U.S. Community Solar to Double by 2029, Says Wood Mackenzie

mericans are finally getting it - you don't need a massive rooftop or a sprawling backyard to harness the sun's energy. Even without a single solar panel on your property, reliable and cheap solar power is still there for the taking. It is quite encouraging to see that state governments are now supporting community solar programs, offering more homeowners the gateway to clean energy.

Looking into the not-so-distant future, experts predict that the community solar market in the U.S. will boom in the next five years. A study by Wood Mackenzie and CCSA predicts that community solar capacity will double by 2029. From the current 7 gigawatts, it is projected to surge to 14 gigawatts of direct current. Join Sun Value as we dig deeper into these predictions and discover what the future might hold for shared solar power.

The ABCs of Community Solar

Picture this: decided it's time to greenify your life and can't wait to power up your home with the most efficient solar panels. But what if you're a renter, or your roof is under the shade of a huge oak tree? Or perhaps, the costs of solar panels are making you hesitate? Well, meet community solar - your chance to use the sun's energy without a perfect solar place or a fat wallet.

So, how does community solar work? Think of it as a group project, where you, either as a single person or a business, become part of a shared solar initiative.

This type of project – also called a community solar garden – is usually a large facility that generates electricity for several participants. Instead of buying solar panels, you can just subscribe to get energy produced by a solar farm for your home or office. The best part? You later receive credit directly to your electricity bills, making them cheaper.

U.S. Community Solar Today

Community solar is carving out its place in the US' energy landscape and racing ahead. Now, over 25 states have implemented laws to encourage these projects, making it simple for everyone to grab a slice of the sustainable pie. Missouri and Alaska recently became the latest states to support community solar energy by passing new laws this year.

Here’s a look at the U.S. states that have adopted policies to encourage community solar:

Source: SunValue

Even in states that lack official laws for it, community solar is flourishing. In Florida, for example, power companies and cooperatives have launched successful community solar projects even without specific policies. This just goes to show that there's a significant demand for this type of solar from both suppliers and users.

Coast to coast, legislators are getting behind the idea of shared solar power. For instance, the Pennsylvania state house passed a community solar bill (HB 1842) earlier this year, which is yet to be approved by the Senate. Once signed into law, it'll kickstart a statewide community solar program.

Similarly, Ohio introduced HB 197, aimed at setting up a community solar pilot. Many other states are also working on passing laws in the same vein.

A Doubling Market, But with Caveats

Since 2020, community solar power in the U.S. has grown a lot. It has tripled in size, showing how important it is for our renewable energy efforts. Currently, the total capacity is nearly 7 GWdc, and Wood Mackenzie predicts that it will double by 2029. The increase is mainly because states like New York, Minnesota, and Massachusetts are actively supporting community solar projects.

Source: Wood Mackenzie

Indeed, solar energy experts are predicting rapid short-term growth, with a predicted 5% rise each year through 2026. However, the road further ahead looks a little bumpy, as predictions hint at an 11% decline from 2026 to 2029. The slowdown is largely because the current state programs are almost reaching their limit, meaning there’s little room for additional projects.

The situation has become a bit more challenging recently with California's choice to cut down its community solar program. This move has led to a hefty 14% drop in Wood Mackenzie's prediction for national growth over the next five years. Given that California was a strong player in the market, the success of community solar in the long run will depend heavily on new laws that can unlock fresh opportunities in other states.

The Role of Federal Incentives

Sure, local laws matter a lot. Still, when it comes to community solar growth, federal incentives are equally important. Two major efforts are driving progress: the Inflation Reduction Act and a large $7 billion fund called "Solar for All." But, these strong federal aids bring a few challenges along the way.

The IRA is introducing tax benefits specifically created for low-to-moderate income families. Analytics expect that it will significantly increase the number of subscriptions from this group. By 2029, experts predict a substantial increase from 829 MWdc in 2024 to 3.6 GWdc in community solar for these subscribers. Plus, by 2025, almost 25% of all shared solar projects will be serving lower-to-middle income customers.

However, getting federal incentives can be quite tricky. Community solar developers often find it hard to fully understand tax breaks and various money benefits. Also, even though the Solar for All fund was announced in April 2024, the final plan is still not clear, which adds to the confusion.

The Solar Tax Credit Explained [2024]

Charting the Road to Progress

The community solar market has great potential but is not without difficulties. One of them is the cost of attracting low-to-moderate income subscribers. It is 27% higher than getting wealthier residential customers on board, approximately $113 per kilowatt. For smaller developers with limited funds, this could be quite a challenge.

Thankfully, there's a plan B: these developers can delegate their community solar sales and management to independent experts. This can help them concentrate on growing their projects as subscribers get all the solar care they need.

Arcadia, a climate tech company, has shared a report with some additional ideas to improve the community solar market. One suggestion is to use a billing system called net crediting.

Net crediting combines your utility bill with your community solar bill. In essence, it means having all your bills in one place, making it easier to see how much you're saving. They recommend allowing customers to keep their solar subscriptions when they move within the same utility service territory.

Americans Are Finally Getting It: Community Solar's Rise

The community solar market in the U.S. is experiencing significant growth and is poised for further expansion in the coming years. According to a recent report by Wood Mackenzie and the Coalition for Community Solar Access (CCSA), the cumulative U.S. community solar capacity is expected to reach 14 GW by 2028, more than doubling from its current level.

This growth is driven by robust project pipelines in existing state markets like New York and Illinois, as well as the emergence of newer state markets.In 2024, the community solar landscape continues to evolve rapidly.

The share of community solar capacity serving low-to-moderate income (LMI) subscribers has grown significantly, increasing from 2% in the second half of 2022 to 12% in the first half of 2024. This trend is expected to continue, with projections suggesting that nearly 25% of community solar capacity will be dedicated to LMI subscribers by 2025.

Additionally, developers are beginning to benefit from incentives provided by the Inflation Reduction Act, further accelerating the sector's growth.

Summing It Up

The beauty of community solar is that it truly democratizes green energy. Now, you no longer need to own a rooftop or land to take advantage of its perks. And fortunately, more and more states are taking steps to provide support.

Yes, there are some things we must work on, such as creating beneficial laws and more beneficial laws and improving the clarity of federal incentives. Still, nothing is going to stop the momentum now, and the projected twofold increase in capacity by 2029 only confirms this.

Maybe the time to hop on the solar power train is now, and you don't need a rooftop to spare. Maybe the time to hop on the solar power train is now, and you really don't need a rooftop to spare. Start looking into what is available in your area, join a local community solar project, and let the sun do its thing.

Sources:

https://www.arcadia.com/the-state-of-community-solar-2024-report.pdf

https://www.legislature.ohio.gov/legislation/135/hb197

https://www.akleg.gov/basis/Bill/Detail/33?Root=sb%20152#tab5_4