Chart: Rooftop solar could tank if GOP repeals key tax credit

See more from Canary Media’s ​“Chart of the week” column.

Rooftop solar is already struggling in the U.S. — but the budget bill passed by House Republicans last month would send the sector into a tailspin. 

Just 2 gigawatts of residential solar would be installed in 2026 if the bill passes in its current form, according to a forecast from market research firm Ohm Analytics. That’s nearly 60% lower than the 5.1 GW installed last year.

The reason for this projected sharp decline is that the GOP budget bill, now under consideration in the Senate, would eliminate federal tax credits for residential solar within six months. These long-standing incentives were renewed for another decade under the 2022 Inflation Reduction Act and can make solar 30% cheaper for homeowners.

It’s bad timing for those hoping to lower their energy costs by installing rooftop solar. Across the country, utility bills are rising, and the budget bill and other Trump administration actions impeding clean energy development are expected to drive the price of energy up further. 

Most households that install rooftop solar see their electricity costs drop. Poorer households experience the most pronounced bill savings.

But without these tax credits, installing rooftop solar will be significantly more expensive — putting it out of reach for many, especially the lower-income residents who stand to benefit the most. It would take the average homeowner five or six years longer to break even on their solar system if incentives disappear, per Ohm Analytics.

The tax-credit repeal would be only the latest blow to residential solar in the U.S., which hit a high-water mark in 2023 when 6.8 gigawatts of panels were put on rooftops across the country. 

That same year, California, the country’s largest residential solar market, slashed the amount of money households can earn from selling solar power back to the grid, eroding the economics of solar as a result. High interest rates over the last few years have also hampered installations because most buyers finance solar panels. In recent weeks, two major national rooftop-solar firms have gone bankrupt due to a combination of these factors and the new uncertainty over the tax credits. 

It remains unclear what the final outcome for the tax credits will be. On Monday, the Senate Finance Committee released its version of the tax bill, which aligns with the House budget bill in eliminating tax credits for rooftop solar, among other home-energy upgrades.

If the tax credits are indeed repealed or significantly reduced, it would be a major setback not only for energy affordability and for the U.S. residential solar industry that employs around 100,000 people, but for efforts to reduce carbon emissions from the power system, too.