It’s been a tough year for the solar industry. What happens next is uncertain

It was going to be difficult for the solar industry to eclipse the record year it had in 2023.

That year, the U.S. solar industry added 32.4 gigawatts of new electricity generation capacity, a 51% increase from 2022, according to data from the Solar Energy Industries Association and Wood Mackenzie, an energy data and analytics company. Solar power accounted for more than half of all new electricity generation capacity added to the energy grid in 2023 – the first time in eight decades that a renewable source accounted for such a share.

As we approach 2024, it was not unreasonable to expect a slowdown, particularly in the growth of residential installations. Interest rates have increased significantly in recent years, making financing a solar system much more expensive for many homeowners. Solar energy has also found itself in the middle of a culture war, with many people (for political or other reasons) avoiding renewable energy, at least in theory, and rallying around fossil fuels.

With the election of Donald Trump, who will begin his second presidential term in January, the new administration is expected to attempt to undo all or part of the Inflation Reduction Act, which helped spur green development and renewable energy production around the world. country. This law made it possible to quadruple the national production capacity of solar panels.

Despite these apparent obstacles, the solar industry has continued to advance in 2024. And experts say it won’t be easy to slow it down.

2024: A difficult year for solar companies?

It was in residential solar installations that the numbers were grim in 2024.

For example, data from the Solar Market Insight Report Q3 2024, released in September by SEIA and Wood Mackenzie, reveals that during the second quarter of the year, solar installations increased 29% year-over-year. other. However, the slowdown was evident in the residential solar segment, where installations fell 37% year-over-year and 10% quarter-over-quarter. The report expects residential installations to “bottom out this year,” representing a 19% contraction in residential solar installations.

So the solar industry as a whole is doing well, while the residential segment is weathering a storm. But this is not unexpected.

“At the start of this year, the residential sector had seen quite remarkable growth: between the end of 2021 and the end of 2023, we saw each new quarter set new records for quarterly residential installations,” said Spencer Fields, director of analytics at EnergySage. . “This narrative began to change toward the end of last year, and early this year many of the industry’s leading prognosticators said 2024 would see a slight pullback.”

Fields said the main reasons for the decline were California’s move away from net metering, which led to a short-term surge in installations before its phaseout, and higher interest rates. “Solar is a primarily financed product,” he said. “Loans finance between 60 and 70 percent of residential installations, so interest rates and inflation have played a role.”

These changes have caused some upheaval in the industry, with a handful of large national installers going bankrupt or getting out of the business altogether.

What’s next for the rooftop solar industry

While solar installations have slowed in the residential segment, the big question hanging over the industry as 2025 approaches is what a change at the White House will ultimately mean. Some experts believe that despite Trump’s broad opposition to many renewable energy projects, little will change.

“I don’t see the new administration stopping the growth of solar,” said Ed Hirs, an energy researcher at the University of Houston. “One of the president-elect’s promises is to cut energy costs in half in 18 months. With natural gas prices as low as they are, electricity prices will not go down,” which is largely due to increased solar capacity.

As for the Inflation Reduction Act, Hirs said the law funnels a lot of money to Republican-leaning or dominated areas of the country, and for that reason, Hirs doubts the administration will try to repeal it or cancel it. The law includes the biggest incentive for residential solar: a 30 percent tax credit.

Fields agrees, to an extent.

“We’re kind of in a wait-and-see mode,” he said. “You can go back to what happened under the first Trump administration, some things were good, but we also saw a preference for tariffs that would hit solar owners.”

Ultimately, though, Fields said, when it comes to residential installations, “it’s hard to say what’s going to happen in the next few years.”

What should consumers know?

For homeowners and consumers, the main thing to know about the past year in the residential solar industry is that changes at the state level, particularly in California, and rising interest rates have been the determining factors of the slowdown in the sector. It’s unclear what the next presidential administration could or would do to change the residential solar landscape.

But while the residential segment has contracted, or contracted, over the first 11 months of the year, the utility-scale solar segment has continued to grow, and there is no reason to think that he will slow down. Fields said consumers should keep an eye on what the Federal Reserve does in the coming months to get an idea of ​​whether further interest rate cuts are possible, which could help lower borrowing costs. Meanwhile, solar components – panels, etc. – continue to get cheaper.

There’s not much a new administration, even one hostile to renewable energy, can do about it. “The fundamentals of solar energy remain the same, the momentum is undeniable and it is driven by the market,” Fields said.

And again, on a global scale, the growth of the solar market is hard to deny. Data from Ember, an energy think tank, shows the world is expected to add nearly 600 gigawatts of solar capacity this year, about 200 more than experts predicted at the start of the year and 29 % more than in 2023. in the background, it is apparently only a matter of time before the residential segment in the United States regains its footing.

“A staggering amount of solar power is being installed and brought online,” Hirs said. That said, for homeowners who currently have solar installations or are curious about getting one, Hirs said nothing has really changed between last year and this year. So if you’re interested in solar energy, it’s always worth considering.

“There’s nothing new under the sun,” he says.