SEIA and Wood Mackenzie: US to add record 32GW of new solar capacity this year

Encouraging solar installations

Two of the sectors to have grown the most in the second quarter of the year were the residential and utility-scale segments. The residential sector installed 1.8GW of new capacity, a quarterly record for the sector, while the utility-scale sector added 3.3GW, a 22% increase on the capacity added in the second quarter of 2022.

This growth helped drive encouraging installation figures across the US sector. While the market added 8% less total capacity than in the first quarter of this year, its installed capacity increased by 20% over the second quarter of 2022. In addition, the report notes that the US has already brought online 12GW of new capacity in the first half of this year, compared to around 8GW brought online in the first half of 2022.

The report also expects the rate of solar installations in the US to continue to grow in the long-term. The authors note that their forecasts have changed “minimally” since the last quarter, expecting annual growth for utility-scale solar to average 9% per year from 2024 onwards.

Residential solar will grow by 6% per year between 2023 and 2028, while non-residential solar installations will grow by 8% over this period, with the report forecasting the entire US solar sector to have installed around 50GW of capacity by 2028.

There is also considerable geographic variation in the new projects brought online, which is not a surprise considering the dominance of Florida, California and Texas in the US solar sector. However, some states have seen their capacity of new installations change considerably.

In 2021, Colorado installed the 12^th-most capacity in the US, before falling to 26^th in 2022 and rebounding to fourth in the country in the first half of this year. Much of this growth has been driven by Lighstource bp beginning operations at its 283MW Sun Mountain project in the state in February, and with Meyer Burger planning to build a 2GW cell manufacturing plant in Colorado, the state could be set for sustained growth in the solar sector.

Conversely, Indiana has fallen down the rankings of the 50 states, plus the territory of Puerto Rico and the city of Washington DC. In 2021, the state installed the seventh-most solar capacity, which fell to 18^th-most in 2022 and 40^th-most in the first half of this year.

Supply chain adaptions

Some of this growth can also be traced back to the passing of the Inflation Reduction Act (IRA), which has sought to develop a domestic supply chain for the US solar sector. While the passing of the act initially created concern as to how the sector could continue growth without imported Chinese modules, many US manufacturers have since invested in and commissioned cell and module factories within the US.

The report also notes that, in the wake of the passing of the IRA, separate forms of legislation have come into effect to further encourage domestic manufacturing. The Withhold Release Order and Uyghur Forced Labor Prevention Act have both raised barriers to importing the quantity of modules from China as the US once did, pushing more companies towards domestic manufacturing.

The results of these supply chain disruptions is clear. According to the report, module manufacturers have announced “approximately three dozen capacity additions”, which could dramatically increase the module manufacturing capacity of the US and Puerto Rico from 10.6GW today to 108.5GW by 2026.

“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.”

However, the disruptions to such an established supply chain as the China-to-US solar module trade have negatively impacted the US sector. The report estimates that the global average selling price for PV modules has decreased by US$0.01-0.03 per watt in the last six months, perhaps as Chinese manufacturers are looking to court new trading partners to fill the gap left by US buyers.

This report’s authors expect this fall in prices to translate to a 10-12% overall price reduction but the tariffs and taxes on Chinese goods brought into the US have meant this has not translated to a fall in costs for US buyers.

Imbalanced benefits

The report also notes that the potential benefits of the IRA have not yet been fully realised, especially for projects at the latter stages of the development pipeline. Its authors name Maine, Massachusetts, New Jersey and New York as states where small-scale solar projects, those with a capacity of less than 5MW, have not received the support initially intended by the IRA, despite continued interest in developing new solar projects.

The report’s authors name: “high interest rates, elevated hardware and labour costs and increased local opposition to clean energy projects” as some of the challenges facing projects that have received planning permission, but not yet started commercial operations. This is also true in the utility-scale sector, where, in the year leading up to the passage of the IRA, the sector installed an average of 5.8GW of capacity each quarter. This has since fallen to 3.8GW per quarter as more projects struggle to get over the line.

There are also concerns for the commercial and community solar segments in particular. The report notes that these sections of the US solar industry installed 9% less and 16% less new capacity, respectively, in the second quarter of this year, compared to the second quarter of 2022.

Many of these challenges can be traced to the unique issues small-scale solar developers have to face, as installing a solar facility in a particular part of the country, with unique local geography and grid infrastructure requirements, can cause delays. As a result, these may not be problems solved by the passing of the IRA, or other federal-level legislation, and could instead rely on the work of individual companies and communities.

“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 about the impacts of legislation.

“Now the challenge becomes implementation — the industry is waiting for clarity on several IRA provisions before moving forward with solar investments.”