Sunshine and storm clouds for residential solar industry

The booming U.S. residential solar market is at a crossroads.

It’s being supported like never before by expanded federal funding and fears of fragile grids and volatile fuel prices. But solar also faces obstacles, including soaring interest rates, state subsidy cuts, a weaker economy and major rainstorms.

Investors got an early look Wednesday at which trend may win out, as SunPower Corp. kicked off a weeklong period in which three of the biggest U.S. residential solar companies report earnings.

SunPower said it sees more growth ahead. But the market has been less sanguine, with shares of SunPower and fellow home solar companies Sunnova Energy International Inc. and Sunrun Inc. down at least 28% since President Biden signed the Inflation Reduction Act in August. “These are serious headwinds, but they are reversible headwinds,” said Pol Lezcano, an analyst at BloombergNEF. “There are ways for the industry to adjust to keep the market at reasonably high levels of activity.”

The bumpy start to the year follows a banner 2022. The U.S. residential solar sector almost certainly set an annual record for installations last year — potentially as much as 30% growth, according to Lezcano. Even with a possible economic slowdown, 2023 may still top last year’s deployment total, though it would be tougher for the country to meet Biden’s lofty climate goals.

Hopes for expanded deployment are being buttressed by Biden’s new climate law, which is ushering in billions of dollars in clean energy funding.

They’re also being supported by electricity price surges in many regions, along with potential energy shortages that have led to more frequent threats of blackouts in grids such as California’s and Texas’.

“Utilities keep sending us new customers,” John Berger, Sunnova’s chief executive, said in an emailed statement. “Last year, the price of electricity went up more than in the previous 10 years combined.”