U.S. Solar Market Q3 takeaways: Good, bad and bittersweet stats in record-breaking year

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Good: The U.S. solar industry expects to add a record 32 gigawatts (GW) of new capacity in 2023, a 52% increase from 2022, according to the U.S. Solar Market Insight Q3 2023 report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie.  

Good: Solar accounted for 45 percent of all new electricity-generating capacity in the country the first half of this year. The utility-scale and residential solar markets led the way with new capacity additions in Q2, growing by 3.3 GW and 1.8 GW, respectively.

“The United States is now a dominant player in the global clean energy economy, and states like Florida, Texas, Ohio, and Georgia are at the forefront of this job growth and economic prosperity,” said SEIA president and CEO Abigail Ross Hopper. “The solar and storage industry is delivering abundant clean energy that is generating tens of billions of dollars of private investment, and this is just the tip of the iceberg.” 

Good: And these record-breaking results are likely just a hint at what’s to come as Inflation Reduction Act (IRA) policies continue to take hold and as supply chains challenges abate. Wood Mackenzie now expects total operating solar capacity to grow from 153 GW today to 375 GW by 2028. That’s a 15% annual growth average.

Bittersweet: The IRA impact is real but not yet spectacular. “In the year leading up to the IRA’s passage, an average of 5.8 GWdc of utility-scale solar was procured each quarter. In the year since then, that average has fallen to 3.8 GWdc. In many major commercial solar markets where IRA incentives are expected to increase development of projects under 5 MWac – Maine, Massachusetts, New Jersey, and New York – pipelines have either shrunk or remained flat recently.”

But hey, it is not for a lack of capital.

“In the year since its passage, the IRA has undoubtedly caused a wave of optimism across the solar industry. Announcements for domestic module manufacturing have exploded, promising more stable solar module supply in the future,” said Michelle Davis, Head of Global Solar at Wood Mackenzie. “Now the challenge becomes implementation — the industry is waiting for clarity on several IRA provisions before moving forward with solar investments.” 

Bittersweet: This marks the largest quarter of growth for the residential solar market in history driven largely by customers in California rushing to install solar before net metering rules took effect and devalued solar production.

Bittersweet: Residential solar growth remains pretty top heavy overall. Florida continues to dominate the 2023 state solar rankings, installing 2.5 GW of new capacity in the first half of this year. This is 52% more than the next highest state of California, and already more solar capacity than Florida has ever installed in a single year. High interest rates have also hurt typical summer solar sales season.

But still: “For all states except California, we expect 12% growth in 2024 as the industry benefits more
from the IRA. Additionally, more third-party owned projects are expected to qualify for the ITC adders over the next few years. These factors drive our expectations for 8% average annual national growth between 2025-2028.”

Bad: The commercial solar market declined in Q2 primarily due to project interconnection backlogs and a hesitancy to move forward with projects before having full clarity on the IRA’s tax credit adders. Despite these challenges, increasing energy prices in certain states is driving demand in the commercial solar market, and the sector is expected to grow by 11% in 2023. 

Bad: Same story for community solar, which installed 16 percent less solar in Q2 2023 year over year — issues with project backlogs, permitting, siting and stalled legislation in some states.

“Community solar developers are also navigating how they will take advantage of new IRA incentives. As in other segments, qualifying for any of the three available ITC adders will prove more difficult than originally expected due to complex requirements.”

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