U.S. solar industry sets record in the first quarter of 2023 but faces a host of challenges
Energize Weekly, June 28, 2023
After a record-setting first quarter in 2023, the U.S. solar industry is poised for rapid growth while facing a spate of challenges including system underperformance, labor shortages and the risk posed by extreme weather, according to clean energy insurer kWh Analytics.
The U.S. solar industry installed 6.1 gigawatts (GW) of capacity in the first quarter of 2023, a 47 percent year-over-year increase.
“This was the best first quarter in the industry’s history, led by delayed utility-scale solar projects coming online,” a market report by the Solar Energy Industries Association (SEIA) and consultant Wood Mackenzie.
The first quarter of the year is usually slow after a rush to install projects at year’s end, the report said.
SEIA, an industry trade group, projects that between 2023 and 2028, the industry will almost triple its capacity, adding 236 GW to the installed base of 142 GW.
The Federal Energy Regulatory Commission also projected in its April energy infrastructure update that with a “high probability,” solar will account for 70 percent of the new capacity additions between May 2023 and April 2026.
New solar energy incentives and an extension of the Investment Tax Credit (ITC), which was set to expire, in the Inflation Reduction Act (IRA), passed in 2022, have been a key spur for the industry.
“Solar will be the leading technology of the clean energy transition, thanks to the long-term policy certainty provided by the IRA,” the SEIA said.
The first quarter installation record was led by a 66 percent increase in utility-scale projects, 3.8 GW, compared with the first quarter of 2022. Residential solar installations were also up 30 percent to 1.6 GW and commercial projects up 27 percent to 391 MW.
The only sector to show a decline was community solar gardens, down 13 percent, as projects faced interconnection and siting challenges in several key state markets.
Still, against this backdrop of current and future growth, the industry is facing a series of emerging challenges, according to kWh Analytics’ 2023 solar risk assessment.
“Global inflation, paired with high energy prices due to Russia’s invasion of Ukraine and anti-dumping duties on module procurement, has created a high-cost environment for solar development in the U.S. in 2022,” the analysis said.
Pandemic-related supply chain disruptions, logistic costs and commodity prices are all starting to level off and kWh Analytics expects system costs to decline in 2023.
Still, even with a projected 3 percent decline in capital costs in 2023, kWh Analytics said the remaining procurement lag and supply-chain delays will keep utility-scale solar costs high.
Inflation-driven labor costs are up between 4 percent and 10 percent in the last year – boosting the system costs – as 44 percent of companies surveyed said a lack of trained labor was the biggest barrier to growth.
Equipment underperformance is also leading to an estimated $2.5 billion in losses annually, the study said.
Extreme weather is an increasing challenge for performance. In desert climates, for example, a reduction in inverter efficiency can reduce power output by up to 2 percent.
Hail is also becoming a prominent issue as more projects are built in the central U.S., and solar modules are tending to larger formats with thinner glass.
The kWh Analytics report said that using tempered glass in modules and employing “hail stow,” moving panels into a sharp tilt to avoid the impact of hail stones – even if it results in a small drop in output – are both ways to reduce the risk to damage.
“Managing solar asset risk requires a concerted industry effort to ensure sustainable growth and investment,” Jason Kaminsky, CEO at kWh Analytics, said in a statement. “It is in our collective interest to address the evolving risks identified in the report and to collaborate on solutions. By doing so, we can ensure the long-term success and sustainability of the solar industry.”
