Solar Sector Dims as Bankruptcies and Subsidy Cuts Mount
PosiGen's bankruptcy filing highlights a deepening crisis in the residential solar industry, battered by high interest rates and the end of key federal tax credits.
The U.S. solar energy sector is facing a severe downturn as a convergence of expiring subsidies, soaring interest rates, and trade policy challenges pushes residential solar firms to the financial brink. The recent Chapter 11 bankruptcy filing of residential solar company PosiGen has sent a clear warning signal, underscoring the formidable economic pressures threatening the industry's stability.
PosiGen's collapse is not an isolated incident. It follows a string of failures, including Sunnova Energy and Solar Mosaic, which also sought bankruptcy protection in June. These events highlight a sector grappling with a difficult new reality. According to a recent industry analysis, corporate funding in solar plummeted by 39% in the first half of 2025 compared to the previous year, with public market financing falling a staggering 73%.
The primary catalyst for the turmoil is a "perfect storm" of policy and economic shifts. A key driver is the confirmed expiration of the 30% federal residential solar tax credit, which is set to end on December 31, 2025. This crucial subsidy has been a cornerstone of the industry's growth, and its removal is casting a long shadow over future demand. New residential solar installations had already dropped 13% in the first quarter of 2025 year-over-year, with further declines reported in the second quarter.
Compounding the issue, the sharp rise in interest rates over the past two years has dismantled one of the industry's most effective sales tools: cheap financing. According to analysis from Wood Mackenzie, the average quoted solar loan APR has more than doubled since the third quarter of 2022, significantly increasing the cost of solar ownership for consumers and dampening demand.
"The industry is caught between the end of vital subsidies and a financing environment that makes new projects much harder to pencil out," noted one analyst. This sentiment is echoed in market projections, which now forecast the U.S. residential solar industry could contract by an average of 7% annually between 2025 and 2027.
Adding to the sector's woes are new tariffs on imported solar components, which were implemented in April 2025 and have driven up the costs of essential project materials. This combination of higher equipment costs, expensive financing, and waning government support has squeezed margins and pushed highly leveraged companies past the breaking point.
While the long-term outlook for solar energy remains a key part of the broader energy transition, the near-term path appears fraught with challenges. The current wave of bankruptcies and financial restructuring may be necessary to weed out unsustainable business models, but it signals a painful consolidation period for an industry that has long been a symbol of green growth.