Big solar stands to win big from IRA tax credit changes under GOP budget bill

House Republicans continue to debate keeping clean energy tax credits as part of their budget reconciliation bill, which they hope to put on the House floor by Thursday. Republican leaders have proposed an early phase-out of the credits, potentially stifling the U.S. clean energy boom created by the Inflation Reduction Act (IRA)— and likely hurting the businesses of small local solar installers the most. 

Under the current House Ways and Means Committee proposal, most residential solar tax incentives will be completely eliminated by the end of 2025, including the residential Investment Tax Credit (ITC), also known as the federal solar tax credit, which allows homeowners to deduct 30% of the total cost of their solar installation from their federal tax bill, making it much more affordable for the average American to go solar.

The GOP attack on clean energy will have a number of damaging effects, from raising Americans’ energy costs to killing jobs and jeopardizing investments and solar projects that are already underway. While the bill aims to scrap the residential ITC (25D), it does preserve most large-scale solar and manufacturing credits through the end of 2028—likely giving an advantage to big solar companies at the expense of small businesses.

This tax policy shift could mark a turning point in how everyday Americans adopt solar, moving away from homeowner-owned systems toward third-party ownership (TPO) models dominated by companies like Sunrun, the country’s largest developer of residential solar systems. 

If the residential Investment Tax Credit (ITC) is eliminated, it will make buying solar panels outright much more expensive for the average homeowner. That means Americans who want to go solar are likely to find low-commitment options such as leases and power purchase agreements (PPAs) more appealing, further squeezing out smaller installers who rely on the customer ownership model, such as cash purchases or solar loans, to stay competitive.

For big solar leasing companies, the elimination of residential solar tax credits isn’t just survivable—it’s potentially profitable. Bigger companies can profit from the TPO model by signing a high volume of customers, thereby creating long-term cash flows, whereas smaller installers may not be able to sign up enough customers to stay afloat. 

According to the latest Wood Mackenzie report, the top ten largest residential solar installers in the U.S. secured more than 30% of the market in 2024. Analysts forecast that in 2025, Sunrun will continue its dominance as the top residential installer through its TPO model. 

In fact, during the fourth quarter of 2024, Sunrun reported $388.6 million in "customer agreements and incentives" revenue, which encompasses TPO contracts. This segment accounted for approximately 75% of the company's total revenue of $518.5 million during that quarter. When it comes to the residential solar market, Wood Mackenzie reports that TPO accounted for 45% of market share overall in 2024, the highest since 2016. 

The elimination or reduction of IRA funding could drive many local installers out of business, lessening competition for big national brands in the residential solar market. More “solar scams” could become a reality, too, as companies aim to cash in by using deceptive sales practices to offer homeowners “$0-down” solar installations while still capturing the bulk of federal incentives themselves rather than passing on the savings to customers.

While this GOP tax proposal may face an uphill battle as it moves through Congress, for the rooftop solar industry, there’s one clear winner in the current draft—and it’s the major players. In addition to the proposed IRA reforms, recent tariff policies may also reduce competition and give high-profile U.S. solar companies a competitive advantage in the domestic market. 

It’s already clear that if tax policy killing the residential ITC is adopted, big solar will benefit right off the bat: Last Monday, after the Ways and Means Committee's rewrite of IRA credits were announced, shares of First Solar, the top U.S. solar manufacturer, jumped 11%, while Sunrun saw its stock surge nearly 17%. 

Under the proposed tax plan, the Clean Energy Investment and Production Tax Credits (45Y and 48E) would also begin phasing out in 2029 rather than 2032, dropping to 80%, then 60% in 2030 and 40% in 2031, before being eliminated by the end of 2031. One major change to the bill that’s likely to have negative consequences for installers across the country is the removal of the “safe harbor" clause, also known as the ”start of construction” clause.

The new rules would require a commercial system to be fully operational and “placed in service” in order to qualify for the tax credit. That’s a significant change for companies that could previously take advantage of the existing safe harbor provision, which only requires that a company’s project be 5% complete during the tax year they want to claim the credit, not 100% finished. 

Several prominent solar companies have utilized the "safe harbor" provision in the past year to secure federal tax credits. SolarEdge Technologies signed safe harbor agreements with Sunrun, while Enphase Energy partnered with IGS Solar on a safe harbor deal.

The 45Y and 48E credits are only available to “investors in the development of qualified energy properties and facilities,” which is where big solar companies step in. With business models based on retaining ownership of rooftop systems and offering homeowners either leases or PPAs, these companies will still qualify under the new IRA provisions and can claim the tax credits for themselves. 

According to Punchbowl News, House Speaker Mike Johnson proposed an even faster phase-out of the clean energy tax credits in the latest proposal, with Republican leaders tentatively agreeing to end all or most credits by 2028. However, it’s likely Senate Republicans will push back against hard-right changes to the IRA because the funding has created thousands of jobs in red states. As the self-imposed Memorial Day budget reconciliation deadline approaches, GOP infighting could continue to stall legislative efforts.