating opportunities for experienced contractors to provide ongoing support, repairs, and system upgrades.

Maintenance work can also be an entry point for adding battery storage or replacing older solar panels with newer, more efficient models. Even without incentives, 2024 saw historically low prices for both solar PV and energy storage systems. Storage adoption is particularly strong in states with time-of-use-based net metering and in regions where extreme weather events highlight the value of backup power.

Contractors can also diversify into complementary services, such as electric vehicle charger installations, general electrical work, and roofing—often needed when installing solar systems.

Building Resilience in a Changing Market

The shift in 2026 gives residential solar installers an opportunity to strengthen their operations. Recommended strategies include:

• Streamlining overhead costs and improving operational efficiency.
• Expanding service offerings to include commercial, institutional, and backup power systems.
• Building strong relationships with suppliers and industry partners.
• Staying active in national, state, and local renewable energy associations to remain informed on policy changes and market trends.

Even as federal incentives wind down, many states and utilities continue to offer regional rebates and credits. Contractors who stay informed, diversify services, and operate efficiently will be better positioned to thrive in a more competitive market.

In this evolving energy landscape, adaptability and innovation will determine which residential solar companies succeed. By integrating battery storage and other complementary technologies, contractors can continue to meet consumer needs while contributing to a more resilient and sustainable energy storage future.