Homeowners may face higher prices for solar panels, batteries, and heat pumps as federal incentives expire and tariffs take effect, though new financing models could soften the blow.
The 30% federal tax credit for residential solar panels, batteries, and heat pumps will expire at the end of 2025, removing a major incentive that previously allowed homeowners to reduce their tax bills by thousands of dollars. Bloomberg reports that a typical solar and battery system generated around $10,000 in tax credits for homeowners, meaning that installations in 2026 could be more expensive for those who purchase systems outright. Tax credits for leased systems will remain through 2027, with installers passing on savings to homeowners through lower monthly payments.
Emily Walker, director of insights at online solar marketplace EnergySage, noted that new financing models such as lease-to-own or prepaid leases are emerging to help homeowners secure savings while ultimately owning their systems. “When you’re talking about something that’s producing electricity for 25 years, it’s really just a blip,” she said, highlighting the long-term financial benefits of electrifying homes despite the expiration of incentives.
Southern California installer SolarShoppers, which sells its systems directly, expects prepaid leases to account for nearly all of its business in 2026. Company president Shawn Heckerman predicts that demand may soften initially but will rebound later in the year due to rising electricity rates and soaring summer temperatures that increase air conditioning use. “When we get into the summer, customer calls spike when they get their first high utility bill,” Heckerman said.
New rules tied to the federal tax credit, effective Jan. 1, 2026, require a portion of solar system components to be domestically manufactured. Final guidance on the percentage of components from China and other countries that are prohibited under the Trump-era tax law has not yet been issued. Tariffs on imported solar panels and nearly all residential batteries, mostly sourced from China, are also expected to increase costs. Analysts say these pressures may encourage the U.S. solar industry to focus on reducing “soft costs” such as permitting and paperwork, which currently make U.S. solar systems significantly more expensive than those in Australia and Europe.
Heat pumps, which can provide heating, cooling, and hot water, have also lost a $2,000 federal tax credit. However, Francis Dietz, spokesperson for industry group AHRI, said most heat pumps were not eligible for the incentive anyway, and basic models will remain accessible for consumers. Tariffs on Chinese components used in domestically assembled heat pumps could push prices slightly higher. In 2024, the U.S. imported 382,000 heat pumps, mainly from China and Mexico, out of a total 4.1 million shipped.
Despite the changes, experts like Walker and Heckerman expect that the long-term demand for solar, batteries, and heat pumps will remain strong, driven by high electricity costs, the adoption of electric vehicles, and the replacement of fossil-fuel appliances with efficient electric alternatives. Bloomberg notes that while upfront costs may rise, the move toward electrification and sustainable energy solutions continues to offer significant long-term savings for homeowners.
The Sri Lanka Guardian is an online web portal founded in August 2007 by a group of concerned Sri Lankan citizens including journalists, activists, academics and retired civil servants. We are independent and non-profit. Email: editor@slguardian.org
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