2025 H1 Solar Industry Retrospective: Policy Shifts, NEC 2026 Prep, and Market Consolidation

The first half of 2025 delivered a whirlwind for solar and electrical professionals. Between sweeping tariff actions, looming tax credit uncertainty, and the publication of the NEC 2026 edition, installers and distributors faced an environment defined by rapid change. This retrospective examines the major developments from January through June 2025 and what they mean for contractors sourcing equipment for the back half of the year.

Q1 2025 Installation Data: A Cooling Market

According to the SEIA and Wood Mackenzie Solar Market Insight Report Q2 2025, the U.S. solar industry installed 10.8 GWdc of capacity in the first quarter — a 7% decline year-over-year and a 43% drop from Q4 2024. Despite the contraction, Q1 2025 ranked as the fourth-largest quarter on record, and solar accounted for 69% of all new electricity-generating capacity added to the U.S. grid.

Segment Breakdown for Q1 2025

Segment	Q1 2025 Installed	Year-over-Year Change
Utility-scale	9.0 GWdc	-7%
Residential	1,106 MWdc	-13%
Commercial	486 MWdc	+4%
Community solar	244 MWdc	-22%

Commercial solar was the only segment to grow year-over-year, setting a record for first-quarter installations at 486 MWdc. The growth was driven largely by California's NEM 2.0 pipeline continuing to come online. Texas led all states with 2.7 GWdc installed, while California maintained its lead in residential solar at 255 MWdc.

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Federal Policy: ITC and IRA Under Pressure

The most consequential policy development of H1 2025 was the House passage of a budget reconciliation bill on May 22 that proposed eliminating residential solar tax credits under Section 25D for both customer-owned and third-party-owned lease systems starting in 2026. The bill also proposed stringent construction-start deadlines for Section 48E projects — requiring construction to begin within 60 days of enactment and placed in service by the end of 2028.

SEIA's report noted that the residential solar market faced compounding headwinds: high interest rates, economic uncertainty, tariffs, and the availability of the residential solar ITC. The five-year residential outlook was downgraded by 9% in the Q2 report. Utility-scale, commercial, and community solar projects relying on Section 48E faced similar uncertainty, with proposed limits on tax credit transferability after 2028.

Additionally, an executive order to "reinvigorate America's beautiful clean coal industry" signaled a pivot in federal energy priorities, excluding solar, wind, and storage from the definition of energy resources while elevating coal, oil, natural gas, and uranium.

Tariffs and Supply Chain Disruption

Trade policy dominated headlines throughout H1 2025. Key developments included:

• Canada/Mexico tariffs: A 25% duty on imports took effect March 4, with a 10% limit on Canadian energy resources and critical minerals. While the U.S. solar industry does not materially import assembled equipment from these countries, components used in inverters and trackers raised production costs.
• Section 232 steel and aluminum: Aluminum tariffs increased from 10% to 25%, then to 50% on June 4, directly impacting module frame and racking costs.
• China tariffs: Escalated from 10% in February to 145% by April 12, before a 90-day rollback agreement on May 12 reduced the combined rate to 30%.
• "Liberation Day" tariffs: Announced April 2, imposing a universal 10% tariff on all imports with country-specific duties ranging from 10% to 49%. A 90-day pause on most reciprocal tariffs followed on April 9.
• AD/CVD final determination: On April 20, the Department of Commerce issued final anti-dumping and countervailing duty rates ranging from 14.64% to 3,500% on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam (CMTV). The ITC issued its final affirmative injury decision on May 20.

The trade actions reshaped import patterns significantly. Module imports from CMTV countries dropped from a 2024 average of 3.8 GW/month to 1.1 GW/month in Q1 2025. Cambodia's imports fell to zero as mandatory respondents withdrew from the AD investigation. Meanwhile, the share of module imports from Indonesia and Laos grew to 34.6% in Q1 2025.

Module Pricing Stabilization

Module prices across all segments rose 2–5% in Q1 2025, reflecting the AD/CVD determinations and shifting supply sources. However, system-level pricing told a more nuanced story:

Segment	Q1 2025 Price	YoY Change
Residential	$3.36/Wdc	+3%
Commercial	$1.47/Wdc	-2%
Utility-scale (fixed-tilt)	$1.18/Wdc	-1%
Utility-scale (tracking)	$1.23/Wdc	Flat

Despite higher module prices, commercial and utility-scale system costs decreased or held steady year-over-year, suggesting that balance-of-system cost reductions and competitive pressure on installation labor were absorbing some of the module price increases.

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Domestic Manufacturing Buildout

The U.S. added 8.6 GW of solar module manufacturing capacity in Q1 2025, bringing the total to 51 GW. ES Foundry opened a 1 GW cell factory in South Carolina in January, becoming just the second domestic cell manufacturer. However, upstream manufacturing growth remained slow or non-existent, with no new polysilicon or wafer capacity coming online during the quarter.

NEC 2026: Code Preparation Begins

The NFPA published the 2026 edition of the National Electrical Code (NEC) during H1 2025, marking a significant milestone for solar installers. According to NFPA's NEC code development page, the NEC Correlating Committee and Code-Making Panels 1–18 are conducting a comprehensive reorganization that began in the 2023 edition and continues through 2026, with the goal of completing the restructuring in the 2029 edition.

Key structural changes include the relocation of Article 220 (load calculations) to Chapter 1 as new Article 120, and the addition of five new articles covering installations over 1000 volts AC and 1500 volts DC. For solar contractors, the most directly relevant change was a Tentative Interim Amendment (TIA 1835) revising Section 690.12(C) on rapid shutdown initiation devices, requiring them to be readily accessible and, for one- and two-family dwellings, located at an outdoor location.

Installers should begin reviewing the 2026 NEC now to prepare for state and local adoption cycles. Ensure your upcoming projects comply with updated disconnect and labeling requirements by sourcing compliant safety disconnects and electrical accessories.

Installer Consolidation and Market Outlook

The residential solar segment experienced what SEIA described as "unprecedented turmoil," with high interest rates and tax credit uncertainty driving contraction. The five-year outlook projects the U.S. solar industry to contract by 2% annually between 2025 and 2030, with an average decline rate of 7% in the near term (2025–2027) before recovery to 3% growth between 2028 and 2030.

However, significant upside factors exist. Wood Mackenzie is tracking nearly 140 GW of proposed data centers — up from approximately 50 GW a year ago — creating massive new electricity demand. AI and data center energy needs, combined with gas turbine supply shortages, are expected to drive solar deployment recovery in the latter half of the decade. The base case projects nearly 43 GWdc of average annual additions through 2030, reaching more than 250 GWdc cumulative.

Key Takeaways for Contractors

• Plan for ITC uncertainty: If Section 25D and 48E changes take effect, project economics shift significantly. Safe-harbor equipment where possible.
• Diversify module sourcing: With CMTV imports restricted, explore domestic and alternative-origin modules.
• Prepare for NEC 2026 adoption: Review rapid shutdown, disconnect, and labeling changes before your AHJ adopts the new code.
• Budget for tariff impacts: Aluminum at 50% tariffs affects racking and framing costs; factor this into project bids.
• Watch data center demand: Utility-scale solar paired with storage is positioned to capture growing load growth from AI infrastructure.

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Sources

• SEIA & Wood Mackenzie — Solar Market Insight Report Q2 2025
• NFPA — NEC 70 Code Development
• NFPA — What Changed in the 2026 NEC?
• EC&M — Six New TIAs Proposed for 2026 NEC
• Wood Mackenzie — Global Cleantech Supply Chain Outlook