SEIA & Wood Mackenzie’s latest report pegs US’ solar PV additions in Q2 2024 at 9.4 GW DC
Utility-scale contributed 7.6 GW DC, while distributed market installations weakened
High interest rates, interconnection challenges, labor availability are some of the factors impacting the industry’s growth
The US solar market expanded by 9.4 GW DC of new PV installations, representing a 29% year-on-year (YoY) growth driven by the utility-scale segment, but a 21% quarter-on-quarter (QoQ) decline thanks to weak distributed solar deployments. However, the latest Solar Energy Industries Association (SEIA) and Wood Mackenzie report calls it the largest Q2 capacity addition in US history.
In the US Solar Market Insight Q3 2024 report, analysts attribute federal clean energy policies as driving manufacturing as well as deployment growth. As the end of June 2024, the US’ total solar panel manufacturing capacity grew nearly 4 times from 10 GW to 31.3 GW since the IRA was passed.
Within 2 years of the Inflation Reduction Act (IRA) coming into force, the US solar industry has added 75 GW of new capacity to the grid, representing 36% of all solar built in the country’s history.
“The solar industry had a great second quarter, mostly due to growth in the utility-scale segment,” said Head of Global Solar at Wood Mackenzie and Lead Author of the report, said Michelle Davis. “But future solar growth is being hindered by broader power sector challenges – interconnection backlogs, electrical equipment shortages, and constraints on labor availability. The industry also faces uncertainty related to newly proposed tariffs and the presidential election. There is currently a lot to navigate in the solar industry.”
In terms of deployments, the utility-scale segment contributed 7.6 GW DC, representing a 59% YoY increase, but a 23% sequential decline. This segment faces problems arising out of lack of labor availability, constraints on the supply of high-voltage equipment, and interconnection delays. A total of 7.7 GW DC of new projects were contracted during this period, representing a 23% YoY decline.
Since the previous outlook, analysts have increased their forecast of new utility-scale solar capacity to come online between 2024 and 2029 by 1%. They now expect over 186 GW DC capacity to be commissioned during this period, with 2.4 GW DC increase concentrated in 2025, driven by projects that were initially expected to come online in 2024, but will be delayed into 2025. Over the 5-year period, the report writers expect this segment to deliver 31 GW DC annually.
While the analysts believe that the new Southeast Asian AD/CVD investigation is likely to have negligible impacts, constrained availability and complex EPC contract negotiations, and long-lead times for procuring transformers and high-voltage circuit breakers are some of the factors that are delaying utility-scale projects.
The residential solar segment with 1.132 GW DC additions during the reporting quarter represented a 10% sequential and a 37% YoY drop, making Q2 its lowest quarter in nearly 3 years. High financing rates and policy changes in California are responsible for this lack of demand, which also forced several installers to lay off staff and exit unprofitable markets during Q2.
Recently, leading residential solar installers SunPower and Lumio declared insolvency (see US Residential Solar Installer Lumio Files For Chapter 11 Relief).
Analysts forecast residential installations to decline by 19% YoY this year with the California market alone dropping by 41% compared to 2023. California made up 30% of the residential solar market last year. Recovery is expected from 2025 onwards, yet the AD/CDV tariffs are likely to impact this growth. In 2025, it will grow by 14% and add over 33 GW DC between 2026 and 2029 as retail electricity rates go up and emerging markets grow.
The commercial solar PV segment added 427 MW DC as it grew by 6% YoY owing to solid installation volumes in California and Illinois. On a QoQ basis, the installations dropped by 5% as developers dealt with market uncertainty regarding receiving the domestic content adder and the possibility of AD/CVD tariffs.
For 2024, the report expects this segment to add 2.138 GW DC of new additions, but a 15% contraction in 2025 due to California’s net billing transition.
For the community solar segment, the report counts Q2 2024 as the lowest quarter of installed capacity since Q3 2022 with 270 MW DC representing a drop of 12% each YoY and QoQ. Interconnection delays were among the factors responsible. As mature states saturate, emerging markets take their own sweet time to grow. Analysts believe stakeholders are now pegging hopes on the $7 billion Solar for All funding from the Environmental Protection Agency (EPAP) to lift this segment (see Joe Biden Announces $7 Billion In Grants For Residential Solar).
Going forward, the report forecasts annual PV installations to grow at 4% on average over the next several years, leading total capacity to double to 440 GW by 2029 from 209.8 GW installed at present.
The complete report can be purchased on Wood Mackenzie’s website for $5,990.