U.S. residential solar installations are expected to decline 15% in 2026 compared with 2025. This is the lowest annual total in five years, according to BloombergNEF.
The industry isn’t expected to recover to levels near 2023’s peak before the mid-2030s. It’s no surprise that selling homeowners on solar is harder now that the One Big Beautiful Bill Act repealed the federal residential solar tax credit—a subsidy that had long distorted the market.
That credit, Section 25D, covered 30% of a rooftop system and its battery with no dollar cap, and the 2022 Inflation Reduction Act had scheduled it to run through 2034. The Joint Committee on Taxation projected it would cost the Treasury about $77 billion over the next decade before the One Big Beautiful Bill Act repealed it. If rooftop systems penciled out on their own, demand wouldn’t track the credit this closely.
The credit expired at the end of 2025, leaving companies built to harvest that tax credit scrambling to retrench. Sunrun Inc. is expecting a 25% drop in U.S. residential solar installations this year. Roth Capital Partners expects residential solar to decline 33% year-over-year, reporting that companies are raising prices, laying off staff, and halting originations in Florida and Texas.
Two states are “bucking the trend”: California and Florida. The reason is their state policies. BloombergNEF projects Florida’s residential additions will rise 62% to 710 megawatts in 2026. Florida requires its utilities to credit rooftop exports at the full retail rate, a rule that survives because Governor Ron DeSantis vetoed a 2022 bill that would have phased those credits down to the wholesale “avoided cost,” which better reflects rooftop solar’s actual value to the grid.
Retail-rate net metering is a transfer because solar owners still depend on the grid for backup and after-dark power, but crediting their exports at the full retail rate reimburses the per-kilowatt-hour charges that customers pay for upkeep. Customers without rooftop solar pay these costs. In 2022, Tampa Electric, Duke Florida, FPL and Gulf Power estimated that full retail-rate net metering cost non-solar customers in their service areas $719 million between 2020 and 2025.
California has already cut back, given the scale the subsidies reached. The state cut new solar customers to avoided-cost rates in 2023, but customers grandfathered onto retail net metering keep their credits for two decades. The Public Advocates Office estimates that the legacy full-retail subsidy cost non-solar ratepayers $8.5 billion in 2024, up from $3.4 billion in 2021, as much as a quarter of the average non-solar customer’s monthly bill.
The end of federal subsidies is revealing which solar installations were economically viable and which depended on government support. Solar still grows where state policy keeps the economics working, usually through full-retail net metering, even as a growing number of states cut those credits back toward avoided cost. In the states that haven’t, the customers without panels pay for their neighbors with panels.