It Was a Rocky Year for the Solar Industry. What Comes Next Is Uncertain

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

That year, the solar industry in the US added 32.4 gigawatts of new electric-generating capacity, an increase of 51% over 2022, per data from the Solar Energy Industries Association and Wood Mackenzie, an energy analytics and data firm. Solar amounted to more than half of all new electricity-generating capacity added to the energy grid in 2023 -- the first time in eight decades that a renewable source had accounted for that much. 

Heading into 2024, it wasn't unreasonable to expect a slowdown, especially when it came to growth for residential installations. Interest rates increased dramatically in recent years, for one, which made it significantly more expensive for many homeowners to finance a solar system. Solar has also found itself in the midst of a culture war, with many people (for political reasons or otherwise) eschewing renewable energy, at least rhetorically, and cozying up to fossil fuels.

With the election of Donald Trump, who will begin his second term as president in January, there are expectations that the new administration will attempt to undo some or all of the Inflation Reduction Act, which has helped spur green development and renewable energy generation around the country. That law has helped increase domestic solar panel production capacity fourfold.

Despite those apparent hindrances, the solar industry has continued chugging along during 2024. And experts say it's not going to be easy to slow it down.

2024: A rough year for solar companies?

It's in residential solar installations where the numbers have been bleak during 2024.

For example, data from the Solar Market Insight Report Q3 2024, released in September by SEIA and Wood Mackenzie, finds that during the second quarter of the year, solar installations were up 29% year-over-year. 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 "will hit a floor this year," amounting to a 19% contraction in residential solar installations.

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So the solar industry at large is in a good place, while the residential segment is weathering a storm. But not an unexpected one.

"Coming into this year, the residential industry had seen pretty 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 insights at EnergySage. "That narrative started to change toward the end of last year, and going into this year, many of the main industry prognosticators said that 2024 would experience a bit of a pullback."

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Fields said the major reasons for that pullback were California's transition away from net metering, which led to a short-term spurt in installations before it was phased out, and higher interest rates. "Solar is a product that is mainly financed," he said. "Loans pay for between 60% and 70% of residential installations -- so, interest rates and inflation played a role."

The changes caused some turmoil for the industry, with a handful of major national installers going bankrupt or getting out of the business entirely. 

What's next for the rooftop solar industry

While solar installations have slowed in the residential segment, the big question that's looming over the industry as 2025 creeps closer is what a change in the White House will ultimately mean. Some experts think that, despite Trump's broad opposition to many renewable energy projects, few things will change.

"I don't see the new administration stopping the growth in solar," said Ed Hirs, energy fellow at the University of Houston. "One of the president-elect's pledges is to cut energy costs in half in 18 months -- with natural gas prices as low as they are, it's not going to get any lower for the electricity," which is helped in large part due to increased solar capacity. 

As for the Inflation Reduction Act, Hirs said the law is funneling a lot of money into Republican-leaning or dominated parts of the country, and because of that, Hirs doubts the administration will try to repeal or rescind it. The law includes the single biggest incentive for residential solar -- a 30% tax credit.

Fields concurs, to a degree.

"We're sort 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."

At the end of the day, though, Fields said for residential installations, "it's hard to say what's going to happen in the next few years."

What do consumers need to know?

For homeowners and consumers, the main things to know about the past year for the residential solar industry is that changes at the state level, particularly in California, and higher interest rates were the driving factors in an industry slowdown. It's unknown what the next presidential administration could or would do to alter the residential solar landscape.

But while the residential segment contracted, or has during the first 11 months of the year, the utility-scale solar segment has continued to grow, and there's no reason to think that it'll slow down. Fields said consumers should keep an eye on what the Federal Reserve does in the months ahead to get a sense of whether more interest rate cuts could be coming, which could help lower borrowing costs. All the while, solar components -- panels, etc. -- are continuing to get cheaper.

There isn't much a new administration, even one who is hostile toward renewables, can do about that. "The fundamentals of solar remain the same, the momentum is undeniable, and the momentum is market-driven," 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, show that the world should add nearly 600 gigawatts of solar capacity this year, which is about 200 more than experts predicted at the beginning of the year and 29% more than 2023. With that sort of momentum as a backdrop, it's seemingly only a matter of time before the residential segment in the US regains its footing.

"An awesome amount of solar is being installed and brought online," Hirs said. With that, for homeowners who currently own solar installations or who are curious about getting one, Hirs said nothing has really changed between last year and this year. So if you're interested in solar, it's still worth considering.

"There's nothing new under the sun," he says.