From pv magazine USA
The US solar market is entering a “transition year” in 2026 as the industry grapples with the shift toward tax credit transfers and 48E technology-neutral credits, said Roth Capital Partners in an industry note. While the firm maintains that utility-scale solar has a longer lead time to navigate these hurdles, the residential segment is facing immediate pressure, with it officially projecting a 33% year-over-year volume decline for US residential solar in 2026.
The challenge stems from capital flows slowing as monetizing tax credits becomes increasingly difficult due to FEOC uncertainty, said Roth Capital Partners.
The firm noted that a number of banks historically active in the space are now “pens down” when it comes to 48E investment tax credits. The trend is driven by a fundamental aversion to the “compliance burden” associated with FEOC rules, it said.
Banks appear unwilling to “go through the brain damage” of dealing with 48E projects when traditional Section 48 deals remain plentiful, said Roth Capital Partners.
The risk could require publicly traded banks to prove that less than 15% of their debt is owned by a Prohibited Foreign Entity (PFE). While developers can pivot to Tier 2 or regional banks, these alternatives are likely to be 100 basis points more expensive, the firm noted.
The credit tightening is already manifesting in the residential installer landscape. GoodLeap has reportedly implemented price increases of approximately $1/W and halted originations in Florida and Texas, said Roth Capital Partners. The firm also highlighted significant volatility among major EPCs:
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Freedom Forever: Management indicated that is had a recent workforce reduction less than 6%. Management said the reduction was driven by AI automation, sees the move as a positive, and does not think it will diminish any of its capacity with the additional benefit of increased margin. The company now believes it is in a better position as the team can now be “faster and better after the reductions.”
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LGCY Power: The company reduced its number of U.S. employees, but management has hired hundreds of overseas employees resulting in a positive net staff gain and has integrated AI deeply into workflows to drive substantial efficiencies and cost reductions. Additionally, while Roth initially suggested the company may be pulling out of Texas and Illinois, management stated that LGCY remains active in both states, though operations may have been downsized.
- Legal Challenges: Freedom Forever has reportedly neglected to make installment payments in a legal settlement against Sunder Energy and may now be in default on a $4 million obligation, said Roth Capital Partners.
Despite the headwinds, Sunrun (RUN) is expected to meaningfully outperform its private third-party owned (TPO) peers due to its sophisticated handling of the tax equity market, said Roth Capital Partners. Similarly, the firm noted that the Propel program appears to have the capital depth to ramp volumes in a healthy way, which remains a positive signal for Enphase (ENPH).
Regarding project timelines, the firm believes that projects with a clear connection to AI/datacenter demand or those utilizing high levels of domestic content will likely receive priority as they move through the federal permitting process.
However, for the broader market, if Treasury guidance on PFE takes too long to materialize, the current capital slowdown may begin to impact utility-scale projects slated for 2027 and 2028, said Roth Capital Partners.
This article has been amended to reflect corrections made by Roth Capital Partners to its initial industry note. The corrections are related to the two bullet points about LGCY Power and Freedom Forever staffing and areas of operation.
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