Market Research: Starting a Solar Business in the U.S.

Growth projections remain optimistic. Industry analysts forecast that annual installations will remain high or continue rising in the coming years.

Market Overview & Growth Trends

 A typical suburban home equipped with rooftop solar panels. Residential installations like this have become increasingly common as solar costs have plummeted – roughly 60% decline in installation cost over the last decade. The U.S. solar industry is large and rapidly growing, fueled by falling costs, technology improvements, and supportive policies. As of 2023, the United States has about 219.8 GW of solar capacity installed, enough to power ~37 million homes.

The sector contributes over $63 billion in annual market value and employs nearly 280,000 workers, with more than 10,000 businesses active in installation, manufacturing, and services. Solar accounted for an impressive 64% of all new U.S. electric-generating capacity added in 2024 (through Q3) – by far the largest share of any energy source. This momentum has made solar the fastest-growing electricity source in the country.

2023 marked a record year for U.S. solar installations, with an estimated 32.4 GW of new solar capacity added – a 51% jump over 2022 and the first time annual additions exceeded 30 GW. This was a 37% growth from the previous record set in 2021. Installations span several market segments: utility-scale solar (large solar farms) led the surge (accounting for the majority of new capacity), while commercial and industrial solar also grew, and residential solar, though facing headwinds from higher interest rates, still contributed significantly.

Notably, more than half of all U.S. solar capacity in operation was installed just since 2020, highlighting the acceleration in recent years. The cumulative installed base reached approximately 5.3 million individual solar systems nationwide by 2023, meaning about 3.3% of U.S. households (5.3% of single-family homes) now have solar panels on their roof.

Growth projections remain optimistic. Industry analysts forecast that annual installations will remain high or continue rising in the coming years. In fact, 2024 is on track for over 40 GW of new solar, and from 2025 onward the industry is expected to install ~43 GW each year on average.

The U.S. Energy Information Administration (EIA) projects solar generation will skyrocket ~75% from 2023 to 2025 – jumping from 163 billion kWh to 286 billion kWh over just two years. In other words, solar is expected to supply the bulk of new electricity demand growth. By 2030, forecasts suggest the U.S. solar market could be growing at a 13.7% compound annual rate, potentially tripling in value from ~$30 billion in 2022 to around $90+ billion by 2030.

 U.S. monthly electric power generation by source, with renewables (right panel) like solar (gold line) rapidly rising through 2025. Source: EIA Short-Term Energy Outlook. Solar energy’s trajectory is strongly upward, supported by both market fundamentals and policy drivers. Consumer demand for clean energy and long-term energy savings continues to rise. Businesses and utilities are investing heavily as solar is now often the cheapest source of new electricity (on a levelized cost basis) in many regions.

Furthermore, technological improvements (higher panel efficiencies, better energy storage) and economies of scale are boosting output while driving down costs. The industry’s growth, however, is not without constraints – challenges like labor shortages, supply chain bottlenecks, and grid interconnection delays are noted as potential brakes on otherwise faster expansion.

Even so, the overall outlook remains very positive: solar power is expected to continue its rapid expansion and play a central role in the U.S. energy mix, growing from about 5% of U.S. electricity generation today to a much larger share in the coming decade.

Competitive Landscape

The U.S. solar market features a mix of national players and thousands of local firms, especially in the installation segment. The competitive landscape can be viewed in two parts: solar panel installers (companies that sell and install PV systems for homes, businesses, and utilities) and solar product manufacturers/suppliers (companies that produce or supply solar panels and related equipment). Below is an overview of key players and their market positioning:

Sunrun – The largest residential solar installer in the U.S. (consistently holding ~12–13% of the residential market). Sunrun pioneered the third-party ownership model, offering solar leases and power purchase agreements (PPAs) that let homeowners go solar with $0 down. Its full-service leasing (branded as Brightbox when paired with batteries) provides customers a fixed monthly payment (often around $100–$200) instead of upfront purchase.

This has made Sunrun popular among cost-conscious consumers. Sunrun’s differentiators include turnkey service (it handles installation, financing, and maintenance) and integration of battery storage (it offers home batteries and has partnerships, e.g. with Ford for EV integration) . However, Sunrun’s market share has seen slight declines as competition rises.

SunPower – A veteran solar company known for its high-efficiency solar panels and premium services. SunPower originally manufactured some of the most efficient panels on the market and now focuses on installations (after spinning off its manufacturing arm). It commands a smaller market share (~3% of residential installations) but is synonymous with quality – offering top-tier panel efficiency (~22%+) and comprehensive warranties.

SunPower often appeals to customers who prefer to buy and own their solar systems; the company facilitates solar loans and cash sales with robust support, rather than emphasizing leases. Its differentiation lies in cutting-edge technology and a reputation for reliability and performance.

Tesla Energy – The energy division of Tesla (known for its electric vehicles) is a high-profile solar player offering solar panels and the unique Solar Roof (integrated solar shingles), along with the popular Powerwall home battery (Tesla). Tesla was once a top-3 residential installer (after acquiring SolarCity in 2016) but in recent years its market share has hovered around 4%. Tesla’s strategy shifted to an online sales model with standardized systems and transparent pricing.

It’s often seen as a value option for those who want to purchase a solar system outright at competitive prices (Tesla’s price per watt tends to be slightly lower than many competitors). A key differentiator is the integrated ecosystem – customers can bundle solar with Powerwall batteries and EV chargers. However, Tesla has been relying more on third-party contractors for installations (focusing its own efforts on product development), which led to slower deployment growth . Even so, Tesla remains influential, especially in the solar-plus-storage market (it currently leads in residential solar+storage deployments, with over 30% share in that subset).

Regional and Emerging Installers – Outside the big names, the U.S. has a fragmented solar installer market with many regional companies. Notable examples include Titan Solar, Momentum Solar, Trinity Solar, Freedom Forever, and others, each holding ~1–5% national market share. These companies often thrive in specific states or regions. For instance, Freedom Forever grew rapidly (~80% growth in 2021) by expanding into new states and aggressive marketing, even overtaking Tesla to become the third-largest installer in 2021.

Many regional installers differentiate through local expertise, customer service, and niche offerings (e.g., some specialize in solar for new homebuilders, others in commercial systems or solar+storage packages). The top five residential installers together account for only ~24–28% of the market , meaning no single company dominates and there is ample room for new entrants with the right value proposition. Competition is often based on pricing, financing options, quality of equipment, and customer experience (including handling of permits and incentives).

On the solar product manufacturing side (solar panels and equipment), the landscape has traditionally been global – many panels installed in the U.S. are made by international manufacturers – but domestic manufacturing is expanding due to recent policies.

First Solar is a key player to note: founded in 1999, it is the only U.S.-headquartered company among the world’s 10 largest solar module manufacturers. First Solar specializes in cadmium telluride thin-film solar modules (primarily for utility-scale projects) and has multiple factories in the U.S. Unlike most silicon-panel makers, First Solar’s technology and U.S. base give it a unique market position (benefiting from tariffs and federal incentives aimed at domestic production).

Other domestic panel producers or brand-names include companies like Qcells (Hanwha), which has opened large panel factories in the U.S., SunPower (though its panels are now made by spin-off Maxeon, it’s still a brand consumers recognize), REC Americas, Silfab Solar, and smaller manufacturers like Suniva or Auxin Solar. Some of these firms have grown with new federal support – Auxin Solar, for example, is expanding U.S. cell manufacturing.

In fact, a recent report listed First Solar, SunPower, Suniva, 1SolTech, Alps Technology, Advance Power, Auxin Solar, BORG Inc., Pionis Energy, Green Brilliance, Lumos, and Itek Energy among key players in the U.S. solar PV manufacturing landscape. This mix shows that beyond the big global brands, a number of niche American manufacturers are vying to scale up production.

In summary, the U.S. solar industry is highly competitive but still growing fast enough to lift many players. An entrepreneur entering the market will find space to differentiate – whether through innovative financing, superior customer service, a focus on emerging tech (like integrated battery storage or smart home integration), or tapping into the burgeoning demand for domestically-made solar products. Strong branding and partnerships (with panel makers, financing providers, or even automakers for EV charging tie-ins) can help a new solar business stand out in this dynamic landscape.

Regulatory Considerations

Operating a solar business in the U.S. requires navigating a range of regulations, incentives, and legal requirements at the federal, state, and local levels. Key considerations include:

Federal Incentives & Policies: The U.S. federal government provides major incentives for solar deployment. Notably, the Investment Tax Credit (ITC) allows a business or homeowner to deduct 30% of the cost of a solar installation from their taxes. The ITC has been a cornerstone of solar economics and was recently extended at the 30% rate by the Inflation Reduction Act (IRA) through at least 2032 (with a step-down thereafter). The IRA (enacted 2022) not only extended the ITC but also introduced new incentives: for example, bonus credits for projects that use domestically manufactured equipment or are located in low-income communities, and a direct pay/refund option for tax-exempt entities.

There’s also a Production Tax Credit (PTC) option for solar, offering a credit per kWh of output which utility-scale developers can choose instead of the ITC. In addition, the federal government has created funding programs like the $27 billion Greenhouse Gas Reduction Fund (a “green bank” program) to finance clean energy projects, and the Solar for All competition to expand solar in low-income areas . These policies collectively improve project economics and open up funding sources for solar businesses. On the flip side, compliance with federal laws like the National Electric Code (for system safety), OSHA regulations (worker safety on rooftops), and IRS rules for claiming credits is essential.

State & Local Incentives: Many state governments have their own solar incentives and regulations. These can include state tax credits, rebates, or grants, sales or property tax exemptions for solar equipment, and renewable portfolio standards (RPS) that require utilities to source a portion of electricity from solar or renewables (creating markets for solar renewable energy credits, SRECs, in some states). One of the most critical state-level policies is Net Energy Metering (NEM), which determines how rooftop solar customers are credited for excess electricity they feed back to the grid.

Net metering rules are in flux in several states. For instance, California – the nation’s largest solar market – implemented NEM 3.0 in 2023, which significantly reduced the export credit rates for new solar customers compared to the prior policy. Under NEM 2.0, Californians received nearly full retail rate credit for each kWh sent to the grid, but NEM 3.0 uses a lower “avoided cost” rate that varies by time of day, significantly slashing the credit value.

This change means longer payback periods for residential solar in California going forward. Other states are also re-examining their net metering: some (like Arizona, Nevada in recent years) have reduced credits or added fees for solar owners, while others have maintained or expanded net metering to encourage adoption . For a solar installer, understanding the local NEM policy is crucial since it directly affects customer savings.

Aside from NEM, local permitting rules (often governed by city/county building codes and fire codes) dictate how solar systems must be installed, which can impact project timelines. Efforts are underway in many areas to streamline permitting (e.g., programs like SolarAPP+ offer instant online permitting in some jurisdictions to cut red tape).

Licensing & Legal Requirements: Starting a solar installation business typically requires obtaining the proper contractor licenses. Licensing rules vary by state. In some states, a general electrical contractor license is sufficient; in others, there are specialized solar contractor licenses. For example, California requires a C-46 Solar Contractor license (or an A/B general contractor with solar experience) to install PV systems, which entails passing trade and law exams and proving relevant experience.

Many states also recognize NABCEP certification (North American Board of Certified Energy Practitioners) as a respected voluntary certification for solar installers – while not legally required everywhere, having NABCEP-certified staff can improve credibility and meet certain state program requirements. Aside from contractor licensing, a solar business must comply with interconnection rules (filing applications with utilities to connect systems to the grid) and, where applicable, insurance requirements (both general liability and specialized insurance for working on roofs and electrical systems).

There are also consumer protection laws: for instance, some states have specific disclosure forms for solar leases/PPAs to ensure customers understand the terms. As the industry grows, there has been increased scrutiny on sales practices, so a new solar company should build compliance into its operations to avoid legal pitfalls.

Regulatory Challenges & Trade Policies: On a broader level, solar companies face some industry-wide regulatory challenges. Import tariffs and trade restrictions have been a factor in the solar supply chain. The U.S. has had tariffs on imported solar panels (especially from China) in place for several years, and these were expanded in 2022 to cover imports from Southeast Asia (due to concerns about Chinese manufacturers circumventing duties by routing products through other countries). In 2024, additional tariffs were imposed on certain solar equipment as part of efforts to protect U.S. manufacturing.

These tariffs can raise the cost of panels for installers, though the IRA’s incentives for domestic panels aim to offset that by increasing local supply. Another challenge is permitting and grid interconnection delays – large projects can be held up by lengthy environmental reviews or wait times to get approval to connect to the grid.

The federal government and some states are discussing permitting reform to speed up energy projects , which could benefit solar deployment if implemented. All these factors mean policy risk is something to consider – changes in net metering, incentive levels, or trade rules can impact a solar company’s business model. Successful firms often engage in policy advocacy (e.g., through industry groups like SEIA) to help shape a stable, favorable regulatory environment.

In summary, a solar entrepreneur in the U.S. must navigate a patchwork of incentives and rules. The good news is there are robust incentives (federal tax credits, etc.) and generally supportive policies pushing the industry forward. However, one must plan for compliance – ensuring the business and its workers are properly licensed, keeping up with changing net metering policies, and structuring financing to take full advantage of tax credits and avoid legal pitfalls. Many solar companies address these by hiring or consulting with policy experts or legal counsel, especially as they expand across state lines.

Investment & Revenue Models

Launching and sustaining a solar business involves not only technical expertise but also savvy in financing and monetization strategies. There are several common business models and revenue streams in the solar sector:

Direct Sales (Customer-Owned Systems): One straightforward model is selling solar installations directly to customers (homeowners or businesses) for an upfront purchase price (often financed by the customer through a bank loan or home equity line). In this model, the solar company’s revenue comes from the installation contract. The customer benefits from energy bill savings and tax credits, while owning the system outright.

This model requires the company or customer to arrange financing for the upfront cost. Many solar installers partner with lenders to offer solar loans to customers. The advantage of direct sales is immediate payment and no long-term obligation for the installer, but high upfront cost can be a barrier for customers.

To alleviate that, some states and municipalities have Property Assessed Clean Energy (PACE) financing programs or green loans that provide low-interest funding for solar projects, making direct ownership more accessible. From a business perspective, direct sales yield one-time revenue per project, but companies can extend revenue through add-on services (maintenance contracts, monitoring, extended warranties).

Leases and Power Purchase Agreements (PPAs): A hugely popular model in the residential market (and commercial, to an extent) is third-party ownership via a solar lease or PPA. Under these models, the solar company (or its financing partner) owns the solar equipment installed on the customer’s property, and the customer either pays a fixed monthly lease payment or buys the power generated at an agreed rate per kWh (that’s a PPA). For example, Sunrun’s standard offering is a $0-down solar lease, where the homeowner pays a flat monthly fee for 20–25 years for the solar power. The benefit for customers is no upfront cost and immediate savings (their lease/ppa payment plus remaining utility bill is designed to be less than their old bill). For the solar company, this model creates a long-term revenue stream over the life of the agreement.

The company can also monetize the tax credits and depreciation benefits since it owns the system (often using a financing arrangement with tax equity investors to absorb those credits). PPAs are common in commercial projects – a business host agrees to buy electricity from a solar developer at a set rate, typically lower than the utility rate, and the developer finances and owns the system. These models can be capital-intensive (the installer/developer must secure upfront funds to build the system), but they build assets and recurring revenue.

Many solar businesses partner with finance companies or use a flip finance model (where a tax equity investor owns the system initially to capture credits, then flips ownership back after a set period). The key is that continued cash flow is generated over 10–25 years, which can be very attractive for business valuation. However, managing a fleet of systems (maintenance, performance guarantees) becomes part of the business operations under this model.

Community Solar Subscriptions: Community solar is an emerging model in many states that allows people (including renters or those who can’t install panels) to subscribe to a share of a larger solar farm. For a solar developer, building a community solar project involves selling subscriptions or shares of the project’s output to many customers. Each subscriber then earns credits on their utility bill for their share of the solar generation.

The revenue model here: the developer earns income from the subscribers’ payments and from selling electricity to the grid. Typically, subscribers pay a monthly fee that is set to be about 10–20% lower than the value of the bill credits they receive – for instance, if a subscriber gets $100 off their utility bill from solar credits, they might pay the community solar provider around $80–90, netting a savings.

That difference (customer savings) is the incentive to subscribe, and the remainder is the project’s revenue. Community solar often requires navigating state regulations and utility credit programs, but it’s a growing segment, especially with the IRA now offering bonus tax credits for projects that benefit low-income subscribers. For a new solar business, community solar can be complex to administer (managing multiple subscribers and utility billing arrangements), but there are established models and even third-party subscription management services. The benefit is tapping into a broader customer base and potentially achieving scale with larger installations.

Utility-Scale Project Development: On the larger end, solar businesses can develop solar farms and sell power wholesale to utilities or through Power Purchase Agreements with corporations. The revenue comes from long-term PPAs or from merchant electricity sales into the grid. These projects often involve significant upfront investment and project finance. The common funding approach is project finance: using a combination of equity, bank loans, and tax equity investment. The tax equity investor provides capital in exchange for claiming the project’s tax credits (ITC/PTC) and accelerated depreciation benefits, effectively monetizing those incentives which many developers can’t fully utilize on their own.

The developer earns revenue from selling power (and possibly renewable energy credits) and tries to achieve a return on equity once the project is operational. Utility-scale projects may also participate in capacity or ancillary service markets, or add battery storage to increase revenue opportunities (e.g., store solar and sell when prices are higher). While this area might be beyond the scope of a small startup, some solar entrepreneurs do start by developing and flipping small utility projects to bigger investors, generating profit at project sale.

Value-Added Services: Beyond installing panels, solar companies can generate revenue through add-on products and services. This includes offering battery storage systems (and managing those under a service model or aggregating them for grid services), ongoing operations & maintenance (O&M) contracts, energy monitoring services, or even energy efficiency upgrades.

For instance, many residential solar installers now also sell home batteries; they may either lease the batteries or sell them outright. Some are exploring models like virtual power plants, where they network distributed solar-battery systems to earn money from utilities or grid operators for providing grid support. Additionally, solar Renewable Energy Certificates (SRECs) can be a revenue stream in certain states: if a business installs systems for customers but retains ownership of SRECs, it can sell those credits to utilities that need to meet RPS requirements (though usually the SREC value is passed to whoever owns the system).

From an investment standpoint, there are numerous sources of capital flowing into the solar industry. Traditional financing (bank loans, lines of credit) is commonly used by installers for equipment procurement and working capital, especially once they have steady cash flow. Larger solar companies tap institutional investors, private equity, and infrastructure funds that seek stable returns from solar assets.

The Inflation Reduction Act has also spurred the creation of green banks and clean energy financing programs – for example, the Greenhouse Gas Reduction Fund will empower local green banks to support small solar developers with low-cost capital . Startups in the solar space have seen interest from venture capital, particularly those with a unique angle like solar software, fintech for solar (e.g. innovative leasing platforms), or hardware innovation (like more efficient panels or IoT monitoring devices).

Importantly, a new solar business should design its revenue model aligned with its target market and funding capacity. Monetization strategy could mean the difference between needing a lot of upfront capital (as in owning assets under lease/PPA models) versus a leaner model (cash sales and quick turn projects). Many successful companies actually use a hybrid approach – for instance, an installer might offer both direct sales and a PPA/lease option via a partnership with a financing provider. This way, customers have choices and the business can capture a broader market.