The distributed generation (DG) solar market grew at 6% with just over 2 GW of installed capacity in Q2 of 2023, according to a new report by Ohm Analytics. The company provided highlights for several categories for residential and non-residential solar and storage installation.
Residential PV capacity was up 11% in Q2 with 1,466 MW added, as 23% year-over-year (YoY) growth in California and 29% aggregate growth in New York, New Jersey, Connecticut and Massachusetts offset declines in southern belt markets of Arizona (-4% YoY), Texas (-20% YoY) and Florida (-5% YoY).
Key themes from the quarter:
Financing trends: Median APRs increased to 4.49% (and dealer fees rose in tandem) as the cost of finance continue to negatively impact the value prop of residential solar. Third Party Ownership (TPO) share vs. loans continued to grow in most markets, with Massachusetts and New Jersey reaching 57% and 68% TPO in July, respectively.
California market update: The NEM 2.0 backlog is expected to extend into Q4 of 2023, giving installers time to work on their NEM 3.0 sales strategy and partnerships, but California will see a meaningful 2024 drawdown as installers adjust to selling under NEM 3.0 changes. The outlook for 2024 including current NEM 3.0 sales and system size trends data are in Ohm Analytics’ California deep dive.
Electric rate changes impact demand: Utility rate cases/increases (New York, Nevada, Maine) and decreases (Colorado, Texas, New Mexico) impacted consumer interest in solar as observed by registered leads data.
IRA adders, regional opportunities: The Energy Community (EC) and Low-Income adders will have particular benefit in solar markets where adders and other PV incentives can be stacked (Pennsylvania, Illinois, etc.). Ohm Analytics’ outlook is for increasing adoption of TPO products from installers building projects in qualifying regions, as they seek to expand their addressable market to low-income consumers and offer savings in the high interest rate environment.
Key themes for storage:
Growth trends: Installed capacity was down 17% in Q2, driven by lower attachment rates on NEM 2.0 projects in California and generally softening PV markets.
California attachment trends: Permit issuance trends show an upward trajectory and signed contract data suggest that NEM 3.0 sales in California are already at 70%+ attachment rate. Ohm Analytics’ forecast for attachment rates and storage volumes in California and the United States is detailed in the company’s storage section.
Positive 2024 outlook: NEM 3.0 projects and $450 million in Puerto Rico PR-ERF funding contribute to Ohm Analytics’ strong forecast for 2024.
Q2 installed volume was 385 MW in the non-residential market (excluding community solar), up 7% YoY.
Broad participation in growth outside a few laggards: The market was up single digits YoY as rapid growth in several states (Arkansas, Georgia, Pennsylvania, Illinois, etc.) was partially offset by declines in larger markets California and New Jersey.
IRA adder guidance provides clarity: EC and Low-Income adder guidance provides more certainty for developers on project qualification. Projects that were waiting on guidance are now moving forward, supporting Ohm Analytics’ positive outlook for the second half of 2023 through 2024.
Positive outlook for the second half of 2023 and 2024: Strong permit demand in recent quarters, incentive timing (Illinois ABP, California NEM 3.0, IRA adders), and industry feedback support a positive view for the next several quarters’ growth.
Non-residential installed storage capacity was 21 MW in Q2.
Continued strength: Non-residential storage growth was 52% YoY as the market has had three very positive quarters in the last 12 months.
Pricing and capacity: Non-residential ESS pricing was up 9% YoY to $1,092/kWh, providing a headwind to growth. Meanwhile median capacity of storage systems decreased, offset by higher attachment rates on projects.
Community solar installed volume was 185 MW in Q2.
Interconnection issues in the Northeast slowing growth: Installed volume was down 24% in Q2, a slight improvement in annualized growth versus Q1. Massachusetts and Maine weighed on YoY trends as interconnection challenges slowed volumes in those states.
IRA adders: Recent guidance allows more projects to move ahead with certainty, and 700 MW of the low-income adder in Category 4 should favor community solar projects.
Improving outlook: While recent trends have been more negative, EOY 2023 into 2024-2025 should see stronger volumes with the combination of new programs and incentives coming into effect.
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