‘Mad rush’ to install solar panels before tax credits run out

Ed Murray has been in the solar energy business long enough to remember the bloodbath of 1985. That’s when President Ronald Reagan… He ended solar tax credits under Jimmy Carter It aims to reduce the United States’ dependence on fossil fuels After the oil crisis in the seventies.

“It was a sad time,” says Murray, who is president of the trade group California Solar & Storage Association. Membership in the organization (which was not yet He added “storage” to his nameThe number of companies dropped from 670 companies to just 37 “almost overnight,” says Murray, as hundreds of companies went bankrupt without tax relief. “I hope this doesn’t happen to us again.” (Then California Governor George Deukmejian also Cut the state tax credit for solar energy at about the same time.)

The industry has been able to make a remarkable comeback since then, thanks in large part to Congress restoring the federal tax credit for solar energy in 2005. Accelerating the adoption of renewable energy sources like solar was intended to reduce Americans’ dependence on foreign energy sources. “By developing these innovative technologies, we can keep the lights on while protecting the environment and using energy produced here at home.” Republican President George W. Bush said When this measure is signed into law.

Now, as As a result of Donald Trump Big, beautiful billthe tax credit is set to It expires At the end of 2025, home solar companies face another abyss. Installers are racing to complete projects for customers who want to take advantage of the tax break while they still can, even as they face some major headwinds in the process. Next, the industry will have to figure out how to adapt to a very different solar landscape next year.

“It’s a crazy rush, and it’s crazy,” Murray says.

It wasn’t supposed to be like this; Solar companies and their customers thought they would be credited for a while longer. The Energy Policy Act of 2005 reestablished a federal tax credit for solar energy in the United States, the Inflation Reduction Act of 2022 (IRA). Expanded and extended Through 2035. This gave the residential solar customer an income tax credit equal to 30 percent of the installation cost.

This year, the Trump administration took action Ira wrecking ball, Which was the Biden administration’s signature climate and clean energy bill, as part of President Trump’s pro-fossil fuel agenda. the The Republican-controlled Congress voted in July To end the home solar tax credit by the end of the year.

Initially, this led to a spike in customers rushing to install home solar systems before the tax credit expired. EnergySage, a nationwide solar marketplace in the US, says it saw a 205 percent year-over-year increase in homeowners connecting with installers on its platform after the Republican spending bill passed in July. The trend has been echoed by Murray, who is also president of Northern California-based Aztec Solar, and other installers. Edge He has been contacted. “It has increased sales dramatically, so we are rushing to the end,” says Murray.

However, the increase in demand has also come with a bigger headache for solar companies, which say they now have to work with permitting offices and local utilities scrambling to keep up with the sudden onslaught of installation applications. The lead time to obtain a permit has doubled since August to about four to eight weeks for Vital Energy Solutions in Northern California, according to sales and marketing director Kevin McGuire.

“It’s no secret that these permit offices are absolutely overwhelmed due to the influx of customers who are just asking to have their systems installed before December 31,” McGuire says, describing a busy city office in Napa that is usually very quick to process permits.

California is the largest solar market in the United States, but it’s not the only state seeing delays. Slow licensing processes across the country have been the “biggest barrier” to reaching an industry-wide goal of getting costs down to about $2 a watt, according to EnergySage insights director Emily Walker. Long wait times are driving up overhead costs for businesses, turning off customers, and now even jeopardizing their ability to qualify for the federal tax credit this year.

Vital Energy Solutions sent a press release In December, it said 120 of its customers in one congressional district were at risk of losing the tax credit “through no fault of their own” as installers face delays, and called on policymakers to grant an extension to the year-end deadline. Home project costs can range from $15,000 to $50,000 depending on whether they include batteries, according to Murray, and average about $37,000 according to McGuire — so customers stand to lose thousands of dollars by missing out on the 30 percent tax break.

“Every step of the process is over-extended,” Vital Energy Solutions CEO Jason Jackson, whose father started the company in 1971, says in the release. This includes longer wait times with facilities and supply chains, the company adds.

Southern California Edison experienced “significant delays” in installing the meter plug adapters needed to connect utility meters to solar and battery components between September and November as a result of a recent increase in applications. Bloomberg Reports.

Rising costs and disruptions in purchasing key equipment including the solar panels themselves — exacerbated this year by Trump’s tariff regime — have been another hurdle according to some installers. Vital Energy Solutions has had to turn to local hardware stores for essential electrical installations as its distributors face shortages, only to find store shelves empty.

Two major solar panel suppliers also had a turbulent year. In November, the manufacturer QCells 1000 workers furloughed In Georgia yet Months of shipments detained by US Customs. The solar components were underneath Increased scrutiny At ports due to policies banning components suspected of being linked to human rights abuses in China’s Xinjiang province. A fire broke out at manufacturer REC’s factory in Singapore in June Reserve deliveries to the United States.

Virginia-based Ipsun Solar has had to redesign and relicense projects to customers unable to obtain the REC components they originally planned to use, according to Leon Keshishian, CEO of Ipsun’s parent company, Civic Renewables. The timing couldn’t be worse. Ipsun has seen a four-fold increase in customers since June, as news began spreading that Republicans would soon end the home solar tax credit. “We had to stop new sales at one point because we didn’t think we’d get invoices for them all,” Keshishian says. The company is offering tax-exempt loss coverage to eligible customers whose projects it was unable to install before the end of the year due to unexpected delays, according to Keshishian.

In order to survive the loss of the tax break, installers are figuring out how to diversify or pivot to other parts of their business. Some are considering providing roofing and HVAC services, or installing heat pumps and electric vehicle chargers. Both Murray and McGuire do commercial installations, which they can count on since these projects qualify for a commercial tax credit available through 2028. They expect smaller, boutique installers will have a tougher road ahead.

“There’s going to be a lot of people who, when the music stops, won’t have a place to sit,” McGuire says. “Either these companies will be absorbed into other companies, or they will go out of business.”

However, no one Edge Talking about it sounds the death knell for the residential solar industry. They expect it High electricity pricesespecially in communities near new data centers, will continue to drive demand for home solar systems that can lower utility bills in the long term. More power outages During severe weather and explosive wildfire seasons, demand for residential systems with batteries that can keep home lights on during power outages also increases further.

Industry leaders have also come to expect extreme volatility from changing regulatory landscapes and have seen the industry transform in response. This time, they see some solar companies benefiting from the loss of tax breaks — the ones that offer “Third party ownership“(TPO) in the industry speaks. This could be through leasing or power purchase agreements (PPA) that allow customers to pay per kilowatt hour for solar energy from a system owned by a third party.

Over the years, the pendulum has swung between customers preferring to buy or lease solar panels. “It’s now going to swing very strongly in the rental direction,” says Brad Hefner, executive director of the California Solar and Storage Association. That’s because the Republican spending bill preserved the solar tax credit for commercial projects longer and allows third-party ownership to qualify.

Sunrun, a solar company that offers power purchase agreements through subscription plans, I was able to click successfully For that protection in the bill — arguing that their fleet of solar and battery systems served as a distributed power plant that would help stabilize power grids as they try to meet the country’s growing electricity demand. (Republicans have also faced criticism for cutting tax breaks Developers in red states benefited.) Sunrun stock is now up about 75 percent year over year.

“While we believe the industry as a whole will shrink slightly next year, we expect Sunrun to gain more market share,” says Paul Dixon, Sunrun’s president and chief revenue officer. Edge.

Keshishian also predicts that Ipsun — which installs panels for customers who buy or lease its systems — “will definitely sell more TPOs in the next year.” Prior to his current project, he was Vice President at SolarCity, Inc Focused on leasing and power purchase agreements Before it was Acquired by Tesla In 2016.

One argument in favor of third-party ownership is that it potentially allows customers who may not be able to afford their own home setups to use solar energy. But PPAs have also gotten a bad rap for price escalations that can cost customers more each year — and in some cases exceed inflation for electricity.

However, the loss of the federal tax credit is creating new third-party ownership options with lower-priced escalators, as well as some rent-to-own models. “Having these as an option is a positive,” says Emily Walker of EnergySage, although the bill that cuts clean energy tax credits is “a very negative overall for the solar industry.”

Ed Murray’s advice to other installers after surviving the loss of the tax credit in 1985? “Save your money,” he says. Edge. “And we hope to have a regime change by the midterms and get some sort of tax break. It’s a tough job.”