Solar generating capacity to set a record 33 gigawatts of new installations in 2023
Energize Weekly, December 13, 2023
Bolstered by a strong third quarter, a record 33 gigawatts (GW) of solar capacity were installed in 2023, even as the sector faces headwinds in 2024, according to a market report.
In the third quarter, 6.5 GW were installed, a 35 percent year-over-year increase. The 33 GW will represent a 55 percent increase over 2022 installations, the report by the Solar Energy Industries Association and consultant Wood Mackenzie said.
Utility-scale installations accounted for the largest share, 4.1 GW, a 58 percent increase over the third quarter of 2022. There was almost as much capacity installed through the third quarter as in all of 2022.
Solar made up almost half of all generating capacity added to the U.S. grid in the first three quarters of 2023, with the total capacity now at 161 GW. By 2050, solar is projected to be the country’s largest source of electricity generation.
Nevertheless, a combination of policy changes, financing challenges and equipment shortages are expected to slow growth starting in 2024, according to the report.
“Changes to net energy metering policy in California and elevated interest rates across the U.S. are expected to lead to a brief decline next year,” the report said.
In 2023, California reduced the solar energy credits for residential solar arrays putting electricity on the grid by 75 percent. The policy is aimed at promoting residential storage.
“Transformer shortages, and interconnection bottlenecks are also impacting the utility-scale segment, which saw its lowest level of new contracts signed in a quarter since 2018,” the report said.
Improvements in the module supply chain, however, did enable the record 12 GW of utility-scale deployed in the first nine months of 2023. The utility-scale segment bore the brunt of the supply chain problems in 2022.
Michelle Davis, head of global solar research at Wood Mackenzie, said in a statement that after a 55 percent year-over-year increase in 2023, installations will grow by only 10 percent in 2024, followed by continued slow growth.
“For commercial and community solar, pipelines in major state markets are getting built out faster than they’re being replenished,” the report said. “And for utility-scale solar, despite healthy early-stage pipeline growth, project execution will become increasingly challenging as interconnection timelines lengthen, grid congestion worsens, and labor availability remains limited.”
The report projects average annual growth for the U.S. solar industry as 14 percent between 2023 and 2028, with growth stronger in the near-term before falling to single digits starting in 2026.
“Growth is expected to be slower starting in 2026 as various challenges like interconnection constraints become more acute,” Davis said in a statement. “It’s critical that the industry continue to innovate to maximize the value that solar brings to an increasingly complex grid.”
For the third quarter, residential installation set a record 1.8 GW in more than 210,000 projects, for a 12 percent increase over the same quarter in 2023. California continued to be the main driver with a backlog of projects seeking to get in before the change in solar credits.
Commercial solar installations decreased slightly quarter-over-quarter. Over the first three quarters of 2023, they were up about 9 percent. “The commercial solar industry is seeing a slowdown in growth in more mature state markets such as New York, New Jersey, and Massachusetts,” the report said.
This has led developers to shift to states with lower development costs, available land, and growing electricity demand and rising electricity rates, such as Ohio and Florida.
Florida overtook Texas for second place for installed solar generation in 2023. California remained in first place with 3.2 GW, followed by Florida with 2.8 GW and Texas with 2.5 GW.
