The quarterly SEIA/Wood Mackenzie Power & Renewables U.S. Solar Market Insight report shows the major trends in the U.S. solar industry. Learn more about the U.S. Solar Market Insight Report. Released September 7, 2023.

1.    Key figures

• In Q2 2023, the US solar market installed 5.6 GW_dc of capacity, a 20% increase from Q2 2022 and an 8% decrease from Q1 2023. With nearly 12 GW_dc installed in the first half of the year, 2023 volumes are set to grow year-over-year, reversing the contraction the industry experienced in 2022. 
• Solar accounted for 45% of all new electricity-generating capacity added to the US grid in the first half of 2023.  
• The residential segment bounced back from a slight dip last quarter to set a quarterly record at 1.8 GW_dc of installations in Q2 2023. As the industry anticipated, California installations grew in advance of the mid-April change from net metering to net billing. We expect this installation surge to continue through the third quarter and begin to wane in the fourth quarter. 
• The commercial solar segment installed 345 MW_dc, declining 9% compared to Q2 2022 and 20% compared to Q1 2023. While capacity decreased quarter-over-quarter, the total number of projects installed increased 7%, indicating relatively stable volumes for the segment.  
• The community solar segment installed 226 MW_dc, 16% less than in Q2 2022 and flat compared to last quarter. While there is considerable momentum for community solar development, installation volumes have stagnated in several states due to challenges around interconnection, growing market penetration, and siting and permitting. 
• The utility-scale segment installed 3.3 GW_dc in Q2 2023, representing 22% growth from Q2 2022, and a 14% decline from Q1 2023. Despite the decline from Q1 2023 volumes, capacity in the second quarter builds on the 66% year-over-year growth seen in Q1 2023, demonstrating momentum from supply chain relief. Getting equipment to project sites is still a challenge but developers have been adapting their equipment sourcing strategies to get projects installed.
• In the year since the IRA passed, module manufacturers have announced approximately three dozen capacity additions. If all of these plans materialize, the US (including Puerto Rico) will increase its total module manufacturing capacity by a significant order of magnitude by 2026 – from 10.6 GW to 108.5 GW. 
• After a 13% market contraction in 2022, Wood Mackenzie expects the solar industry to grow 52% this year, installing nearly 32 GW_dc of capacity. A record 20 GW_dc will be installed over the second half of the year, surpassing every annual total prior to 2021. Modest growth is expected across distributed solar, while the utility segment is set to almost double compared to last year.  
• In our five-year outlook, annual growth in the solar industry will average 15%. Implementation of the IRA, which was enacted just over a year ago, has been slow and complicated. But the long-term policy certainty provided by the legislation continues to drive our expectations for double-digit growth in the solar industry.

2.    Introduction

The US solar industry installed 5.6 gigawatts-direct current (GW_dc) of capacity in the second quarter of 2023, a 20% increase from Q2 2022 and an 8% decrease from Q1 2023. The industry continues to recover slowly from the supply chain constraints it felt acutely in 2022. There is already nearly 12 GWdc of capacity online this year, compared to less than 8 GW_dc in the first half of 2022.

After dipping slightly last quarter, the residential segment set another quarterly record with 1.8 GW_dc installed. Volumes were supported by a record 607 MW_dc installed in California due to demand pull-in ahead of the switch from net metering to the less favorable net billing regime. Commercial and community solar volumes declined or stagnated compared to the first quarter, reflecting the drawn-out impacts of interconnection delays, supply chain constraints, and uncertainty over IRA implementation. Utility-scale solar had another quarter of healthy growth, up 22% year-over-year. This helps bolster our expectations for nearly 23 GW_dc of utility-scale solar in 2023. This growth has occurred despite persistent challenges for the utility-scale segment, including supply chain constraints, tight labor availability and uncertainty surrounding various IRA requirements.

Overall, photovoltaic solar (PV) accounted for 45% of all new electricity-generating capacity additions in the first half of 2023.

Second quarter solar installations reinforce our 52% growth outlook for 2023

Healthy installation volumes in the first half of the year support our expectations for nearly 32 GW_dc of capacity to come online this year. This will be a welcome return to growth. Annual solar additions contracted in 2022 due to intense supply chain constraints related to the pandemic, the Auxin anticircumvention case, and other regulatory trade action. This growth is predominantly driven by the utility-scale segment. Imports of solar modules have increased considerably compared to last year – module imports through the first half of the year reached 24.4 GW_dc compared to only 11.4 GW_dc in the first half of 2022. And Florida, a rapidly growing market for utility-scale solar, has already installed more than 2 GW_dc of capacity in the first half of the year. These factors have led to a 13% uplift (2.5 GW_dc) to the utility-scale outlook compared to last quarter.

One year after passage of the IRA, the full benefits have yet to materialize

The Inflation Reduction Act (IRA) passed in August 2022 and has undoubtedly caused a wave of intense optimism for the future growth of the solar industry. In the last year, Wood Mackenzie and SEIA have tracked dozens of announcements for new solar manufacturing facilities across the supply chain stemming from the law’s manufacturing provisions and the anticipated increases in solar demand. If all of the announced plans for module manufacturing facilities materialize, the US (including Puerto Rico) would increase its total capacity by an order of magnitude by 2026 – from 10.6 GW to 108.5 GW.

But the IRA has yet to drive more solar projects through final stages of development, causing pipeline growth to stagnate. In the year leading up to the IRA’s passage, an average of 5.8 GWdc of utility-scale solar was procured each quarter. In the year since then, that average has fallen to 3.8 GWdc. In many major commercial solar markets where IRA incentives are expected to increase development of projects under 5 MWac – Maine, Massachusetts, New Jersey, and New York – pipelines have either shrunk or remained flat recently.

This isn’t due to a lack of interest in solar project development. If anything, the amount of capital seeking high-quality solar project investments has only increased. Multiple factors are causing pipeline stagnation. They include high interest rates, elevated hardware and labor costs, and increased local opposition to clean energy projects. But the uncertainty around qualifying and claiming IRA benefits is exacerbating this, as well. Critical guidance from the Department of the Treasury has helped address some questions but has left others unanswered. The processes for qualifying for various tax credit adders have proven more complicated than the industry anticipated, particularly for the domestic content tax credit adder. Without full clarity on qualifications and processes, developers, manufacturers, and financiers are often left in limbo. As a result, the full benefits of the IRA, in the form of more development of solar projects that meet various policy objectives, won’t manifest until developers, asset owners, and financiers have enough regulatory clarity to make confident investments.

The residential solar industry is also waiting for more clarity on various IRA benefits. Wood Mackenzie expects that third-party ownership financing (leases and power purchase agreements) will increase over the long-term as third-party financiers take advantage of the tax credit adders. (Note that the tax credit adders are not available to customer-owned residential solar.) But until there’s more clarity, particularly related to qualifying for the domestic content adder and low-income communities (LMI) adder, residential solar companies are waiting to factor these tax credit benefits into their projected sales.

Developers are adapting their supply chains as modules with non-Xinjiang Chinese polysilicon have yet to pass customs

It’s clear from installation volumes and solar equipment imports through the first half of this year that developers are adapting their supply chains. This work began in late 2021 with the initiation of the Withhold Release Order (WRO) and continued with the anticircumvention investigation and the Uyghur Forced Labor Prevention Act (UFLPA). Developers have procured alternative sources of solar equipment and have successfully demonstrated compliance with polysilicon sourcing requirements to US Customs and Border Protection (CBP).

All that being said, there is still no evidence that solar modules made with Chinese polysilicon are making their way through US ports. Demonstrating compliance with the UFLPA for Chinese polysilicon from outside Xinjiang (the region of China that the UFLPA targets) has proven challenging. For the time being, solar equipment that is making its way through ports utilizes polysilicon from North American or European sources. But these sources make up a small portion of global solar-grade polysilicon. It’s unclear when solar modules made with non-Xinjiang Chinese polysilicon – one of the industry’s largest sources of solar-grade polysilicon – will move through US ports.

Developers have also been adapting their supply chains to manage the impacts of the anticircumvention investigation. In mid-August, the US Department of Commerce (DOC) released its final determination, confirming nearly all the provisions of its preliminary determination released last December. Beginning in June 2024, new tariffs will be applied to solar cell and module imports from Southeast Asia unless the importer can meet one of the exemptions. Manufacturers and developers will be safe-harboring modules prior to the deadline and working to source non-tariffed supply. However, all safe-harbored equipment must be installed within 180 days of the end of the moratorium, potentially leaving supply gaps in 2025. This puts added pressure on manufacturers working to build new facilities that could fill this industry need. The anticircumvention tariffs will impact where US importers source their modules. The UFLPA continues to be the most limiting factor for utility-scale solar buildout, but on balance, we expect there will be sufficient supply to serve the market by 2025. 

The clear consequence of these events is more expensive solar equipment for the US market, at least in the near-term. In the last six months, China has brought an immense amount of solar equipment manufacturing online (across the value chain from polysilicon through modules) reducing module prices globally. Our tracking reveals that global average selling prices for modules have decreased by 1-3 cents/watt in the last six months, which can amount to a 10-12% price reduction. But layers of tariffs and other trade barriers have prevented such movement in US prices. Import prices through June continued to remain well above global averages. 

We still expect the solar industry to nearly triple in the next five years

Our outlooks have changed minimally since last quarter. We increased our outlook for utility-scale in the near-term, but lowered our expectations slightly in the later years. After 2023, annual growth for utility-scale solar will average 9% as pipelines of contracted projects come online. Distributed solar markets will experience fluctuations in growth over the next five years as net billing is implemented in California, community solar markets work through interconnection challenges, and emerging markets pick up momentum. Residential solar will grow 6% on average over the next five years while non-residential solar will increase by 8%. 

There is a cumulative total of 153 gigawatts direct current (GWdc) of solar capacity installed through the first half of 2023, and we expect this figure to grow to 375 GWdc by the end of 2028. Even with the current challenges facing this market, the solar industry is looking at many years of sustained, strong growth. 

3.    Market segment outlooks

3.1.    Residential PV  

• 1,773 MW_dc installed in Q2 2023
• Up 30% from Q2 2022
• Up 6% from Q1 2023 
   

In Q2 2023, the residential solar market grew 30% year-over-year and set a national quarterly record. After a decline in newly installed capacity in the first quarter, the segment bounced back in Q2. While more than 10 states set quarterly records, growth has not been as strong in traditionally larger markets with lower retail rates like Arizona and Texas, where high interest rates are creating headwinds. However, installation backlogs created under California NEM 2.0, significant retail rate increases in many states, and reduced equipment pricing are offsetting some of these impacts.

Despite installation growth, the first half of 2023 has been unique and challenging for the residential segment. Some installers report that it has been the slowest ramp-up to the solar sales season since 2019. This demand softening continues to reflect customer expectations of a recession and a lower urgency to go solar due to the ITC extension, coupled with rising interest rates and inflation. Many installers are re-evaluating sales strategies and product offerings as these market dynamics challenge business-as-usual models.

Wood Mackenzie forecasts 9% growth for residential solar in 2023, up slightly from last quarter’s forecast, driven by growth in states with retail rate inflation. Immense sales made under California NEM 2.0 contributed to a quarterly record of 607 MW_dc of statewide capacity and will continue to fuel a surge of installations in the short term. The eventual drop in California installations will lead this year’s volumes to be similar to 2022 and a 38% contraction for the state in 2024, leading to a 4% national market contraction. For all states except California, we expect 12% growth in 2024 as the industry benefits more from the IRA. Additionally, more third-party owned projects are expected to qualify for the ITC adders over the next few years. These factors drive our expectations for 8% average annual national growth between 2025-2028. 

3.2.    Commercial PV 

• 345 MW_dc installed in Q2 2023
• Down 9% from Q2 2022
• Down 20% from Q1 2023 

Note on market segmentation: Commercial solar encompasses distributed solar projects with commercial, industrial, agricultural, school, government or nonprofit offtakers, including remotely net-metered projects. This excludes community solar (covered in the following section).

Commercial solar installations declined quarter-over-quarter, and we continue to see stagnation or declines in major market pipelines. That being said, many markets still have healthy project pipelines, driving our expectations for 11% growth in 2023. Although second quarter capacity decreased from the first quarter, the number of projects increased by 7%. Along with supply chain constraints easing up, increasing energy prices are sustaining activity in major state markets such as New Jersey and New York, and driving new development in other emerging states like Georgia and Ohio.

Developers across the nation are encountering a wide variety of difficulties. At the forefront are interconnection and queue congestion, caused by slow completion of studies and issues with receiving prompt approval for other interconnection-related applications. Prevailing wage and apprenticeship requirements for projects larger than 1 MW_ac as well as a lack of formal incentive programs in emerging markets like the Southeast are also challenging the industry. Developers are hesitating to include certain tax credit adders in their financial models until Treasury provides additional clarity, taking their risk appetite into consideration and ensuring capital returns without these adders. Overall, interconnection delays are impacting the segment most significantly.

Changes to our broad commercial solar outlook have been minimal this quarter. We still expect more than12 GW_dc of installations and 8% average growth over the next five years. Near-term growth is boosted by California’s shift to net billing, creating demand pull-in through 2024. In the medium term, installations are expected to decrease as projects exempt from wage and apprenticeship requirements have mostly come online and California’s pipeline of NEM 2.0 projects has been installed. Long-term growth will gradually increase due to the IRA and higher electricity rates. We expect 1,731 MW_dc to come online nationally this year and to grow to 2,500 MW_dc by 2028. 

3.3.    Community solar PV

• 226 MW_dc installed in Q2 2023
• Down 16% from Q2 2022
• Down 1% from Q1 2023 

Note on market segmentation: Community solar projects are part of formal programs where multiple residential and non-residential customers can subscribe to the power produced by a local solar project and receive credits on their utility bills.

Community solar installations declined 16% year-over-year in Q2 2023, resulting in the lowest first half of the year for the segment since 2020. Massachusetts recorded its lowest quarter since 2019 with 10.3 MW_dc of new community solar interconnected, and New Jersey did not record any new community solar installations. Installed capacity in New York increased 15% year-over-year, and the state made up 52% of total national capacity for the first half of the year. 

After years of rapid expansion, the community solar segment shows clear signs of growing pains. On one hand, well-established markets have seen sharp declines in installed capacity driven by market saturation, persistent interconnection delays, and the slow process of program reform. On the other hand, several states issued beneficial policy announcements this year. These include the expansion of programs in New Jersey and Maryland, as well as significant program reform in Minnesota. As a result, while we expect national volumes to decline 6% year-over-year in 2023, momentum will pick up again in 2024. The segment will grow at an annual average rate of 11% from 2024-2028 as installed capacity catches up to an improved policy environment and revived developer interest.

Community solar developers are also navigating how they will take advantage of new IRA incentives. As in other segments, qualifying for any of the three available ITC adders will prove more difficult than originally expected due to complex requirements. Community solar developers will most likely target the low-income communities adder – applications for which will open this Fall. We are also closely monitoring the impact of the $27 billion Greenhouse Gas Reduction Fund, particularly the EPA’s $7 billion Solar for All funding opportunity. Several states announced requests for funding throughout this quarter, but funding will not be awarded until 2024. Awards will support the establishment and expansion of community solar programs throughout the country with an emphasis on supporting low-income communities.

3.4.    Utility PV 
 

• 3.3 GW_dc installed in Q2 2023
• 170 GW_dc of utility-scale solar will be added between 2023 and 2028

Utility-scale solar rebounded this quarter with the strongest first quarter on record. The sector achieved 66% year-over-year growth and exceeded the previous record Q1 by more than 170 MW_dc. Over 3 GW_dc of new contracts were signed in Q1, maintaining the total utility-scale solar pipeline at 90 GW_dc.  
A strong Q4 2022 and Q1 2023 indicates that developers are recovering from supply chain hurdles. Developers are receiving inventory, as more than 40% of all electronics shipments from Malaysia, Thailand, and Vietnam have been released from UFLPA detention (though not all electronics shipments are modules). Although prices have stabilized, they remain high compared to Q1 2022. Additionally, President Biden’s veto of legislation that would have repealed the two-year pause on new solar tariffs ensures that there is time to source alternate supply if new duties come into effect in June 2024.

Though inventory levels are improving, the utility-scale industry still faces supply chain constraints. Despite increasing shipment releases indicating a more stabilized UFLPA situation, there is no indication that products containing Chinese non-Xinjiang polysilicon are entering the US. Additionally, other factors such as growing NIMBYism, high interconnection times and costs, and low labor availability will continue to challenge the utility-scale solar industry.

Despite these headwinds, Wood Mackenzie forecasts that total new utility-scale installations will reach 172 GWdc between 2023-2028. A strong first quarter resulted in a slight uplift to our 2023 outlook to more than 20 GW_dc. While the market will start to feel the impacts of the IRA in 2024 and 2025, we decreased the latter years of the forecast by 4% due to changing assumptions on interconnection queue delays and the cost competitiveness of solar against other technologies.

4.    US solar PV forecasts

5.    National solar PV system pricing

Note: Wood Mackenzie has updated the reporting methodology for modeled prices to be consistent with US solar system pricing reports. Therefore, figures shown below may not match those published in earlier editions of the US Solar Market Insight report.

Wood Mackenzie employs a bottom-up modeling methodology to capture, track and report national average PV system pricing by segment for systems installed each quarter. The methodology is based on the tracked wholesale pricing of major solar components and data collected from industry interviews. Wood Mackenzie’s Supply Chain data and models are leveraged to enhance and bolster our pricing outlooks. Wood Mackenzie assumes all product is procured and delivered in the same year as the installation except modules for the utility segment, which are procured one year prior to commercial operation. 

National PV system prices were higher in Q2 2023 compared to Q2 2022. Despite easing supply chain constraints and logistical issues, costs have remained high in 2023 as labor and balance of system costs have increased. Components such as modules and inverters are up 5% to 20% year-over-year for the commercial and utility segments, and labor costs are up by 5% in 2023 due to rising inflation. Last year’s supply chain constraints are having a delayed impact on 2023 utility-scale module pricing due to the one-year lag in module procurement for the utility segment.

The average residential PV system price is up 2% compared to Q2 2022 and the commercial PV system price is up 1% during the same time. The average utility-scale fixed-tilt and single-axis tracker system prices are up 5% and 3%, respectively, in Q2 2023 compared to Q2 2022.

About the Report

U.S. solar market insight^® is a quarterly publication of Wood Mackenzie and the Solar Energy Industries Association (SEIA)®. Each quarter, we collect granular data on the U.S. solar market from nearly 200 utilities, state agencies, installers and manufacturers. This data provides the backbone of this U.S. Solar Market Insight® report, in which we identify and analyze trends in U.S. solar demand, manufacturing and pricing by state and market segment over the next five to ten years. All forecasts are from Wood Mackenzie, Limited; SEIA does not predict future pricing, bid terms, costs, deployment or supply. The report includes all 50 states and Washington, D.C. National totals reported also include Puerto Rico and other U.S. territories. Detailed data and forecasts for 50 states and Washington, D.C. are contained within the full version of the report.

References and Contact

• References, data, charts and analysis from this executive summary should be attributed to “Wood Mackenzie/SEIA U.S. solar market insight^®.”
• Media inquiries should be directed to Wood Mackenzie’s PR team ([email protected]) and Morgan Lyons ([email protected]) at SEIA.
• All figures are sourced from Wood Mackenzie. For more detail on methodology and sources, click here.

About the Authors

Wood Mackenzie Power & Renewables | U.S. Research Team

Michelle Davis, Director, Head of Global Solar (lead author) 
Sylvia Leyba Martinez, Principal Analyst 
Zoe Gaston, Principal Analyst 
Sagar Chopra, Senior Analyst 
Caitlin Connelly, Research Analyst 
Matt Issokson, Research Analyst 
Elissa Pierce, Research Associate 
Amanda Colombo, Research Associate

Solar Energy Industries Association | SEIA

Shawn Rumery, Senior Director of Research 
Colin Silver, Senior Vice President of Content & Strategy
Tyler Thompson, Research Analyst 
Justin Baca, Vice President of Markets & Research

Note on U.S. solar market insight report title: The report title is based on the quarter in which the report is released, not the most recent quarter of installation figures.

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