Dive Brief:
- Highly leveraged solar-only installers may struggle after federal tax credits for customer-owned residential systems expire on Dec. 31, but independent home energy installation businesses have proven surprisingly resilient over the years and will adjust to the new normal more readily than assumed, Enphase Chief Marketing Officer Marco Krapels told Utility Dive.
- Prepaid leases will help shore up the market by reducing upfront expenditures and longer-term price risk for customers while giving installers a new marketing tool, Krapels said in an interview.
- Tech companies and data center developers could provide additional support — and free up grid capacity for their own operations — by subsidizing distributed energy deployments, Krapels added
Dive Insight:
Distributed energy industry analysts and equipment manufacturers broadly expect the residential solar and energy storage market to contract in 2026.
Jefferies, an investment bank, this summer predicted a 30% contraction in the solar market for 2026. Energy consultancy Wood Mackenzie foresaw a 6% decline in storage installation volumes. In July, Enphase CEO Badri Kothandaraman said his “personal view” was that the residential solar market would contract 20% next year.
Amid the expected fall in home energy equipment sales, experts expect third-party-owned systems to account for a much higher share of total installs. Jefferies sees a 25% jump next year in third-party ownership, also known as TPO.
The TPO model has steadily gained ground in recent quarters, covering nearly half of new installs as of this summer. Unlike customer-owned systems, where the customer purchases the equipment for themselves in cash or with loan financing, residential energy providers or financial companies retain ownership of TPO systems. The customer typically leases the system or pays a per-kilowatt rate for the energy they consume.
Critically, under the One Big Beautiful Bill Act, TPO systems remain eligible for the section 48E investment tax credit — which can offset 30% of construction costs or more — for longer than customer-owned systems. That’s a boon for TPO providers like Sunrun, whose stock price has more than doubled since OBBBA’s passage. Systems that begin construction before July 4 can qualify for the 48E credit if placed in service by the end of 2029.
The shift to TPO is a partial reversal of the industry’s move toward customer ownership as residential solar sales took off last decade. Sunrun was one of several large solar installers — most of which have consolidated or gone out of business in the interim — that offered a loan product.
Today, most Sunrun’s originations hinge on long-term subscriptions where Sunrun retains ownership of the equipment. In November, Sunrun said it had 36% of the U.S. market for solar subscriptions. Sunrun and other solar leasing companies can further monetize their assets by enrolling them in virtual power plant programs like California’s Demand Side Grid Support.
Krapels said Enphase is rolling out its own TPO product in “our most important markets” in the coming months, including California. Its 25-year term begins as a “prepaid lease” similar to competing home energy lease offers, but the customer repays the upfront system cost with a loan and gains ownership of the system in year five, he said. Unlike some leases, Krapels said the product has no escalator clause: The customer pays the same rate for the entire contract.
That feature is a potent hedge against rising utility bills. Krapels said it’s easier to sell systems when customers see a clear path to cutting their home energy costs by at least 15% — a likelier outcome with no escalator. Prepaid lease payments may also reflect generous upfront VPP incentives from utilities like San Diego Community Power, widening the gap with customers’ retail bills.
“What customers ultimately want is a lower monthly payment compared to their utility payment,” he said.
Krapels said Enphase “has seen good results so far” as it brings the independent installers it works with up to speed on the TPO model. He sounded more optimistic than Jefferies, the investment bank, that installers would successfully adjust their business models after 25D expires by diversifying into energy storage, electric vehicle charging equipment and HVAC. Past experience is predictive, he said.
“We’re celebrating our 20th anniversary in 2026 and we’ve had [installers] with us since the beginning,” Krapels said. “At the end of the day, homes are being electrified and the skill sets they have gained over the years apply not only to solar.”
Separately, Krapels said Enphase and its competitors see opportunities to work with data center companies in 2026 and beyond as they look to free up megawatts on capacity-constrained grids. A September report from electrification nonprofit Rewiring America found that tech and infrastructure companies could unlock nearly 100 GW of spare grid capacity in part by paying 30% of the cost of new residential solar and storage systems. That subsidy would neatly offset the expiring 25D tax credit for customer-owned systems.
The approach could also help tech and infrastructure companies combat increasingly fierce local opposition to data centers, Krapels said.
“This is a way to get the community involved… to get excited about the data center because they’re getting paid,” he said.
