32GW! U.S. photovoltaic new additions will hit record high in 2023
The Solar Energy Industries Association (SEIA) and Wood Mackenzie have released the latest U.S. solar industry report. The report predicts that the industry will add 32GW of capacity this year, which will be a record number.
The report, "U.S. Solar Market Insights," is the latest in a quarterly series of reports that generally takes a positive view on the development of the U.S. solar industry. The report pointed out that in the second quarter of 2023, the US solar market added 5.6GW of new power capacity, an increase of 20% from the second quarter of 2022. Solar energy accounted for 45% of the new power capacity of the US power grid in the first half of this year.
Inspiring solar projects
The two areas with the largest growth in the second quarter of this year are household and large-scale ground photovoltaics. The newly installed capacity in the household sector was 1.8GW, setting a quarterly record in this field; the newly installed capacity in large-scale ground photovoltaics was 3.3GW, an increase of 22% from the second quarter of 2022.
This growth is driving encouraging installed capacity figures across the U.S. industry. Although the total new capacity in the market decreased by 8% compared with the first quarter of this year, the installed capacity increased by 20% compared with the second quarter of 2022. In addition, the report also pointed out that in the first half of this year, 12GW of new capacity has been connected to the grid in the United States, and the capacity to be connected to the grid in the first half of 2022 will be approximately 8GW.
The report also predicts that the share of U.S. installed solar capacity will continue to grow in the long term. The authors noted that forecast changes since the previous quarter were "minimal", with annual growth for large-scale ground-mounted PV expected to average around 9% from 2024 onwards.
From 2023 to 2028, household solar energy will grow at an annual rate of 6%, and non-residential solar installed capacity will grow by 8% during this period. The report predicts that by 2028, the installed capacity of the entire US solar industry will reach approximately 50GW.
There is also considerable geographic variation in new projects being connected to the grid. This is not surprising given the dominance of Florida, California and Texas in the U.S. solar industry. However, some states have experienced large changes in new installed capacity.
In 2021, Colorado's installed capacity ranked 12th in the United States, then fell to 26th in 2022, and rebounded to fourth in the United States in the first half of this year. The growth is mainly due to Lighstourcebp's 283MW Sun Mountain project in Colorado, which was put into operation in February this year, and Meyer Burger's plan to build a 2GW battery manufacturing plant in Colorado. Colorado’s solar industry is set for continued growth.
By contrast, Indiana's ranking dropped among the 50 states plus the territory of Puerto Rico and Washington, D.C. The state ranked seventh in installed solar capacity in 2021, dropped to 18th in 2022, and fell to 40th in the first half of this year.
Supply chain adjustment: increasing local manufacturing
Part of this growth can also be traced to the passage of the Inflation Reduction Act (IRA), which was designed to develop a domestic supply chain for the U.S. solar industry.
Initially, the passage of this bill raised concerns about how the industry could continue to develop without imported components from China, but later, many American manufacturers invested in and commissioned cell and component plants in the United States.
The report also pointed out that after the passage of the IRA, different forms of legislation came into effect to further encourage domestic manufacturing. Both the withholding orders and forced labor laws have raised barriers to importing components from China, pushing more companies to switch to U.S. production.
The consequences of these supply chain disruptions are clear. According to the report, module manufacturers have announced more than thirty new capacity projects, which will significantly increase module production capacity in the United States and Puerto Rico from the current 10.6GW to 108.5GW in 2026.
"The United States currently dominates the global clean energy economy, with states like Florida, Texas, Ohio and Georgia at the forefront of job growth and economic prosperity," said Abigail Ross Hopper, SEIA President and CEO. The solar and energy storage industries are providing abundant clean energy, generating tens of billions of dollars in private investment, and that's just the tip of the iceberg."
However, disruptions to mature supply chains such as the U.S.-China solar module trade have had a negative impact on the U.S. solar industry. The report estimates that the global average selling price per watt of photovoltaic modules has dropped by US$0.01-0.03 in the past six months, perhaps because Chinese manufacturers are seeking new trading partners to fill the gap left by US buyers.
The report's authors expect the price drop to result in an overall price fall of 10-12%, but tariffs and taxes on Chinese goods mean this will not lead to lower costs for American buyers.
Uneven benefits
The report also noted that the potential benefits of IRAs have yet to be fully realized, particularly for projects in later stages of development. The report's authors list Maine, Massachusetts, New Jersey and New York as states where small-scale solar projects (less than 5MW in capacity) have not received initial support from the IRA, although these states remain interested in developing new solar projects.
The report's authors point to "high interest rates, rising hardware and labor costs and growing local opposition to clean energy projects" as some of the challenges faced by projects that have received planning permission but have not yet begun commercial operation.
The same is true for the large terrestrial sector, which averaged 5.8GW of installed capacity per quarter in the year before the IRA was passed. That has since fallen to 3.8GW per quarter as more projects struggle to get approvals.
The commercial and community solar sectors are of particular concern. The report pointed out that compared with the second quarter of 2022, the new installed capacity in these areas of the U.S. solar industry decreased by 9% and 16% respectively in the second quarter of this year.
Many of these challenges can be traced back to the unique issues small solar developers must face, namely the delays that can arise from unique local geography and grid infrastructure requirements when installing solar facilities in specific regions of the United States. Therefore, these problems may not be solved by the passage of the IRA or other federal-level legislation, but may rely on the efforts of individual companies and communities.
Michelle Davis, global head of solar at Wood Mackenzie, said of the impact of the legislation, "In the year since its passage, the IRA has certainly triggered a wave of optimism across the solar industry. There has been an explosion of announcements related to domestic module manufacturing, which is expected to materialize in the future. A more stable supply of solar modules."
"Now, implementation becomes a challenge. The industry is waiting for clarity on several provisions in the IRA before moving forward with solar investments."
