The US solar industry installed a record 6.1GW of solar capacity in the first quarter of this year, driven by stabilisation of supply chains and the impact of landmark climate legislation, a report by the Solar Energy Industries Association (SEIA) and research analytics firm Wood Mackenzie said.
The news follows a tumultuous 2022 that saw installations across market segments contract 16% year on year.
The report, US Solar Market Insight Q2 2023, attributes the surge in demand to the Inflation Reduction Act, which directs some $369bn in tax credits and incentives towards renewable energy development and manufacturing.
Utility-scale alone comprised 3.8GW of installations while residential solar rose 30% compared to the first quarter of 2022 to reach 1.6GW, on track to add 36GW over the next five years. Community solar rose 12% to 391MW, but commercial solar declined 13% at 212MW, mostly due to ongoing interconnection challenges.
As the IRA “begins to flex its muscle and drive demand, the US solar and storage industry is eagerly awaiting further guidance on some of the most impactful pieces of the law,” said Abigail Ross Hopper, SEIA CEO.
“Timely, specific, and workable implementation guidance from the administration will have a major impact on our success in both the near and long-term. This guidance is powerful, and if done correctly, it could unlock new market potential across the country,” she added.
Wood Mackenzie expects the solar market to triple in size over the next five years on the strength of the IRA, bringing total installed solar capacity to 378GW by 2028. Solar accounted for 54% of all new electricity-generating capacity added to the grid in Q1.
President Joe Biden’s administration has been slowly issuing guidance on the application of adders to the law’s tax credits, particularly those on energy communities and other incentives aimed at driving investment in low-income communities.
The pace of the guidance and the complexity of the rules continue to challenge the sector, SEIA noted. The US also has no crystalline silicon solar cell manufacturing capacity, so “it could take a few years before the credit can be widely used”, the report noted.
The rules “also fail to provide specific directions for the residential market, leaving this market segment without clarity,” SEIA noted.
“Qualifying for the domestic content adder will be a very complex process for solar project developers,” said Michelle Davis, head of global solar at Wood Mackenzie and lead author of the report.
“Even once crystalline silicon cell manufacturing is established, many other components will need to be produced domestically before projects can qualify,” she added.
Also key to the rebound, more module importers were able to satisfy the documentation requirements under the Uyghur Forced Labor Prevention Act (UFLPA). This enabled more solar equipment to make it to project sites and allowed the industry to build out its long pipeline of delayed projects.
The UFLPA law addresses alleged human rights abuses in China’s Xinjiang region, a major supply source for polysilicon, cells, and other critical components in solar panels.
Florida was the top solar state thanks to 1.46 GW of utility-scale installations, building 70% more solar capacity in Q1 than the next highest state, California.