The US residential solar total addressable market will exceed the current US generation fleet

The passage of the One Big Beautiful Bill Act (OBBBA) presents significant challenges and uncertainty for the US residential solar industry. Most immediately, OBBBA eliminates the Section 25D customer-owned investment tax credit (ITC) for residential solar systems after 2025, making solar less affordable for homeowners. While third-party owned (TPO) systems under Section 48 can continue qualifying for the ITC and bonus adders after 2025, projects are subject to foreign entity of concern (FEOC) restrictions and placed-in-service deadlines. Further, an executive order from July 7th introduces additional uncertainty and could make it more difficult for TPO systems to continue qualifying for the ITC. 

The future trajectory of the residential solar market is up in the air. How will companies adapt and operate without the ITC? Where are the optimization opportunities in the residential solar cost stack? The next few years may be tumultuous for the industry – many companies will not survive.  

However, significant long-term residential solar market potential remains. Wood Mackenzie’s latest insight Near-term challenges but long-term potential: evaluating the US residential solar addressable market estimates and analyzes the segment’s installation potential by 2050. We compare the addressable market with how much capacity will realistically be installed, especially in light of the recently passed OBBBA. Purchase the full insight here or read on for key highlights. 

The residential solar total addressable market will be substantial by 2050, reaching nearly 1,500 GWdc 

Leveraging US Census Bureau and Wood Mackenzie data, we estimate that there will be about 92 million single-family owner-occupied residential homes in the US by 2050. Excluding unsuitable homes and those that have already installed solar, there will be the potential for more than 70 million residential homes to add solar over the next 25 years. Assuming average system sizes more than double by 2050, this potential equates to an addressable market of about 1,494 GW. To put this in perspective, this would surpass the current US generation fleet across all technologies (approximately 1,300 GW). 

OBBBA presents significant challenges and uncertainty for residential solar, delaying market penetration 

Nationally, only 7.5% of suitable owner-occupied residential homes had solar installed at the end of 2024. Under our Q2 2025 business-as-usual base case, we expected the residential solar market to grow at an average annual rate of 9% over the next five years and reach an adoption rate of 13% by 2030. However, our base case scenario did not incorporate the impacts of OBBBA.  

For comparison, our Q2 low case forecast scenario represents a “floor” for residential solar, and assumes no project, customer-owned or TPO, installed after 2025, qualifies for the ITC or bonus adders. We also assumed other pessimistic outcomes, such as less retail rate growth, no interest rate cuts by 2030, and more pessimistic state policy outcomes. This scenario resulted in 46% less residential solar capacity than our base case through 2030, which would be a significant blow for the industry. 

Our Q3 base case projection (due to be published in September) will likely fall between our Q2 forecast scenarios: rising retail rates, eventual interest rate cuts, and state policy support present upside to our low case. While the final OBBBA allows TPO projects to qualify for the ITC and adders after 2025 (a major upside from our low case), the executive order casts uncertainty on how many projects can continue qualifying. 

While uncertainty remains on the magnitude of impact, the OBBBA will result in less residential solar adoption in the near term. Many companies will not be able to stay in business. However, the market will eventually adapt, and the remaining players will diversify and find ways to cut costs. Further, rising retail rates will continue to make the residential solar value proposition more compelling. Even in our low case scenario, we expect the residential solar market to return to growth by 2028 and add more than 150 GWdc by 2050 (and we expect a more positive outcome). 

Only a portion of the addressable market will realistically install residential solar in the next 25 years 

The total addressable market (TAM) differs from and is significantly larger than our market outlook. While the TAM represents the remaining estimated market potential that can be tapped, our market outlook considers numerous qualitative and quantitative factors to determine realistic growth. For example, in our 25-year low case outlook, only 12% of the TAM is penetrated by 2050. However, a lot can change in nearly three decades, including technological and product advancements, business model evolution, and cost declines that could accelerate residential solar growth in the future. 

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For a closer look at our analysis, you can purchase the insight here.