Sunnova and Sunrun are preparing to release their latest earnings reports later this week, closing out a difficult 2024 that saw a 31% market contraction. And though 2025 has so far not been kind to the industry either, analysts are predicting that 2025 will bring a pretty significant turnaround for residential solar companies.
“Last year was the lowest year of residential solar capacity since 2021, and the first annual contraction in the market since 2017, which is pretty crazy,” said Zoë Gaston, a distributed solar analyst at Wood Mackenzie.
The difficulties have so far persisted into 2025, and into the Trump administration. According to a note from TD Cowen, analysts “are cautious on an uptick in residential demand given a cautious consumer backdrop,” especially in light of interest rates. Just last week, Sunnova laid off roughly 300 employees, or more than 15% of its workforce, largely from its commercial organization; the company cited high interest rates and policy uncertainty as reasons for the cuts.
In 2023, Sunnova received a $3 billion partial loan guarantee from the Department of Energy’s Loan Programs Office, which was “the single largest commitment ever made by the federal government to solar power and DOE’s first loan guarantee for a virtual power plant.” The loan closed in September 2023, though as Latitude Media has reported, even finalized agreements for projects that aren’t aligned with Trump administration priorities still face uncertainty — even if any move to cancel them would be a breach of contract and almost certainly face lawsuits.
Meanwhile, Aurora Solar in January also laid off at least 58 workers — though later estimates suggest that the total could be closer to 100. The company cited “ongoing macroeconomic challenges and continued uncertainty in the solar industry” as its rationale.
A bumpy 2024
One primary cause of 2024’s difficulties for the residential solar sector was the high interest rates cited by Sunnova.
“There was optimism at the beginning of last year that customer demand would bounce back at some point in 2024 once interest rates came down,” Gastön said. “We saw there were multiple rate cuts in the fall, but unfortunately, many installers we talked to report that they really didn’t see a significant uptick in demand or a significant change in financing rates.”
Another major contributor toward 2024’s historic lows was installer and finance exits from the market, Gaston added, pointing to SunPower and Titan Solar, which both filed for bankruptcy in 2024. Those bankruptcies left “open sales pipelines and orphan projects,” she explained. “The residential solar industry already struggles with a bad reputation with sale practices so these company exits, orphaned systems, just contributed further.”
Political uncertainty also played a role in last year’s downturn. “Something I heard from a lot of different installers throughout last year was homeowners just wanting to wait [until post-election],” Gaston said. “Even after the election, I’ve still heard a lot of uncertainty….because of fear that the ITC would go away immediately.”
Gaston said installers are also reporting delays in getting paid from financing companies, attributed to delays with those companies’ own tax equity funding that’s “trickling down to the installers.” Changes in funding terms, she added, may also be in part due to uncertainty about the new administration.
Looking ahead
Of course, much of that uncertainty remains moving into 2025. But Rob Barnett, an energy analyst at Bloomberg Intelligence, predicts 25% to 35% growth in topline numbers. And interest rates may play just as key a role as political changes.
“A big part of what really pumped the brakes on residential demand was a combination of rising interest rates and California’s switch to the NEM 3.0 model,” Barnett added. That switch, initial reports found, boosted energy storage but dragged down panel prices in the state.
The expected upswing should start to become more visible in 2025’s second and third quarter financial results, he said, because of seasonal cool downs common at the start of the year.
Geographic diversification, Barnett said, will likely be key to company performance.
“Companies that have diversified away from California…might fare reasonably well,” he said, pointing in particular to Sunnova as a company that moved early into markets beyond California. Places like Florida and Texas, he added, are experiencing significant growth.
Barnett also expects storage attachment to be a major theme driving growth in 2025. “It’s no longer a world where you’re going to see solar only,” he explained. “You’re going to see solar plus storage as a very big theme, and that does read through to the residential developers as well.” That trend, he added, will boost financials for residential solar companies — a revenue boost for the Sunnovas and Sunruns of the world.
More broadly, though, Barnett sees positive macro growth drivers, both for residential and large-scale solar.
“I’m very optimistic about power demand growth being driven by AI needs and other factors like vehicle electrification and increasing manufacturing out of the U.S.,” he said.
Editor’s note: This story was updated on March 4 to correct the date of Sunnova’s LPO loan; it was received in September 2023, not September 2024.
