Solar After the Tax Credit: What’s Changing and What’s Coming Next
The solar industry is changing quickly.
For homeowners, that can make it difficult to separate the headlines from what is actually happening. The federal residential solar tax credit has ended. Some major solar companies are struggling. California changed the economics of rooftop solar under NEM 3.0. At the same time, solar technology continues to improve, equipment prices are becoming more competitive, and entirely new ways of financing and even installing solar are emerging.
So is solar slowing down, or are we simply entering its next chapter?
The answer is a little bit of both.
The Solar Industry Is Going Through a Reset
The end of 2025 marked a significant change for residential solar.
The federal Residential Clean Energy Credit, commonly called the 25D credit, ended for expenditures after December 31, 2025. For qualifying systems installed through the end of 2025, homeowners had been able to claim a federal credit equal to 30% of the cost.
Removing an incentive that significant was bound to affect the industry.
The transition has contributed to a difficult period for solar companies as the market adjusts. But that shouldn’t be confused with solar disappearing.
Solar continues to make up a major share of new electrical generation in the United States, while California recently reached a milestone that would have been difficult to imagine just a decade ago.
California Just Crossed the 50% Mark
In May 2026, solar produced approximately 51% of California’s electricity for the month, including utility-scale and small-scale solar generation. It was the first time California crossed the halfway mark for an entire month.
That’s significant for more than just California.
Solar has moved from being an alternative source of electricity to becoming a major part of the state’s electrical infrastructure.
At the same time, the economics for individual homeowners are changing. Today’s solar customer has to look beyond the old question of simply, “How many panels can I fit on my roof?”
The better question is:
How can solar, battery storage, utility rates, and the way I actually use electricity work together?
That is a very different conversation from the one the industry was having ten years ago.
The Panels Themselves Keep Getting Better
While financing rules and government incentives receive most of the attention, some of the most interesting developments are happening in the technology itself.
Traditional silicon solar cells have physical limits on how efficiently they can convert sunlight into electricity. Researchers and manufacturers are now developing perovskite-silicon tandem cells, which layer different photovoltaic materials together so they can capture a broader portion of the light spectrum.
We’re also seeing continued improvements in commercial module efficiency, bifacial panels that can collect light from both sides, and increasingly flexible solar materials.
Then there’s the question homeowners have been asking for decades:
How long will solar panels actually last?
Long-term field data is increasingly helping answer that question. Modern solar is no longer an experimental technology. We now have decades of real-world operating history to evaluate.
Battery technology is progressing as well. More sophisticated battery monitoring can track battery health and identify degradation, giving owners and manufacturers better information about system performance over time.
In other words, while the financial side of solar is experiencing disruption, the technology continues moving forward.
The Tax Credit Didn’t Entirely Disappear. Access to It Changed.
Here’s where the post-2025 solar market gets particularly interesting.
The residential 25D tax credit used by homeowners who purchased qualifying systems ended after 2025.
But tax incentives associated with certain third-party-owned solar systems operate under different sections of the tax code. Section 48E continues to play a role for qualifying leased and third-party-owned solar and storage projects, although new timing and eligibility requirements apply.
That is bringing renewed attention to leases and power purchase agreements, or PPAs.
Under these arrangements, a third party owns the solar equipment rather than the homeowner owning it directly.
We’re also beginning to see alternatives to the traditional long-term solar lease, including prepaid arrangements in which much more of the cost is paid upfront while the system initially remains third-party owned.
The important lesson for homeowners is that comparing solar options in 2026 isn’t as simple as comparing the price of two sets of panels.
You need to understand:
Who owns the equipment? Who receives the available tax benefits? What are your long-term obligations? When can ownership transfer? And what will the system actually save you over its lifetime?
Those details matter.
Could Solar Soon Be Something You Plug Into an Outlet?
One of the most interesting developments may also be one of the smallest.
Plug-in solar generally refers to relatively small solar systems designed to connect to a home’s electrical system without the type of installation traditionally associated with a full rooftop solar array.
The idea could dramatically lower the barrier to entry.
Instead of installing a large rooftop system, a household might use a small number of panels to offset a portion of its everyday electricity consumption.
That could be especially significant for renters and people who can’t justify or accommodate a conventional rooftop installation.
California lawmakers have been considering this idea through SB 868, legislation governing portable solar generation devices.
And there’s been an important development: as of late August, the legislation has passed both the California Senate and Assembly and has been enrolled, moving it beyond the committee stage described in some earlier reports.
If enacted, the legislation would create specified exemptions from traditional interconnection requirements for qualifying portable solar generation devices.
That could open solar to an entirely different group of consumers.
Solar Isn’t Going Away. It’s Changing.
The solar industry of the next decade probably won’t look exactly like the solar industry of the last decade.
The old formula was fairly straightforward: put panels on the roof, use a federal tax credit to reduce the cost, and send excess electricity back to the grid.
Now we’re entering a more complicated, but potentially more interesting, phase.
Solar is increasingly being combined with batteries and energy management. Financing structures are changing. Panel efficiency continues improving. Small plug-in systems could make solar available to people who have never been able to participate before.
At the same time, the shakeout occurring within the solar industry is a reminder that consumers need to look carefully at who they work with, how their system is financed, and what assumptions are being used to calculate long-term savings.
For California homeowners in particular, solar is no longer a new technology.
It has become a major part of how our state produces electricity.
The question now isn’t simply whether solar has a future.
It’s what the next version of solar is going to look like.
About the Author
Jeff Riley is with Solarponics, a Central Coast solar company serving the region since 1975. Jeff helps homeowners understand solar energy, battery storage, financing options, emerging technology, and the changing energy landscape.
As a member of Early But Worth It, Jeff brings his industry knowledge to the group and helps local business owners stay informed about the rapidly evolving solar market.
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