A Contracting Market, Not a Growing One
Residential solar is shrinking in 2026. Installations are forecast down 18% to 21% for the year, the direct result of the Section 25D residential tax credit ending on a hard cliff, with no phase-down, for any system installed on or after January 1, 2026. Cash and loan buyers now get zero federal credit on a new system.
That does not mean nobody is buying. It means the buyers left in the market are being fought over harder, by fewer installers and dealers, with a shrinking incentive to close the deal quickly. This page is a sourced reference for what that contraction actually looks like in numbers: install volume, acquisition cost, financing mix, and where the exceptions to the downturn (batteries, commercial) sit.
What Rising CAC Means for How You Buy Appointments
A 40% jump in customer acquisition cost changes the math on every appointment a dealer or installer buys. A lead vendor optimized for loan-qualified homeowners is a worse bet in a year where two out of three deals are expected to close as a lease or PPA instead of a loan. An appointment that is financing-structure-agnostic, meaning it converts whether the homeowner ends up in cash, loan, or third-party-ownership (TPO), holds its value better as that mix shifts. See how that plays out against the dealer-fee-funded 1099 model on the VA Horizon vs. shared solar leads page.
The two other pages in this series go deeper on two pieces of this picture: the solar bankruptcy list tracks the installer and dealer failures this CAC spike is accelerating, and the solar sales benchmarks page covers what close rates, no-show rates, and commission bands look like inside that shrinking pool of deals.
The Numbers
US residential solar installations are forecast to contract 18% to 21% in 2026, driven by the expiration of the Section 25D federal tax credit.
Residential solar customer acquisition cost (CAC) is projected to spike 40% to $0.84 per watt in 2026, up from a five-year low of $0.60 per watt in 2025.
Total US solar installations fell to 7.8 GWdc in Q1 2026, down 27% year over year and down 42% quarter over quarter.
Residential installations in Q1 2026 reached 1,179 MWdc, up 6% year over year but down 15% from Q4 2025, a pullback after homeowners rushed to install ahead of the tax-credit deadline.
The Section 25D residential clean-energy tax credit ended for any system installed on or after January 1, 2026, a hard cliff with no phase-down, under the One Big Beautiful Bill Act signed July 4, 2025.
Third-party-ownership (lease and PPA) deals are projected to make up 65% of solar sales reps books in 2026, up from 44% in 2025, as cash and loan buyers lost access to the federal credit.
Customer-owned solar market share fell from 54% to 43% during 2024, while third-party-ownership share grew from 40% to 52% over the same period.
The average solar loan dealer fee reached roughly 22% in 2026, adding more than $5,700 to a typical loan balance, and this fee funds the commission stack for door-to-door dealer networks.
National solar-plus-storage attach rate hit 45% in Q1 2026, up from 38% a year earlier, and residential battery storage grew 51% year over year in 2025 to 3.1 GWh.
Commercial and industrial (C&I) solar grew 6% in 2025, adding 2,345 MWdc, but a 13% decline is forecast for 2026, driven largely by California policy changes.
The average residential solar system cost roughly $2.58 to $2.95 per watt before incentives in early 2026, putting a typical 12kW system near $31,135.
Roughly 21,000 clean-energy jobs were lost and more than $24 billion in investment was cancelled nationally through September and October of 2025.
Sources
The external data in this article draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.
- SEIA, Q2 2026 Solar Market Insight Report
- SEIA, Q1 2026 installation data (via TaiyangNews)
- Wood Mackenzie, 2026 residential solar CAC outlook
- SEIA, clean energy provisions of the OBBBA
- Aurora Solar, 2026 TPO financing trends
- IntegrateSun, solar dealer fees analysis
- SurgePV, 2026 US residential solar market trends
- EnergySage, solar panel cost data
- pv-magazine-usa, 2025 clean energy investment and jobs report