Solar installers are staring down a potential one-two punch of changes that could drastically alter the math for residential customers who are considering whether to invest in panels.
A federal tax credit that can help a homeowner offset thousands of dollars of the cost of buying solar panels is set to expire at the end of this year, thanks to the federal megabill dubbed the “One Big Beautiful Bill.”
Separately, Virginia utility regulators are deciding whether to allow Appalachian Power and Dominion Energy to reduce how much they credit future residential solar panel owners for the electricity they generate beyond what they consume.
Lindsay Tomsheck, director of business development for Christiansburg-based Baseline Solar Solutions, said there is a “lot of uncertainty” about how her 17-person company will adapt to the end of the tax credit.
“We’re running towards a cliff, and we’re not sure yet what’s on the other side,” Tomsheck said in an email.
The basic financial principle behind buying residential solar is that the money saved on a homeowner’s electric bill eventually pays for the solar panels, which are often installed on the roof of a house, and then continues to benefit the homeowner after that.
Ending the 30% federal tax credit on the cost of a new residential solar panel system will add years to the timeline under which a homeowner breaks even on that investment, making it a less desirable prospect.
If state regulators approve a reduction in how much Appalachian and Dominion compensate solar panel owners for their excess generated electricity, that timeline would be lengthened even further.
When a homeowner’s solar panels produce more electricity than a home uses, such as on sunny summer days, the homeowner receives a bill credit that can offset electricity usage at other times, such as during winter. This is called “net metering.”
Appalachian and Dominion have said that solar panel owners receive too much credit for the extra power that they send to the electric grid, and that unfairly shifts some of the cost of maintaining the grid onto people who don’t use solar panels. Solar advocates have argued that the utilities aren’t accounting for benefits that solar power brings to the grid.
[Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy.]
The details of the utilities’ proposals differ, but customers still would avoid the cost of buying electricity that they use themselves by generating it instead, and existing solar panel owners would be grandfathered into the current compensation rates for excess electricity.
The State Corporation Commission is expected to decide on Appalachian’s request to change how it compensates future solar panel owners by Sept. 2 and Dominion’s request by May 1.
“Combined with the tax credit ending, an SCC ruling in Appalachian Power’s favor would likely put many companies across the state out of business,” Tomsheck said.
Residential solar tax credit set to end years earlier
The cost of a residential solar system depends on factors including its size, the components used and the labor required, but typically it falls somewhere between $15,000 and $35,000 before tax incentives, based on information published by multiple solar installation companies.
On a hypothetical $20,000 system, the 30% federal tax credit amounts to $6,000. It’s a significant selling point for companies pitching solar to homeowners.
The tax credit was previously set to phase out over two years beginning in 2032.
Now, it will cut off entirely after the end of this year.
That earlier expiration is part of the federal government’s larger shift away from solar and wind and toward nuclear and fossil fuels. The megabill also ends tax credits for larger, utility-scale renewable energy projects.
President Donald Trump has called wind and solar “unreliable” and a “scam” and has said taxpayers should not subsidize them.
“The proliferation of these projects displaces affordable, reliable, dispatchable domestic energy sources, compromises our electric grid, and denigrates the beauty of our Nation’s natural landscape,” Trump said in a July 7 executive order instructing federal agencies to enforce the megabill’s provisions.
Investing in nuclear and fossil fuels, he has said, will improve energy reliability and strengthen national security.
Rick Brown, owner of Roanoke-based Solshine Energy Alternatives, called the earlier elimination of the tax credit a “dramatic change.”
“The good thing is that it’s enticed people to move forward with something they’ve been considering. We’re busier than we ever have been,” he said.
He said his seven-person company’s volume of work has been about 50% greater this year than last year — but he expects a 30% to 50% reduction starting next year.
With the tax credit, homeowners typically break even on their investment in solar panels in 10 or 11 years, Brown said.
Without it, the break-even time likely will be 15 years, he said.
Because solar panels are designed to operate for at least 25 years, they remain a viable investment even without the tax credit, Brown said.
“It’s still a hedge against rising energy costs,” he said.
The average Appalachian monthly residential bill has risen by about $50 since July 2022 to about $174 today. Some customers have shared stories online and in public hearings about having monthly bills many hundreds of dollars higher.
In addition to the tax credit going away, if the electric utilities’ compensation for residential solar panel owners’ excess energy is reduced, that break-even timeline could reach 20 years, Brown said.
New solar systems likely would be smaller because there won’t be the same incentive to generate excess power, and home battery systems to store that excess instead would become more appealing, he said.
Tomsheck, of Baseline Solar Solutions, said that the proposed lower net metering compensation combined with the end of the tax credit would extend the break-even timeline on a residential solar system to 25 to 35 years, and “only affluent households unconcerned with financial payback can afford that.”
The number of Appalachian Power customers with solar panels participating in net metering has increased approximately fourfold from nearly 1,000 in 2018 to nearly 3,900 in late 2024, according to filings with state regulators. More than 80% of those customers are residential.
Despite that growth, those homes and businesses account for less than 1% of Appalachian’s 540,000 customers in Virginia today.
Industry warns of job losses
At a May meeting of Virginia’s Commission on Electric Utility Regulation, Ben Norris, vice president of regulatory affairs for the Solar Energy Industries Association, warned that the elimination of the residential solar tax credit would lead to at least 84,000 lost jobs nationwide.
“These are, by and large, small businesses, family-owned businesses, Main Street solar firms,” Norris said.
Norris’ comments came as part of a presentation on how the megabill’s reduction of government support for solar and wind — which, at the time of the May meeting, was still being hashed out — would jeopardize renewable energy projects large and small nationwide.
“Are these projects not economically viable without the tax credit?” asked Del. Terry Kilgore, R-Scott County.
Norris said that the loss of tax incentives would require “substantial rethinking, at a minimum” for solar companies, and in particular, smaller businesses installing rooftop solar on homes might not be able to adjust.
“We’re really, really deeply worried about some of these companies and whether they’ll be able to survive past the holidays,” he said.
Tomsheck said in her email that fossil fuels receive a “shocking” amount of government support themselves, but subsidies for solar are more visible to consumers.
She said the solar industry never expected to be subsidized forever and that the industry knew this day would come.
“We just didn’t expect it to come so quickly, and this on/off switch is going to lead to massive disruption of our industry,” she said.
Brown said that when he started Solshine Energy Alternatives 15 years ago, most customers bought solar for environmental and sustainability reasons.
The 30% tax credit and the reduction in material costs over the years improved the financial benefits for customers.
“Now we’re losing that 30%, that financial benefit isn’t as great as it was, but there’s still the environmental stewardship aspect of it. We can’t negate that,” he said.
