By Mark Jaffe, EUCI energy writer
The solar industry posted a solid first quarter in 2025, but is already seeing a slowdown that will continue through 2030 due to federal tax and tariff policies, according to a Wood Mackenzie-Solar Energy Industries market analysis.
The industry installed 10.8 gigawatts (GW) of solar generating capacity in the quarter and 8.6 GW solar module manufacturing capacity. It was the fourth biggest quarter for solar generating capacity and third biggest quarter of manufacturing capacity.
The installed solar generating capacity, however, was down 7% compared with the first quarter of 2024 and down 43% compared to the fourth quarter of 2024. There is usually a push to bring projects online at the end of the calendar year.
Going forward, the picture is unsettled. “The U.S. solar industry faces significant policy headwinds due to multiple recent federal actions,” the Wood Mackenzie-SEIA market report said.
The analysis projects the solar industry contracting by 2% annually between 2025 and 2030, adding an average of 43 GW annually. Between 2025 and 2027, installations will decline by an average 7%.
Residential installations are projected to decrease slightly in 2025, after a 30% market contraction in 2024 – the result of high interest rates and other market headwinds hurting consumer demand. The potential loss of residential tax credits will further damper the market.
Commercial solar capacity is set to drop by 4% this year compared to 2024, and community solar will decline 22% year-over-year, after a record year in 2024. Utility-scale installations, which account for 90% of installed capacity in 2024, will drop by 2% in 2025.
The Trump administration’s “Big, Beautiful Bill,” which passed the House of Representatives and is now in the Senate, eliminates or sharply curtails all the tax credits for solar projects.
The legislation would eliminate residential tax credits for both homeowners and solar-leasing companies. Commercial, community solar, and industrial would have to start construction within 60 days of passage of the bill and be placed in service by the end of 2028.
In the current Inflation Reduction Act, the tax credit deadline is the start of construction rather than the tighter placed in-service deadline, adding “further complexity and risk for developers,” the report said.
Developers would also be hurt by the elimination after 2028 of the ability to transfer tax credit, which has been a way to raise project capital.
The bill also proposes eliminating electric vehicle tax credits and hydrogen production credits after 2025.
“If Congress fails to fix the legislation passed by the House – which would render the energy tax incentives unusable – lawmakers will trigger a dangerous energy shortage that will raise our electric bills and stop America’s manufacturing boom in its tracks,” SEIA president and CEO Abigail Ross Hopper said in a statement.
The tax credit changes are compounded by the Trump administration tariff policies.
“The U.S. solar industry faces a complex and evolving trade landscape that will significantly impact development over the next five years. The flurry of recent trade actions, both industry-specific and non-industry-specific, is reshaping the economics of solar projects and supply chains,” the market report said.
The analysis is based on 25% tariffs on Canada and Mexico, a 30% tariff rate for China in 2025 and 2026, and a 10% rate for all other countries, as well as a 25% tariff on aluminum and steel.
“Although the U.S. solar industry doesn’t materially import assembled equipment from Canada or Mexico, these tariffs have an indirect impact on the sector,” the analysis said. “Some components used in the production of inverters and trackers are sourced from these countries, effectively raising production costs for U.S. manufacturers.”
Although paused for 90 days, the Trump administration has proposed stiff country-specific tariffs for some of the major sources of solar equipment, including a 36% rate on Thailand and 26% on India, which supply inverters, and 48% for Laos, 32% for Indonesia and 25% for South Korea, all cell and module suppliers.
These duties would be applied in addition to the existing anti-dumping tariffs. “The solar industry continues to be nimble, but the rapid proliferation of trade action poses potential challenges in maintaining a steady supply and managing costs,” the report said.
President Donald Trump has also signed an executive order to “reinvigorate America’s beautiful clean coal industry” signaling “a stark pivot in federal energy priorities” toward fossil fuels.
“The cumulative effect of these policy changes creates a challenging and uncertain environment for solar development over the next five years,” the analysis said. “While underlying demand drivers such as imminent load growth and corporate sustainability goals remain strong, the industry will need to navigate a complex policy landscape with potentially reduced federal support”
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