Home solar installations are dropping in 2026, forecast down 21% after the federal tax credit ended and the industry number 2 installer collapsed

Why home solar installations are dropping in 2026

Home solar installations are dropping in 2026, and the reason is a law, not a drop in demand. The Residential Clean Energy Credit, the federal tax credit that had paid back 30% of the cost of a new home solar system, stopped applying to any system placed in service after December 31, 2025, the Internal Revenue Service states on its own page describing the rule. Wood Mackenzie, an energy research firm, forecasts that United States residential solar installation volume will contract 21% in 2026 against 2025.

A second, independent count agrees. A trade publication reporting on the same joint industry report from the Solar Energy Industries Association and Wood Mackenzie found the identical 21% contraction for the full year of 2026. Michelle Davis, head of solar at Wood Mackenzie, pointed past the tax credit to the years ahead.

We are forecasting that US solar additions will be flat over the next five years despite the need for more power supply in the US.

Michelle Davis, head of solar at Wood Mackenzie. Source 1.

A leading installer already failed

Freedom Forever was the industry number 2 residential solar installer in the country, with 6.1% of the national market, behind Sunrun, which held 12.7%, and it operated in more than 30 states. Freedom Forever filed for Chapter 11 bankruptcy on April 15, 2026. About 1,600 employees were laid off that same morning, with no paychecks and no timeline for when, or if, they would be paid.

The shifts in the industry have made the dealer model unstable and unattractive.

Mary Powell, chief executive of Sunrun. Source 5.

We saw the makings of a poor consumer experience and of a lack of long-term support.

Supratim Srinivasan, chief executive of Atma Energy. Source 5.

Both chief executives were describing the same practice, installers signing customers through independent sales dealers rather than direct company employees, the model Freedom Forever relied on.

The market leader is shrinking too

Sunrun, the largest United States residential solar installer, is not immune. Its own second quarter 2026 report puts the number precisely, 174 megawatts of solar capacity installed, down from 227.2 megawatts a year earlier, a 23% decline. New customer additions fell 31%, to 19,793 from 28,823. Sunrun cut its own full year financial guidance twice, lowering expected cash generation to a range of 200 million to 375 million dollars, citing higher financing costs and higher capital costs.

The rush before the tax credit ended, then the drop

The pattern shows in the calendar too. The residential segment installed 1,179 megawatts direct current in the first quarter of 2026, a trade publication reports, up 6% from the same quarter of 2025 but down 15% from the fourth quarter of 2025, the quarter when homeowners rushed to beat the December 31 tax credit deadline. Working back from those 2 reported percentages puts the fourth quarter of 2025 at about 1,387 megawatts and the first quarter of 2025 at about 1,112 megawatts, a calculation made for this article from the reported figures. The same report expects the residential market to return to growth in 2027, averaging 6% annual growth through 2031.