Under a cloud
US solar ABS are under strain.
Published April 24 2026
The US residential solar industry — and the associated solar asset-backed securities (ABS) market — has deteriorated far more sharply than many investors anticipated over the past two years. Since mid‑2024, the sector has transitioned from growth to contraction, marked by falling installations, structural policy headwinds, and a wave of high-profile bankruptcies. The picture today is far from bright, with developments through the first quarter seemingly confirming that many of the risks previously identified have now fully materialized.
The Chapter 11 bankruptcy filings of two of the largest solar ABS sponsors — Sunnova Energy and Solar Mosaic — in mid‑2025 were particularly consequential. Together, these two bankruptcies alone eliminated more than 40% of historical annual solar ABS issuance capacity, drastically shrinking the sponsor universe. In our view, these failures have fundamentally altered the sector’s risk profile and exposed longstanding structural weaknesses. That said, it’s important to note this view is not a judgement on the long‑term importance of solar energy to decarbonization efforts, but rather an assessment of the current risks within the US residential solar market.
Industry backdrop
Underlying market conditions have also continued to worsen. After more than a decade of rapid adoption driven by falling equipment costs, accommodative financing, and favorable policy support, the US residential solar market entered a pronounced downturn beginning in 2023.
Residential solar installations fell roughly 31% in 2024, the first annual decline in years. Policy changes, meanwhile, have only exacerbated these pressures. California’s Energy Metering (NEM) 3.0 (or the Solar Billing Plan) reduced the export compensation rate by 75–80%, significantly extending payback periods. Any remaining hope for near-term relief ended in March 2026, when appellate courts upheld the NEM framework. Sales in California remain down 60–80% from pre‑2023 levels. At the federal level, uncertainty around the durability of residential solar tax credits has further weakened demand and undermined financing assumptions.
Issuance trends
From a credit perspective, solar ABS issuance has contracted accordingly. After peaking at approximately $5.2 billion in 2024 (across 17 transactions), issuance dropped to approximately $4.3 billion in 2025 (across 12 transactions) and has since become sporadic and highly concentrated. Solar ABS issuance in 2025-2026 has been limited to a small number of issuers refinancing seasoned portfolios. Some select transactions have demonstrated that capital is available for high‑quality, well‑serviced collateral but we view these deals as exceptions rather than evidence of recovery. By comparison, the broader ABS market remains dominated by auto, credit card, and equipment securitizations. In 2025, auto ABS alone accounted for more than $160 billion of issuance across nearly 190 transactions, highlighting the marginal role of solar ABS within structured finance.
Even absent further bankruptcies, we remain concerned about the sector’s vulnerability to second‑order effects. Installer failures, warranty disputes, incomplete installations and customer dissatisfaction directly undermine borrower willingness to pay — especially when originators and servicers are replaced mid‑stream. The Sunnova and Mosaic restructurings underscore the key structural weaknesses in solar ABS transactions, including the sector’s dependence on sponsor‑affiliated servicers, limited excess spread, and sensitivity to operational disruption.
Our outlook
As of early 2026, we see little evidence of sustained stabilization and no clear policy catalyst for recovery in either the residential solar market or the solar ABS ecosystem.
As mentioned, issuance is expected to remain sporadic and highly selective, concentrated among a small number of niche sponsors managing legacy assets rather than funding growth. Given elevated counterparty risk, persistent policy headwinds, servicing uncertainty and thin liquidity, we continue to view solar ABS as offering unattractive risk-adjusted returns relative to other ABS sectors and believe it's best to avoid exposure at this stage.