Will the US Solar Market Face a Collapse Similar to the UK’s a Decade Ago Before Stabilising?

The US solar industry is currently in a transition phase. The recently terminated residential solar tax credit (ITC) is expected to significantly slow US solar market growth. The residential solar tax credit, officially known as the Residential Clean Energy Credit (formerly the Solar Investment Tax Credit or ITC), was a US federal tax incentive allowing homeowners to deduct a percentage of the cost of installing a solar energy system from their federal income taxes. It provided a dollar-for-dollar reduction in taxes owed. With the 48E tax credit for large-scale projects on its way out as well, the number of installations across all markets is expected to fall. Many research groups believe that the US solar industry won’t ever again reach the annual installation high of 50 GW seen in 2024. 

2024 was a record-breaking year for solar installations in the US according to a report from Wood Mackenzie. The report said that installations grew 21% year-over-year and set a second consecutive record year and that solar accounted for 66% of all electricity-generating capacity in 2024. However, Wood Mackenzie warned that the year over year growth might discontinue for the United States through 2035. Wood Mackenzie predicted that cumulative solar installations would reach 730 GW over the next decade compared to 236 GW installed as of the end of 2024. The report also forecast that challenges related to grid interconnection delays and labour availability would further constrain future development amounting to a 1% contraction over the next 10 years.  

The US solar market continued to show strong overall growth in 2025 despite facing significant policy and economic challenges. Solar dominated new electricity capacity additions (over 50%) mostly driven by utility-scale projects. Investment in domestic manufacturing increased and the solar market remained vital for meeting ever bigger energy demands from data centres. A slight decline was seen in the residential solar market due to rising costs, policy uncertainties, interconnection delays, and evolving supply chains. 

However, this was all about to change. With the residential solar tax credit expiring on 31st December 2025, a 13% drop in residential installations is expected in 2026. This loss will lead to longer homeowner payback periods, the number of years that it takes to break even, and potential industry consolidation which favours larger companies offering leases. Although a transition is expected with so much long-term potential remaining, the immediate effect is a tougher market, increased upfront costs for homeowners (around 30% higher), and a greater dependence on the commercial/large-scale market for overall growth. Analysts say that adoption could be reduced by up to 46% without the tax credit or any other support through 2030 as solar has become less immediately affordable for homeowners. Obviously, the cost of solar systems will rise significantly for homeowners without the 30% credit which will extend the time it takes to recoup their investment (payback period) by several years, which will make solar less immediately affordable. The US market might shift towards large-scale projects and third party-owned (TPO) systems (leases/PPAs), which may retain some ITC benefits, and away from smaller installers and customer-owned systems. The industry could face bankruptcies and job losses as it adjusts to reduced demand and increased costs. Having said that, even with higher costs, solar often remains a positive long-term financial decision due to rising electricity rates.

To get an idea of how a non-incentivised era for the solar industry might pan out in the US, let’s look at how the UK has fared in the last 10 years. Around 2016 the UK altered the solar incentive scheme which led to a sharp decline in installation habits from a high of 4 GW in 2015 to just 268 MW in 2018. It has taken many years for the UK to rebuild its solar programme with residential installs only now surpassing 2015’s high. Despite the two markets being different in many ways, for example, the UK reached 20 GW total installed in 2025 while the US manages twice that amount annually, the sudden removal of incentives affected real people and jobs in the UK and it’s possible the United States will face a similar disruption. Although the solar world has changed considerably in the last decade, there’s no guarantee that the US will come through the next few years completely untouched. The UK solar market has managed to navigate its own difficult incentive transition period back to its current healthy state. 

Back in 2010 the UK government offered a feed-in tariff (FIT) to the residential and small commercial market which incentivised energy suppliers to pay homes and businesses for generating and exporting renewable energy. The FIT came in two forms, a generation tariff and an export tariff and was available to projects smaller than 5 MW. These incentives were generous - if your home or business had a solar system, you got paid for the power it produced. This was the generation tariff, originally set at around 40 pence/kWh. The export tariff was a separate payment for any electricity sent to the grid and was initially set at around 3 p/kWh. The FIT payments were guaranteed for 10 to 25 years and led to a large increase in solar installations in the early 2010s. UK residents and businesses could recoup the initial cost for their solar installations far quicker than before with these advantageous incentives.

However, all good things come to an end and eventually deployment caps were introduced in 2016 that limited the size of installations that could receive the highest tariff rates, and tariffs were adjusted to provide lower payouts. The FIT programme stopped accepting applications completely in 2019. The UK government cited that the scheme had served its purpose with the growth of domestic renewable energy.

In the utility-scale market, the UK offered renewable obligation certificates (ROCs). These were first introduced in 2002 and were issued for each megawatt-hour of electricity produced. Project owners could sell these certificates, alongside generated power, for an additional revenue stream. Energy suppliers and utilities could buy ROCs to demonstrate compliance in sourcing requirements. The UK announced the closing of the ROC programme in 2015 and accepted its last new applicants in 2017, but some certificates will remain until completely phasing out in 2037.

The UK solar market seriously contracted in 2016 due to the uncertainty around future incentives. During this period of turbulence, the advocacy group Solar Energy UK (then known as Solar Trade Association) said one-third of the industry’s 35,000 solar jobs were lost in 2016, and 40% of solar companies planned to exit the solar power sector entirely.

Between 2017 and 2020 the residential solar market stagnated, barely reaching 85 MW installed each year. It was obvious that a new scheme would be necessary to re-energise the UK solar industry. 

2020 saw the beginning of the recovery of the solar market with the introduction of new incentives alongside solar installations becoming cheaper. The UK introduced the Smart Export Guarantee (SEG) to residential and small commercial solar systems. A simple generation tariff was no longer included but an adapted export tariff was available. The scheme requires energy suppliers to pay system owners for the power they export to the grid although the rate is not specified by the UK government. Once energy suppliers realised that higher payouts could attract new customers, they adapted the SEG into multiple time-of-use (TOU) tariffs. It is possible for households to earn more than the old FIT programme if they can successfully navigate the TOU export options. 

2025 has been a record year for UK solar in terms of the number of installations. It has been estimated that the UK will have closed the year with 235,000 total solar installs, surpassing the previous annual record of 203,125 installs set in 2011. It appears that paying residential solar customers for the power they produce has reinvigorated the market. 

On the Utility side, the ROC programme was replaced with the contracts for difference (CfD) scheme, which offers a fixed-rate contract that is essentially a power purchase agreement (PPA). This offers protection for project owners from unpredictable electricity prices as well as setting a price for electricity generation. Initially CfD was introduced for large-scale energy projects in 2014, but the government tended to favour offshore wind and didn’t begin accepting solar to the auction rounds until 2021.

Gareth Simkins, senior communications adviser for advocacy group Solar Energy UK, said that the UK market has been growing strongly since 2022, after incentive programmes across all markets were stabilised.

“We are now in build-out mode, with gigawatts of projects set to be backed by the CfD scheme in the coming years.” 

Multinational investment manager Quinbrook Infrastructure Partners recently reached a significant milestone in the UK, completing the country’s largest solar project. Keith Gains, Quinbrook Infrastructure Partners managing director and UK regional leader, said that a decade ago this seemed like an impossible feat. But the CfD scheme, along with the government-supported Nationally Significant Infrastructure Project process, brought the 373-MW Cleve Hill Solar Park project online in July 2025. The Nationally Significant Infrastructure Project (NSIP) process is a streamlined, national system in the UK for major energy, transport, and waste projects, replacing local planning for these large developments, involving six stages: Pre-application, Acceptance, Pre-examination, Examination, Recommendation, and Decision, managed by the Planning Inspectorate for the relevant Secretary of State, culminating in a Development Consent Order (DCO) for a single, comprehensive permission. 

During the UK market slowdown, the Quinbrook group increased its presence in the US, funding their largest project, the nearly 1 GW Gemini Solar + storage project in Nevada which started operating commercially in 2024. Keith Gains has already said that Quinbrook isn’t planning on focusing on other energy areas in the current unincentivised US solar market. At least on the utility-scale side, there’s enough demand for new electricity to keep everyone busy.

Keith Gains said:

“When the ROCs ended, everything just ground to a halt in the UK. That’s not happening in the United States. The level of growth of demand from data centres is beyond everybody’s expectation. There is a lot of societal pressure on companies to decarbonise as well, and that pushes the companies toward wanting to buy power from renewable sources. It’s just got to be a change of mindset. You can’t just sit there and rely on the tax credits. There’s a way to make these projects economic. These companies need power, and they will pay for the power. It’s not all doom and gloom in America by a long shot. It’s still the land of opportunity.”

Looking at all the various factors, it is safe to say that the US will most likely experience a contraction in residential installations as the market adjusts. However, strong underlying factors, like rising energy costs, suggest the market will eventually recover and grow, but the pace at which it does so and structure will change. Bearing this in mind, states with higher electricity rates and robust commercial/third party ownership markets are better positioned to weather the change. In summary, the market faces a painful but potentially temporary adjustment as it moves from an incentive-driven boom to a more competitive, cost-based environment.