Now what? That’s a central question for the solar industry as it approaches a July 4 deadline for projects to begin construction or risk losing lucrative federal tax credits.
Solar is under particular pressure because it’s the largest source of new power generation on the U.S. electric grid. Even so, the phase-out of tax credits as part of Republicans’ One Big Beautiful Bill Act signed into law a year ago raises questions about how much growth to expect for utility-scale and rooftop installations.
But many large developers planned ahead, signaling the looming deadline may not be a massive disruption.
“Solar will continue to dominate new power generation development,” said John Miller, an analyst at TD Cowen, noting the technology is cost-competitive with other sources of power.
Several challenges could shape the industry’s future, however, including federal permitting rules.
As the deadline approaches, here’s five questions answered about where the solar industry may be headed next:
Has the industry met the July 4 deadline?
For the most part, yes. The majority of utility-scale projects — more than 200 gigawatts’ worth — are safe harbored ahead of July 4, said Michelle Davis, head of global solar at research firm Wood Mackenzie.
That means growth should be steady at roughly 40 gigawatts a year through the end of the decade as projects roll out. That’s lower than what have occurred with credits in place but likely enough to keep solar as the leading technology added to the grid through 2031.
Solar’s share could fall to less than 45 percent of new adds by then as more battery storage and new gas capacity comes online, according to the firm. Projects that safe harbored ahead of the deadline have four years to come into service to obtain credits, which is the same rule for wind.
What about projects that don’t make the deadline?
A major question is how much of a new solar pipeline will develop in the next five years, which is critical for the industry’s trajectory after 2030.
Demand is contributing to the higher costs for securing power purchase agreements. That can help offset the loss of tax credits, but it’s unclear how much projects can make up the financing gap through those higher prices. There’s a limit to how much equipment costs will decline further and labor is getting more expensive, analysts said.
“There’s only so much you can cut costs,” Davis said.
Solar (and wind) projects that miss the July 4 deadline also can still tap tax credits if they are put in service by the end of the next year. That could be a tougher target for companies to meet.
Is the industry pushing to extend the tax credits?
In recent weeks, some renewable leaders have said they would welcome an end to the incentives, despite pledges by Democrats to try and extend them if they win back control of one or both chambers of Congress.
“If the Democrats come in and start reintroducing tax credits again, I don’t think that’s good for the industry,” Cypress Creek Renewables CEO Kevin Smith said in May at an event held by the American Council on Renewable Energy. Manufacturers concerned about Chinese-influenced imports have pushed for expansion of the credits.
Some say “let them lapse, let’s move on,” said David Burton, a tax attorney at the Norton Rose Fulbright law firm. “But that’s not a universal position.”
“The tax credits are still beneficial and still productive,” he added.
But for some middle-sized or small companies, transaction costs and legal fees to obtain incentives can end up a wash after getting the subsidy.
Tim Pawlenty, CEO of the Solar Energy Industries Association, said what matters the most is the capacity to keep growing as an industry. “With energy demand only going up,” he said, “now isn’t the time to ignore policy opportunities that will help our country build new power generation.”
What about rooftop solar?
It’s dropping, but not solely because of the July 4 deadline. The industry was hit by an earlier phaseout of a tax credit known as 25D for rooftop systems by the end of last year under the One Big Beautiful Bill Act. As a result, the industry is facing a “collapse” in 2026 and is not expected to recover to 2023 record levels in the next decade, research firm BloombergNEF said in a report this month.
That decline follows earlier constraints on residential solar such as high interest rates and pullbacks in state net metering policies. Plug-in “balcony solar” — which has gained traction in state legislatures this year — is not likely to make up the loss of larger residential projects, said Davis of Wood Mackenzie.
But it’s not all bad news. The megalaw allowed systems owned by a third party to continue receiving federal credits. That stands to boost companies like Sunrun that lease panels. Overall residential solar is expected to start growing annually in 2027 through the end of the decade.
Residential solar is “not dying by any means,” said Burton, the attorney.
Are other factors more important than tax credits?
It depends. Permitting and “foreign entity of concern” (FEOC) rules could be significant for many projects. FEOC rules are aimed at blocking use of materials from China and other foreign adversaries.
“There’s a lot of uncertainty,” said Burton, providing an example of a U.S. company potentially running into trouble by buying equipment from Germany that might have ties to China.
Treasury is supposed to release more detailed rules on what’s allowed to receive credits, but it’s not clear when. Some large banks are hesitant to lend to developers without more clarity, Burton said. Still, most utility projects safe harbored before the FEOC rules hit in January, said Davis.
An analysis Monday from Wood Mackenzie also found that the Trump administration’s lengthier reviews for wind and solar power threaten more than $121 billion in investments and may affect solar the most. The risk is not limited to public lands, as many companies must obtain federal permits for private projects.
Solar “has the largest absolute exposure, with 30% of its pipeline at risk of additional review,” the analysis states.
Pending tariff cases also could affect U.S. solar manufacturing, which has boomed in the past five years and could help companies avoid violating FEOC rules. And ultimately, the industry could be most affected by factors shaping the power sector as a whole, including electricity demand from data centers and backlogs to connect to the grid.
“Interconnection is still a huge challenge,” Burton said.
