Based on the U.S. Solar Market Insight report, released by Wood Mackenzie and the Solar Energy Industries Association (SEIA), the United States solar market managed to exceed the 100 gigawatts (GWdc) of installed electric capacity, by obtaining a double electric generating capacity size made in the past 3.5 years. Furthermore, it was reported that in the first quarter of 2021, the U.S. solar market installed more than 5 GWdc of solar capacity, which has a large increase of 46% over the first quarter of 2020 and is recognized as the largest Q1 on record.
U.S. Solar Energy Market in 2021
Despite the global issues and challenges on public health, supply chains, and financial markets that every country was facing, the U.S. solar market still managed to set another record year.
The solar energy market in the U.S is segmented into three main sectors: Residential PV, Non-residential PV, and Utility PV.
Residential PV
In 2021, the residential solar market industry installers managed to convert high consumer demand into sales and installations. According to the solar installers, the supply chains issues made a huge impact on every solar project timeline and caused higher solar component/equipment prices. These supply chains issues also affected the overall growth of the solar market as well as persistent permitting and labour constraints. Based on Wood Mackenzie’s forecasts last year, there would be a 12% growth in the residential segment this year, assuming bottlenecks do not dramatically worsen.
In Q3 of 2021, the residential solar industry installed 1,073 MWdc, setting a new record for quarterly installations and exceeding 1 GWdc installed in a quarter for the first time in history. There are also more than 130,000 systems made in a single quarter and one out of every 600 US homeowners was installing solar power systems every quarter. In addition, Wood Mackenzie estimated that there will be an additional 5.8 GWdc of residential capacity between 2022-2026. The market would grow at an average annual rate of 11.5% during this time.
Moreover, California with 373 MWdc remains the leading state that obtained high record-breaking quarters in the residential market segment while Florida and Texas are in the second and third spots.
(source: Wood Mackenzie)
Commercial PV
In quarter 3 of 2021, the commercial PV solar industry managed to install 327 MWdc, which is less than the Q1 and Q2. The Q2 results reflected that some solar markets had experienced delays in their solar projects due to supply chains constraints, pushing capacity into 2022. Consequently, quarter 3 results indicated that these project delays appeared more widespread than what was forecasted. Although, the supply chain issues led to solar equipment delays and made some changes in orders resulting in redesigning of solar projects they expect that 2022 and 2023 will get higher solar market growth compared to 2021.
Additionally, the solar market outlook for Illinois and New Jersey made a big improvement, resulting in a better forecast to annual capacity in 2023 and 2024. Illinois also managed to pass the qualifications for Energy Transition Act which regained some critical programs for distributed solar. Meanwhile, it was depicted that many Transition Incentive projects are bound to increase their solar capacity in the next coming years. Specifically, there are more than 700 MWdc of applications submitted between June and September.
(source: Wood Mackenzie)
Community Solar
Unlike the residential and commercial PV market, the Community solar installations result in Q3 2021 drastically dropped by 21% quarter-over-quarter. Major solar markets for this segment continue to face delays from supply constraints, interconnection issues and components delivery. Fortunately, it still got a significant improvement over the years and remains on track and made a record-breaking year.
From the last quarter, Maine and Massachusetts’ forecasts have been adjusted downward. The completion dates for most transmission studies in Maine experienced a delay in several months. Whereas, ongoing cluster studies have shown potentially prohibitive upgrade costs for many solar projects in Massachusetts. These reductions are offset by increases in other markets, particularly in Illinois. The Illinois Energy Transition Act revives funding for the Adjustable Block Program, laying out a pathway for completing waitlisted projects. In summary, the solar outlook for the community segment has been increased by 2% since Q4.
(source: Wood Mackenzie)
Utility PV
Despite the challenges related to supply chains, and the high cost of solar equipment, the utility solar sector got its first largest capacity in the third quarter of 2021 by installing 3.8 GWdc. On its Q3, it managed to register and sign new contracts with 6.1 GWdc, pushing the pipeline to 81 GWdc. Moreover, there were solar projects under construction with 22.3 GWdc, and another 7.5 GWdc, which brought a total of 20.2 GWdc in 2021. It was the most significant growth that the industry made in a single year.
Before these numbers were gained, it surpassed many turmoils related to supply chain constraints and high solar equipment prices. It was believed that these current solar industry’ challenges are still expected to strike the solar market growth in 2022 and early 2023, which will add to the complexity that developers will experience in negotiating and procuring strategies for 2022. These challenges may result in a 7.5 GWdc or 33% decrease from the prior forecast. In addition, other constraints such as tax equity availability, labour shortages, interconnection limitations, and siting restrictions may also add up to the utility solar projects’ challenges for the next coming years.
Nevertheless, the utility PV sector will continue to grow in much bigger numbers under the current policy environment. An extension of the ITC with the option for solar projects to maximize the use of the Production Tax Credit (PTC) and elect direct payment for the ITC, would reflect additional upside to the forecast, increasing solar capacity by nearly 36 GWdc in 2026.
(source: Wood Mackenzie)
National Average PV System Pricing by Segment for Systems
Wood Mackenzie and SEIA conducted a bottom-up modelling methodology to determine, monitor, and report the national average PV system pricing by segment for solar systems installed every quarter. The methodology is based on the data collected from the solar industry reports and from the monitored wholesale pricing of major solar components. The graph reflects the report a weighted average of standard mono-PERC and high-efficiency modules for all solar market sectors. Wood Mackenzie assumed that all solar equipment is procured and delivered in the same year as the installation.
Based on the graph presented below, the PV system pricing increased both year-over-year and quarter-over-quarter across all solar market segments in the third quarter of 2021. The pricing for PV System increased quarter-over-quarter by 1.0% for residential, 3.2% for non-residential, 3.0% for utility fixed-tilt and 0.8% in the utility single-axis tracking markets.
The reason for the sudden increase in solar system prices is the high costs of solar equipment, components, raw material input as well as freight.
(source: Wood Mackenzie)
Solar Investment Tax Credit (ITC) in 2021
According to the forecast, the extension of the investment tax credit (ITC) is expected to raise the solar power capacity of the U.S by approximately 31% over the preceding five years. Despite the supply chain challenges and other trade action issues in the industry, the Build Back Better (BBB) Act managed to depict the significant and long-term growth of the country’s solar market. In November, the House version of the bill passed the extensions of ITC which also includes the modifications to some critical local tax credits concerning renewable energy.
In particular, the House bill version focused on extending the Investment Tax Credit (ITC) for the solar industry, allowing all sorts of solar power projects to obtain the Production Tax Credit (PTC), imposing a standalone storage ITC. It also permits solar project owners and developers to select direct payment of tax credits, which usually depends on whether a solar project is qualified to the domestic content requirements or not.
(source: Wood Mackenzie)
The proposed extension of ITC for the solar industry is expected to drive an additional 43.5 GWdc of solar capacity for the next coming five years. It was depicted also that the main contributor to this estimated solar capacity would come from utility-scale solar projects. Although utility-scale projects may suffer from various supply chain constraints over the discussed periods, an ITC extension would be a great help in continuing the competitiveness of the US solar energy market. It can also partially drive the increase of solar prices even after the negative impact of supply chain issues. Some utility or large-scale solar power projects with high capacity can also obtain the PTC, which offers a better incentive than the ITC.
Indeed, an ITC extension would be a principal stimulator for the solar market’s rapid growth, but deploying more solar power projects is still needed to prioritize by the government to achieve the decarbonization goals. According to Wood Mackenzie’s report before the BBB Act implementation, an ITC extension at 26% and the PTC at $15/MWh can improve the US electric sector reaching the estimated 55% carbon-free energy by the end of 2030.
Solar Panel Manufacturing in the US – Market Size 2012–2022
- $3.4bn Solar Panel Manufacturing in the US Market Size in 2022
- 10.9% Solar Panel Manufacturing in the US Market Size Growth in 2022
- 39.5% Solar Panel Manufacturing in the US Annualized Market Size Growth 2017–2022
When it comes to the manufacturing sector in the U.S, the market size of the Solar Panel Manufacturing industry made a rapid major increase compared to other sectors. Particularly, it has grown 39.5% per year on average between 2017 and 2022. With that number, the Solar Panel Manufacturing industry ranked at 170th by market size and the 634th largest in the US.
(source: https://www.ibisworld.com)
Solar Panel Manufacturing Industry in the U.S – Number of Business 2012-2022
- 20 – Solar Panel Manufacturing Businesses in the US in 2022
- 5.3% – Solar Panel Manufacturing in the US Business Growth in 2022
- 5.9% – Solar Panel Manufacturing in the US Annualized Business Growth 2017–2022
Both capital (plant, machinery and equipment) and labour play a vital role in the Solar Panel Manufacturing industry in the US. The highest costs for business in the Solar Panel Manufacturing industry as a percentage of revenue are Wages (15.4%), Purchases (36.9%), and Rent & Utilities (0.4%). Whereas, the states with the higher number of solar manufacturing businesses are California with 280 businesses, Texas with 83 businesses and Massachusetts with 44 businesses.
(source: https://www.ibisworld.com/)
Solar PV Installation Rankings by State (Q1-Q3 2021)
(source: Wood Mackenzie)
Key Takeaways
According to Wood Mackenzie the supply chain challenges and other logistics problems, including the high cost of components and months of delayed shipments, due to the recently dismissed AD/CVD petition, will affect the 2022 outlook for US solar growth, particularly, it will decrease by 33% or 7.4 GWdc. Whereas, the 2022 outlooks for the utility sector are lowered to 33%, 4% for commercial, and 0.3% for community solar segments. With that being said, although the installation growth will increase, there will be more challenges for the solar industry in 2022.
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 (WoodmacPR@woodmac.com) and Morgan Lyons (mlyons@seia.org) at SEIA.
- All figures are sourced from Wood Mackenzie. For more detail on methodology and sources, click here.
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