Overview of the US Residential Solar Industry

Industry Status: The US residential solar industry is built on cheap funding, questionable accounting practices, and aggressive claims for federal tax incentives. Residential demand faces pressure, while commercial and industrial demand shows some improvement.

Representative company Solaredge saw a 22% year-on-year decline in total revenue in the third quarter, with a steady performance compared to the previous quarter. Looking at product sales, US residential photovoltaic inverter channel sales fell by 13% quarter-on-quarter. Commercial and industrial photovoltaic inverter channel sales increased by 8% quarter-on-quarter. Energy storage battery sales grew by 31% quarter-on-quarter.

Industry Challenges: Despite strong growth in US residential photovoltaics in recent years, the industry faces serious problems due to sharp rises in interest rates, declining demand, and increased debt risks.

High interest rates remain a significant constraint on distributed photovoltaic installations, with the substantial rise in rates leading to reduced demand for residential systems and increased risks for installed system debt repayment. Furthermore, declining demand issues are causing some companies to face bankruptcy.

Affected by California's NEM 3.0, California's third-quarter grid connection volume declined, and residential photovoltaic demand is expected to remain relatively subdued for a longer period.

Despite the decline in residential photovoltaic grid connection volume, residential photovoltaic paired storage rates have increased, providing support in various states, especially in California.

Observations indicate some improvement in the US commercial photovoltaic market, with previously paused projects resuming, possibly related to declining component prices.

Accounting issues and tax incentives: The industry is built on cheap funding, questionable accounting practices, and tax incentives initiated in 2005. Some accuse the industry of exaggerated claims, and there may even be fraudulent activities. Some have reported to the IRS (Internal Revenue Service) alleging widespread exaggeration of tax incentive claims in the residential solar industry.

Investor Concerns: Due to the industry's unique nature, investors may not scrutinize it as strictly as other sectors. Some veteran investors worry this could lead to some form of "reckoning" within the industry.

Allegations claim that some companies have adopted overly aggressive assumptions when estimating the value of solar systems, thereby exaggerating their value, misleading investors, and making excessive claims for tax incentives.

Industry Outlook: Some industry views suggest that the residential solar industry may experience a crisis similar to the subprime mortgage crisis 15 years ago. Industry professionals are concerned about the outlook, especially amid current rising interest rates and investor concerns about tax incentive exaggerations.

Over the next few quarters, it is expected that the US residential photovoltaic market will continue to be under pressure, while the commercial and industrial market will continue to recover, with no significant changes anticipated.