US solar sector faces challenging headwinds in 2024

After a year in which it has experienced considerable growth as the Biden administration seeks to embrace a more diverse energy portfolio, the US solar sector is expected to face a more challenging 2024, according to a new report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.

According to the report, the United States is expected to add a record 33 gigawatts (GW) of production capacity this year, up 55% compared with new capacity in 2022, but growth is expected to slow in 2024 amid economic challenges.

The report showed the US solar industry added 6.5GW of new electric generating capacity in the third quarter, helped by record installation of residential solar.

However, changes to net energy metering policy in California and elevated interest rates across the US are expected to lead to a brief decline next year before growth resumes in 2025, the report suggested

“The US solar industry is on a strong growth trajectory, with expectations of 55% growth this year and 10% growth in 2024,” said Michelle Davis, head of solar research at Wood Mackenzie.

Solar accounted for 48% of all new electricity-generating capacity added to the US grid through the first three quarters of 2023, the report said. By 2028, solar capacity in the United States is expected to reach 377GW, compared with 161GW now.

The utility-scale segment saw lowest level of new contracts signed in a quarter since 2018, owing to higher financing costs, transformer shortages, and interconnection bottlenecks, the report said.

California and Texas led the nation in new solar installations in the third quarter. Fourteen states and Puerto Rico installed more than 100 663 megawatts of new solar capacity in the same period.

Despite the gloomy prognosis for the sector next year, the medium-term prognosis is better: Wood Mackenzie expects growth in the US solar industry to average 14% annually over the next five years, but noted sustained growth will become more challenging in the longer term as interconnection bottlenecks and transmission capacity suppress the pace of installations.

Solar has been a key plank of US President Biden’s energy ambitions. In April this year the US Department of Energy unveiled a $52 million funding boost for solar projects, in addition to $30 million for research and development across new solar technologies, while also providing a $3 billion loan guarantee for solar panel Sunnova’s project to help target disadvantaged communities, so that people with lower credit scores can still access rooftop solar panels. 

The $3 billion is to be used by Sunnova to “provide loans for clean energy systems for approximately 75,000 to 115,000 homeowners” across the US and Puerto Rico, the Energy Department said.

Solar accounted for 48% of all new electricity-generating capacity added to the US grid through the first three quarters of 2023, the report said. By 2028, solar capacity in the United States is expected to reach 377GW, compared with 161GW now.

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