The US solar industry faces a perfect storm of Federal policy and trade challenges

The US solar industry installed 10.8 gigawatts-direct current (GWdc) of capacity in the first quarter of 2025. Despite both a quarterly and annual decline in capacity, Q1 2025 was the industry's fourth-best quarter. Further, solar accounted for 69% of all new electricity-generating capacity additions in Q1.  

But recent federal policy and trade action present significant challenges and uncertainty for the US solar industry. In our US solar market insight Q2 2025 report, created in collaboration with the Solar Energy Industries Association (SEIA), we dive into the federal policy headwinds and trade-action whirlwind and how these factors impact the future of the US solar industry. 

Purchase the full report here, download the executive summary, or read on for some key highlights. 

Recent trade action is reshaping the economics of solar projects and supply chains 

The US solar industry faces a complex and evolving trade and policy landscape that will significantly impact development over the next five years. The Trump administration implemented significant trade policy changes in Q1 2025 by modifying and introducing new tariffs. These changes initially included duties on imports from Canada and Mexico, followed by modifications to Section 232 duties on all imports of steel and aluminum articles. 

Tariffs on Chinese goods also underwent significant fluctuations throughout early 2025. As of the publication of this report, the resulting structure is a 30% tariff that can stack on top of other tariffs (e.g., Section 201, Section 301, AD/CVD). And more broadly, the "Liberation Day" announcement on April 2 introduced sweeping new universal tariffs aimed at addressing perceived longstanding "unfair trade practices" and stimulating domestic manufacturing. While initially scheduled to take effect in early April, President Trump announced a 90-day pause on most country-specific reciprocal tariffs while maintaining the universal 10% duty and China-specific duties. Adding to this complexity, on April 20, the Department of Commerce (DOC) issued its final determination in the anti-dumping and countervailing duties (AD/CVD) investigation on solar cells and modules.   

The cumulative effect of these policy changes creates a challenging and uncertain environment for solar development over the next five years. For the distributed solar segments, the tariff announcements will affect pricing, resulting in a 4% downgrade to our five-year outlook. For the utility-scale segment, which is particularly sensitive to equipment costs, trade action could slow deployment in the next 1-2 years as developers navigate higher prices and supply chain disruptions. We anticipate some projects may be delayed or canceled, especially those with tight margins or fixed power purchase agreement prices that are harder to renegotiate.  

The US solar market will add more than 250 GWdc by 2030 in our Base case, but Federal policy actions introduce uncertainty and downside risk 

The proposed House budget reconciliation bill, passed by the House on May 22, would, if enacted, eliminate the residential tax credits for both customer-owned and third-party owned lease projects starting in 2026. Section 48E (utility-scale, commercial & industrial, and community solar) projects would have to start construction within 60 days of enactment and be placed in service by the end of 2028 (or the end of 2025 for residential third-party financed systems). While this bill passed the House by one vote, it must now make it through the Senate, where any changes would require the House and Senate to work out a compromise. 

Our Base case outlook does not yet reflect the provisions in the House budget reconciliation bill (details on the impacts of the bill on our outlook can be found in Wood Mackenzie’s insight Budget reconciliation bill: less a sledgehammer, more a big, ugly bulldozer through renewables). Pending the final iteration of the bill, we currently expect the US solar industry to add nearly 43 GWdc on average each year but contract by 2% annually between 2025 and 2030. In the near term, solar installations will decline at an average rate of 7% from 2025 to 2027. Policy uncertainty and rising costs due to tariffs will impact market growth across all solar segments.  

Industry growth will resume in the second half of our outlook, with solar installations projected to increase by 3% between 2028 and 2030. The solar industry’s supply chain shifting domestically and increased energy demand from AI and data centers are driving this recovery, but labor shortages and interconnection delays will continue to hinder growth. However, proposed tax credit changes and stricter regulations on foreign entities included in the budget reconciliation bill could result in a more significant market contraction in our outlook. 

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The full report explores each segment in detail. You can purchase the full report here, or download the executive summary