Dive Brief:

• Solar energy is expected to lose some of its shine in 2017, if only temporarily, as the U.S. residential market for the renewable energy source contracts for the first time in 16 years, according to Bloomberg. 

• The market is set to add 2,263 megawatts of residential solar in 2017, reflecting a 2.4% dip from 2016, which reported 2,319 megawatts. The nation's biggest rooftop solar market, California, in particular, is seeing its new residential solar capacity decrease.

• The slide in solar comes as major installers shift from leasing systems to selling them and utilities press for changes to incentives. New tax policies are also having an impact. The sector will bounce back in 2018, however, with increases of nearly 22% projected.

Dive Insight:

Though 2017 breaks a long trend of growth in residential solar, the sector looks to be undergoing a transition to focus on profitability as markets mature, competition intensifies and the cost of bringing in new customers increases, Utility Dive reported. 

With a saturated market and the potential loss of a key solar program, according to Utility Dive, increased competition and budget cuts called for by the Trump administration could stand to further dampen the industry's prospects in California. The Department of Energy's SunShot program — intended to reduce solar energy costs by 75% by 2020 — could face cuts to its budget of as much as 71%. What's more, policy standoffs over net metering, which requires utilities to buy electricity from consumers, could continue to be a drag on growth in the industry. 

Companies like Tesla, with its new rooftop solar system, could help renew interest in the segment in the coming years. Meanwhile, Tesla challengers like California-based startup Forward Labs are emerging. The Palo Alto company is presenting a building-integrated solar roof that it says will cost two-thirds that of Tesla's product, while delivering double the energy-generation capacity. 

Solar will likely continue to gain traction as the products become more attractive (and, with increased adoption, more affordable) to residential buyers looking to add value to their properties while making them more energy efficient. More still, the push among U.S. cities to reach net-zero energy, both in the residential and nonresidential sectors, could help propel the market into next year.