adminResidential solar contractors across the United States are grappling with a confluence of challenges in 2025, as policy changes, economic factors, and shifting market dynamics create an uncertain landscape for the industry, according to Solar Power World.
Policy changes and financial strains
A significant policy shift occurred with the enactment of a Republican-backed tax and spending bill on July 4, 2025, which eliminates the longstanding 30% federal tax credit for residential solar installations. This credit has historically reduced the average $29,000 installation cost by 30%, making solar energy more accessible to homeowners. The rollback is expected to reduce rooftop solar demand by up to 85% over the next decade, leading to job losses in an industry that currently supports around 100,000 jobs.
The immediate removal of residential incentives is anticipated to cause deep disruption, with industry leaders predicting significant layoffs and halted investments.
Market dynamics and industry confidence
Despite these challenges, a 2025 survey by SolarReviews indicates that nearly 90% of residential solar companies remain confident in their ability to stay in business in the coming months. Over three-fourths of respondents expect to see increased demand this year, even as they navigate the evolving market landscape.
However, the survey also highlights that nearly 60% of respondents represent residential solar installation companies, and the report has a special focus on their needs and desires. The vast majority of those installers saw the closure of one or more large competitors in 2024, which brought up a number of challenges, including increased service calls and the need to improve customer service to retain and attract customers. Nearly 25% of residential companies now say they offer third-party warranty coverage to improve their sales pitch.
Long-term outlook
Looking ahead, Wood Mackenzie projects that the residential solar total addressable market (TAM) in the U.S. could reach nearly 1,500 GW by 2050. This potential is driven by factors such as rising retail electricity rates, technological advancements, and increasing consumer interest in energy independence. However, the firm also notes that many companies may not survive the current market turbulence, and the remaining players will need to adapt by diversifying and finding ways to cut costs.
The U.S. residential solar sector is at a crossroads. While the immediate future presents significant challenges due to policy changes and economic pressures, the industry’s long-term potential remains substantial. Adaptation, innovation, and strategic planning will be essential for contractors to navigate the current turbulence and capitalize on future opportunities in the evolving energy landscape.
Daniyal Ahmed
