Solar Now Makes Up More Than Half of New U.S. Electricity Capacity

n 2023, the US solar industry hit a milestone, installing an impressive 32.4 gigawatts-direct current (GWdc) of solar power capacity. This was a whopping 51% leap compared to the year before, showcasing just how important solar power has become in the American energy scene.

For the very first time, solar energy made up more than half of all the new power-generating capacity added to the US grid, marking a major move towards renewable energy sources. To uncover more details, let's delve into the key points from the “US Solar Market Insight, Year in review 2023”," a comprehensive report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.

Solar Power Takes Center Stage in US Electricity Production

The success story of solar in 2023 is really something to talk about. Over half of the new energy capacity introduced to the US grid, specifically 53%, was thanks to solar installations. This shows that solar isn't just a passing trend – it's a core part of America's energy lineup now. Reaching this milestone underscores the growing appreciation for what solar power offers – a boon for environmental sustainability and a catalyst for economic progress.

A Closer Look at Solar's Big Year

Across the board, every part of the solar industry, from residential setups to massive utility-scale projects, either broke new records or came very close to doing so. Let's explore each segment in more detail.

Residential Solar Keeps Climbing

The home solar power sector kept on growing, with 6.8 GWdc installed, which is a 13% increase compared to 2022. Much of this growth came from California, where homeowners were quick to get solar panels installed under more favorable net metering rules before they were updated. Even though there was a bit of a slowdown across the country in the last part of the year—mainly because California wrapped up a wave of projects and because interest rates were going up in other states—the residential sector still managed to set a new all-time high for yearly installations.

Commercial Solar Hits New Heights

The commercial solar sector broke a record that had been in place since 2017 by installing 1,851 MWdc, up 19% from the year before. California saw a big surge in solar installations in the last quarter, mirroring the rush seen in the residential solar market. This increase across the country shows that businesses are really getting into solar, motivated by supportive government policies and the financial benefits of going green.

Community Solar Grows Steadily

The growth in community solar was a bit more subdued last year, with a 3% increase, bringing the total to 1,148 MWdc. Even though New York, a state known for its enthusiasm for community solar, saw a slight dip compared to 2022, the overall growth was helped by strong project pipelines in states like Illinois and New Jersey. This growth came despite ongoing challenges like delays in grid interconnection and getting permits, which are common in well-established solar markets.

Utility-Scale Solar Breaks Records

The biggest solar projects, known as utility-scale solar, hit a new high by setting up 22.5 GWdc in 2023. This was a massive leap of 77% compared to what was installed in 2022, adding almost 10 GWdc more than the year before. The growth in this segment is especially impressive considering the delays many projects faced in 2022 due to supply chain issues. With more than 10 GWdc installed in just the last quarter of the year, large-scale solar projects have shown they're a major force in shaping the US energy landscape.

Solar Pricing Trends

In 2023, the cost to install solar panel systems saw some interesting shifts. Here's a glimpse into how solar system prices varied across different segments.

• Residential Solar Systems: Those interested in buying home solar panels received some good news as the cost of solar panel installation dipped by 2% compared to the previous year. A big part of this drop came from a 43% decrease in the price of solar panels for home due to an oversupply in the market. Despite the overall decrease, the cost to attract and sign up customers did go up a little, which balanced out the panel price reduction to some extent.
• Commercial Solar Systems: Businesses saw an even better deal, with a 6% year-over-year decrease in solar panel installation cost. This segment benefited from a 34% reduction in module prices, thanks to the same reasons the residential sector did— there were more panels available than the installers needed.
• Utility-Scale Solar Systems: On the other end of the spectrum, prices for fixed-tilt utility-scale systems increased by 9%, while the cost for systems with moving panels that track the sun's path rose by 11%. This uptick is linked to a lag in panel procurement and rising costs for both construction work and labor.

Texas Outshines California in Solar Installations

For decades, California has been at the forefront of solar installations in the US. However, 2023 was a turning point as Texas stepped up and took the lead in the amount of solar power installed, driven largely by utility-scale projects that produce a lot of electricity. This shift shows that solar power keeps spreading out and growing in more places across the country.

Texas's rise to the top was marked by nearly 4 GWdc installed in the fourth quarter alone. This big move not only shows how fast the state is expanding its solar capabilities but also highlights how important it is for the future of solar energy in the US.

Growth Trajectory

By the end of 2023, the nation boasted 177 GWdc of solar panels. But that's just the beginning. Experts believe this number will jump to an impressive 673 GWdc by 2034, meaning solar installations will almost quadruple in just over a decade. And by 2040, solar power is expected to outshine all other forms of electricity generation, becoming the dominant source of power in the US.

• Residential Solar: The residential market might see a 13% dip in 2024, largely due to the ripple effects of California's switch to net billing and the broader impact of high interest rates. However, there's a silver lining. As interest rates begin to level off and more solar projects get extra benefits from Investment Tax Credits (ITC), a recovery is on the horizon, with a projected 13% growth in 2025 and steady growth up to 2028.
• Commercial Solar: The business solar market is looking at a 19% surge in 2024, thanks to a backlog of projects in California. Looking ahead, experts anticipate a slight contraction in 2025 due to various regulatory and market dynamics. Despite that, the long-term outlook remains optimistic, with an expected average annual growth of 7% over the next five years.
• Community Solar: The community solar market is set to enjoy a healthy 7% annual growth rate through 2028. This optimistic forecast is powered by strong project pipelines and the chance that more states will jump on the solar legislation bandwagon.
• Utility-Scale Solar: This big player in the solar market is projected to add 148 GWdc between 2024 and 2028 and a total of 343 GWdc over the next decade. Utility-scale solar will continue to thrive, driven by a mix of utility buying strategies, corporate sustainability goals, and state policies.

Conclusion

In short, 2023 marked a huge win for the US solar industry, hinting at a brighter road ahead. With unprecedented levels of solar installation and a growing shift towards solar nationwide, we're on the brink of an energy transformation. Looking ahead, it's clear that solar energy is moving from a supporting role to the main player in US electricity generation, offering a cleaner future for everyone.

Sources:

https://www.woodmac.com/industry/