They Said the Solar Boom Was Over. Your Electric Bill Disagrees.
- Matt Chamberlain
- Mar 12
- 5 min read
Everyone is focused on the federal tax credit that expired. Nobody is talking about the real reason residential solar is going to keep growing in 2026 — and it shows up on your bill every single month.
The Headline Everyone Got Wrong
When Congress let the Section 25D residential solar tax credit expire at the end of 2025, the solar industry held its breath. The forecasts were grim: SEIA and Wood Mackenzie projected a 13% drop in residential installations for 2026. Ohm Analytics called for a 25% decline. Some early models were even darker, warning of drops exceeding 50%.
Here's what those models may be underweighting: the reason most homeowners go solar in the first place has nothing to do with tax credits. It has everything to do with the number at the bottom of their electric bill. And that number has been climbing — fast.
Your Utility Bill Is the Real Story
U.S. residential electricity prices have risen more than 31% since 2020, reaching a national average of 17.29 cents per kilowatt-hour in 2025. The EIA projects that figure will climb to roughly 17.94 cents/kWh in 2026. In high-rate states like California, Massachusetts, and Hawaii, prices are already well above 30 cents — and still rising.
Some analysts are projecting residential electricity prices could increase 13 to 18 percent by the end of 2026 alone — potentially outpacing general inflation by nearly 29%. That's not a blip. That's a structural shift.
The forces behind the increase aren't going away either. Utilities are expected to spend up to $1.4 trillion upgrading aging grid infrastructure between 2025 and 2030. Data centers — driven largely by AI demand — are responsible for an estimated 40% of all new electricity demand growth in the country. Those costs get passed to ratepayers. That means you.
What the Tax Credit Actually Did — and Didn't Do
The 25D tax credit was genuinely valuable — a 30% reduction off a $30,000 system installation is a $9,000 check you didn't have to write. We're not dismissing that. But it's worth asking: what was that credit actually doing?
In most cases, it was reducing the payback period on a decision that already made financial sense. A typical residential solar system installed in 2026 — purchased outright, without any tax credit — can still save a homeowner $40,000 to $50,000 in avoided utility costs over its 25-year lifespan. Staying on the grid for that same power could cost $80,000 or more. The math hasn't stopped working. The federal incentive just made it work faster.
The Australia Lesson
If you want to know what happens to solar markets when incentives disappear, look at Australia. The country phased out its federal solar rebate programs years ago. Solar adoption didn't collapse. It kept growing — because electricity rates kept rising, and rooftop solar remained the cheapest way for households to control their energy costs. Analysts believe the U.S. will follow the same pattern: perhaps a 6 to 12 month dip as the market adjusts, followed by a demand recovery driven entirely by economic fundamentals.
The Third-Party Ownership Bridge
Here's something the gloomier forecasts also undercount: the tax credit didn't disappear for everyone. Leases and power purchase agreements — third-party ownership models where a solar company owns the system and sells you the power — remain eligible for the 48E investment tax credit through at least 2028. That means companies offering solar leases still have a strong federal subsidy to pass along as savings to customers.
The market is already shifting that direction. As customer-owned systems face the headwind of the lost 25D credit, leases and PPAs are rapidly gaining market share. For many homeowners — especially those without sufficient tax liability to use the credit anyway — this model was always the better option. 2026 may simply accelerate an industry evolution that was already underway.
The Most Important Number in All of This
Solar installations in 2025 came in at approximately 4,647 megawatts on the residential side. If the bearish forecasts are right and installations fall 25%, that's still roughly 3,500 megawatts of new residential solar — more capacity than the entire U.S. residential market installed just a few years ago. What looks like a contraction from the inside is still, by most historical measures, an enormous and growing industry.
And critically: every year that utility rates rise without a comparable rise in solar installation costs, the economics of going solar get better. Not worse. Every kilowatt-hour you generate on your roof is a kilowatt-hour you don't buy from a utility charging 18, 20, or 25 cents for it. That's not a subsidy. That's math.
What This Means If You're Thinking About Solar
The expiration of the tax credit is real, and if you were on the fence in 2025 and didn't move, you did miss something. But the window on solar making financial sense hasn't closed — in many ways, it just got wider. Here's what to actually think about in 2026:
Compare lease vs. purchase carefully. With third-party ownership retaining federal incentives, leases may now offer more competitive economics for many households than they did when you could claim 30% back yourself.
Look at your current and projected utility rate, not just the sticker price of a system. In high-rate states, the math is becoming increasingly compelling — tax credit or not.
Ask about state and utility incentives. Even with the federal 25D credit gone, many states have their own solar incentives, net metering programs, and property tax exemptions that meaningfully change the math.
Consider plug-in solar as an entry point. If a full rooftop system feels like too big a commitment right now, portable and balcony systems — now legal in Utah and Vermont, with 50+ bills pending in 29 states — let you start capturing solar savings for a few hundred dollars.
The Bottom Line
The residential solar market in 2026 is going to look different than 2025. Some installers will struggle. Some forecasts will come true. But the fundamental value proposition of solar — locking in your own electricity rate against a grid that keeps charging more — has never been stronger. The tax credit was a tailwind. Rising utility rates are a headwind against staying grid-dependent. And right now, that headwind is blowing harder than the tailwind ever did.
Sources & Citations
[4] Goldman Sachs Research — Electricity Demand & Utility Rate Outlook 2026
[5] Lawrence Berkeley National Laboratory — Tracking the Sun: Residential PV System Economics (2025)
Comments