As the US looks to decarbonise its energy mix, solar has emerged as one of the most high-potential power sources in the country. A report from the Solar Energy Industries Association (SEIA), the sector’s trade body, and research firm Wood Mackenzie, found that, at the end of 2022, the US solar sector had installed 142GW of capacity, and the companies expect the sector to add an additional 236GW of new projects by the end of 2028.
This optimism seemed well-placed in the first quarter of the year, with the SEIA and Wood Mackenzie noting that the US solar sector added 6.1GW of new capacity in the first three months of 2023, a 47% increase from the first quarter of the previous year, making it the best first quarter for new capacity additions in industry history.
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However, there was considerable discrepancy in the capacity added for each subsector. Utility-scale and residential PV added a combined 5.4GW, while the community solar sector added just 212MW of new capacity. Some of this is attributable to the nature of the community solar sector, where installations typically feature lower capacities than utility-scale projects as they are designed to meet the energy needs of a smaller, localised community, but there has been a clear downward trend in new community solar installations across the US.
The report found that the community solar sector installed 13% less new capacity in the first quarter of 2023 than in the first quarter of 2022, and a striking 45% less new capacity than in the fourth quarter of 2022, suggesting that appetite for new community solar installations, or at least potential to construct them, is drying up. With this in mind, the US community solar sector could be in need of a step-change as it looks to return to growth as part of one of the fastest-growing industries in the US.
A new approach
Two companies looking to looking to challenge the community solar status quo in the US are Summit Ridge Energy (SRE), a solar developer, and HASI, an investment firm based in the state of Maryland. Last month, the companies announced plans to develop 250MW of new community solar capacity at a string of projects across Illinois and Maryland, a massive project that builds on large-scale work SRE has already completed in the industry.
In April, SRE ordered 2.5 million solar panels from QCells, a South Korean module manufacturer, as part of its plans to install a staggering 1.2GW of community Solar in Illinois, Maine and Maryland. Even earlier, in 2019, SRE and HASI announced plans to develop 250MW of community solar in the same part of the country, and these commitments to projects like this could change how solar developers perceive and understand the role of community solar.
“This commitment is not for a single project, rather a pipeline of projects equalling 250MW,” explains Leslie Elder, vice president of political and regulatory affairs at SRE, speaking about the 250MW addition announced last month. “SRE is elated at the opportunity to continue to execute building commercial solar projects with HASI that save consumers money in Illinois and Maryland.”
Of course, implementing such a radical change in any industry is not without challenges, and the large-scale community solar sector is no different. Elder notes that siting solar effectively on both roofs and ground-mounted facilities could be challenging, as the nature of this project as a series of connected farms, rather than a single large facility, means each aspect of the project will need to be planned, constructed and installed differently, based on the environmental conditions present at each stage of the project.
“High interconnection costs have material impacts on the success of any project,” continues Elder, pointing to some of the financial challenges associated with building a project of this scale. “Competition in the skilled labour market associated with increased demand from the renewable energy industry and other infrastructure projects have created shortages and delays in project development.”
Benefits of the IRA
However, this is not to say that community solar projects are inherently doomed. Elder herself expresses optimism about overcoming some of the geographical and financial challenges associated with community facilities, noting: “the industry is making strides to addressing these challenges and we do not see them as long-term challenges.”
What could work in the community solar sector’s favour, meanwhile, is the Inflation Reduction Act (IRA). President Biden’s landmark piece of legislation to encourage domestic manufacturing of many of the components and machinery required for renewable power generation, including solar. The SEIA estimates that the passing of the act has encouraged so many new investments into solar manufacturing and deployment that the US is US$100 billion richer already.
Indeed, the association estimates that the act alone will encourage 155GW of new solar manufacturing capacity in the US, and there could be particular benefits for the community sector. Earlier this year, Scott Graybeal, CEO of PV startup Caelux told PV Tech that many of the benefits of the act are tied to effective implementation of community solar.
“Because it is critical to ensure that the benefits of IRA are deeply rooted in communities, more stakeholders should be brought to the table from the outset to help guide strategy development and implementation,” said Graybeal.
On the subject of the impacts of the IRA on SRE and HASI’s work in north-east of the US, Elder agrees that the act has changed how the companies approached the project for the better.
“Yes, the historic investment by the IRA in renewable energy has shaped many of our business strategies for siting solar facilities and our supply chain purchases,” says Elder. “We are eagerly awaiting the final guidance for many of the provisions in the IRA, including domestic content, before we can properly evaluate de-risking opportunities available for our investments.
“We are still hoping to see material changes to both the domestic content and energy community adders.”
This enthusiasm is not idle speculation, either, with the US community solar supply chain already delivering the kind of changes Elder is calling for. When SRE signed the deal to acquire the 2.5 million solar panels from QCells, it was also announced that QCells would produce the panels in a factory in the US state of Georgia, creating a closed loop in which solar modules are produced by the US, and US communities benefit from the renewable power generation of those modules.
Significant solar ambitions
The strong legislative environment created by the IRA could be integral to helping the community solar sector realise some of its most ambitious targets. The SEIA and Wood Mackenzie expect the community sector to grow by 8% annually between 2023 and 2028, with more than 1.5GW of capacity installed by the latter date.
However, this is not the only target for the sector. The Coalition for Community Solar Access (CCSA) has even more ambitious targets for the community sector, aiming to increase the total installed capacity of community solar in the US up from 5GW today to 30GW by 2030.
Much of the CCSA’s optimism stems from the assumption that many more states will pass legislation encouraging the development of new solar projects within their borders, effectively following the lead of the IRA but on a local level, and the passing of a community solar programme in the state of New Jersey in March this year was a key victory for this proposal.
“Absolutely, the IRA has and will continue to have a material impact on the community solar sector,” adds Elder, discussing the need for state governments to implement solar programmes in the wake of the IRA. “Federal legislation introduced in previous sessions known as the community solar choice act accelerated state’s establishing community solar tariffs, allowing customers in states that do not currently have a state program to enjoy the immediate bill relief associated with a subscription.”
Challenges beyond communities
However, implementing new solar legislation in each state will take time, especially as, by the CCSA’s own estimation, just 22 of the 50 states currently have what it calls a “competitive community solar policy”.
As Elder puts it: “Currently, more than half the states in the union cannot take advantage of the low-income-bonus-tax credit if they do not have a utility tariff that allows community solar to supply savings to low-income customers, preventing these states from accessing 700MW per year of low income capacity benefits.”
As a result, reversing the decline in community solar installations in the US, and effectively implementing projects such as SRE’s and HASI’s to meet the sector’s lofty goals, is as much about making change within the community solar sector as it is making change to broader US government policy. The federal government has already made a significant impact for the solar sector, and now responsibility falls on state governments to do the same.
There are similar challenges associated with the US’ energy grid. A solar project is of little value if it is not connected to a national, or even local, power grid, and figures from the US Federal Energy Regulatory Commission found earlier this year that inadequacies in the US grid had left around 1TW of power generation and storage capacity waiting to be connected to the grid.
Critically, 947GW of this was solar generation capacity, suggesting a widespread failure to effectively integrate solar generation facilities into the US grids. This could be particularly significant for the community solar sector, where a key advantage of local, small-scale solar production is that a solar farm can be built in a relatively remote area to serve a community that may not be covered by legacy grid infrastructure; if the US cannot improve its grid connections, community solar projects of all sizes will struggle to make an impact.
Ultimately, dealing with ineffective grid infrastructure and an absence of state policy are not issues that a solar developer, or enthusiastic local community, can effectively overcome, but challenges that will require the support of governments and energy system operators. As community solar projects grow larger to meet the US’ growing energy demands, these structural weaknesses in the US power system are only likely to become more apparent.