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According to the US Solar Market Insight Q3 2024 report, in the two years since the IRA was passed, the solar industry has added 75 GW of new capacity to the grid, representing more than 36% of all solar capacity built in US history.
The U.S. solar industry installed 9.4 GW of new electric generating capacity in the second quarter of 2024, thanks to a strong clean energy policy, according to the US Solar Market Insight Q3 2024 report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie.
In August 2022, when President Joe Biden signed the Inflation Reduction Act (IRA) , it was the largest climate and energy spending package in U.S. history, but little was known about how the investment would impact the solar industry. According to the Insight report, in those two years the solar industry has added 75 GW of new capacity to the grid, representing more than 36% of all solar capacity built in U.S. history.
“The solar and storage sector is putting federal clean energy policies into practice by rapidly creating jobs and driving economic growth in all 50 states, especially in battleground states like Arizona, Nevada and Georgia,” said Abigail Ross Hopper, president and CEO of SEIA.
Residential
While second-quarter growth was a record for the sector, it was not uniform across all sectors. The residential solar market installed 1.1 GW, its lowest quarter in nearly three years. The contraction was due to political changes in California and high interest rates nationwide.
Unfortunately, the decline of residential solar led many installers to lay off staff, and two major bankruptcies, Titan Solar and SunPower, made headlines.
Based on these factors, Wood Mackenzie forecasts a 19% year-over-year decline in residential installations in 2024. California, which accounted for more than 30% of residential solar last year, is expected to see a 41% drop compared to 2023.
Other states are expecting an 8% decline in residential installations this year, but the Insight report sees a recovery coming, forecasting 14% growth for the sector in 2025. This growth will be driven in part by increased third-party ownership and eligibility for ITC rebates, as well as rising electricity rates. Over the longer term, the report’s authors expect the market to add more than 33 GW between 2026 and 2029.
Commercial
In the commercial solar sector, 877 MW was installed in the first half of 2024, up 6% year-over-year in the second quarter. Growth was driven in part by strong volumes in California and Illinois. In California, it was partly the NEM 2.0 market that was installed before the shift to net metering. More mature states like New Jersey and New York had strong quarters, even though their pipelines declined in recent quarters, the report says. In new markets, commercial developers are benefiting from land availability, lower costs and rising energy prices.
As a result of low installations in many states so far this year, the report’s overall outlook for commercial solar in 2024 is down 3% compared to last quarter and expectations for average annual growth of 8% from 2024 to 2029 remain. 2025, however, will be a tough year for the sector, with a 15% contraction expected, thanks to California’s new net billing plan. The IRA will come into play in the long run, as the sector is expected to grow to nearly 3 GW by 2029.
Community solar energy
Community solar typically involves a customer subscribing to a portion of the generating capacity of an off-site solar facility, receiving credits on their utility bills for the electricity produced by the facility. Its an advantageous model for those who live in apartment buildings or dont have the cash or credit to cover the upfront costs of solar.
In the first half of 2024, the Insight report notes that there were 577 MW of community solar installations, down 2% from the first half of 2023. Some of the strongest markets, Massachusetts and Maine, had slow quarters, with second-quarter capacity volumes down 95% and 52% year-over-year, respectively. And emerging markets missed expectations.
As in other sectors, interconnection is a major challenge, pushing many projects to the end of 2024 or later.
The reports authors say that "what could have been a banner year for EU solar legislation has instead turned into a year of disappointment, highlighting the difficulty of getting new EU solar programmes enacted and implemented."
However, the $7 billion Solar for All program offers hope and is expected to have a positive impact on the community solar sector as the programs get off the ground. The Insight report projects the sector to grow at an average annual rate of 2% through 2026 and then contract by an average of 7% through 2029. One caveat is that the five-year outlook includes only state markets with programs currently in place and does not include states with proposed program legislation, meaning growth could be higher if the legislation is put in place.
Public services
The utility-scale sector recorded its strongest second quarter ever, with 7.5 GW of installed capacity, representing a year-on-year growth of 59%. At the same time, 7.7 GW of new utility-scale projects were contracted in the second quarter of 2024, representing a year-on-year decline of 23%. Wood Mackenzie’s five-year forecast is for more than 186 GW of new utility-scale solar projects through 2029, an increase of 1% from the previous forecast.
Some of the challenges faced by this sector are the difficulty in hiring EPC companies, the long lead times for acquiring high voltage transformers and circuit breakers, and delays in interconnection.
Forwards
Despite the challenges, the U.S. solar sector is on track to install more than 250 GW over the next five years, reaching 440 GW of installed capacity. Continued support is needed, but the solar industry will remain the “foundation of the energy transition,” according to the report’s authors. |
