Key Drivers of 2018 Residential Solar Growth
Falling module prices, expanded state incentives, and a maturing financing ecosystem combined to push U.S. home solar installations upward in 2018. The average cost per watt dropped to about $2.70, making a 5‑kW system roughly $7,500 before rebates. Simultaneously, more states introduced or extended tax credits, net‑metering rules, and loan programs, lowering upfront barriers for homeowners.
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Installation Volume and Market Share
According to industry reports, roughly 2.5 million residential solar systems were installed in the United States in 2018, up from 2.0 million in 2017—a 25 % increase year‑over‑year. Residential solar's share of total U.S. solar capacity rose from 33 % to about 38 % during the same period, indicating that the residential segment outpaced utility‑scale growth.
Geographic Hotspots
California, Texas, Florida and Arizona continued to dominate installations, together accounting for over 60 % of the national total. California's strong net‑metering policies and aggressive clean‑energy targets kept it at the top, while Texas benefited from a deregulated market that allowed third‑party ownership models.
Financing and Ownership Models
Power Purchase Agreements (PPAs) and solar leases remained popular, but direct ownership grew faster in 2018. Homeowners increasingly used cash purchases or solar loans to capture the full value of tax credits and depreciation benefits. The shift toward ownership improved system performance monitoring and reduced long‑term costs for consumers.
Policy Landscape
Federal tax credits stayed at 30 % through the end of 2019, providing a stable incentive for new projects. Several states renewed or expanded their own rebates and net‑metering rules, though a few began to limit compensation rates, creating a nuanced policy environment that varied by region.
Comparative Overview
| Aspect | 2017 | 2018 | Change |
|---|---|---|---|
| Total residential installations | 2.0 million | 2.5 million | +25 % |
| Average system cost (per watt) | $3.00 | $2.70 | -10 % |
| Residential share of solar capacity | 33 % | 38 % | +5 pp |
| Direct‑ownership installations | 45 % | 53 % | +8 pp |
Implications for Future Growth
The 2018 surge set a benchmark for the next decade. Continued cost declines, broader financing options, and clearer state policies are likely to sustain residential solar momentum. However, any reduction in federal tax credits or restrictive net‑metering reforms could slow the trajectory, making policy stability a critical factor for investors and homeowners alike.