US Adds 11.8 GW of Solar in Q1 2024, Led by Florida and Texas

The U.S. solar industry is expected to install about 40 GWdc of capacity in 2024

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The U.S. solar industry installed 11.8 GWdc of capacity in the first quarter (Q1) of 2024, marking the second-best quarter for the industry, only behind the last quarter of 2023, according to the U.S. Solar Market Insight Q2 2024 report by Wood Mackenzie and Solar Energy Industries Association (SEIA).

Solar accounted for 75% of all new electricity-generating capacity added to the U.S. grid in Q1. Florida installed the most solar at 2.7 GWdc, with Texas as a close second with 2.6 GWdc. For both states, the vast majority of these installations were utility-scale.

US capacity additions

Utility-scale solar

The utility-scale solar segment had a record-breaking first quarter in 2024, adding 9.8 GWdc, a 135% YoY increase. This performance was driven by a backlog of projects initially scheduled to come online in 2023 and the temporary waiver of tariffs on imported Southeast Asian crystalline silicon modules.

Utility-scale solar is expected to maintain strong demand, driven by utility procurements, corporate clean energy goals, and state-mandated targets. However, the buildout of utility-scale solar projects is expected to face challenges due to labor availability, high-voltage equipment constraints, and permitting and interconnection issues, according to the report.

Despite these challenges, 184 GWdc of new utility-scale solar will come online between 2024 and 2029, with an average annual buildout of 30 GWdc.

Residential solar

In Q1 2024, the residential solar market added 1.3 GWdc, a 25% year-over-year (YoY) decrease and an 18% reduction from the previous quarter. This decline marks the lowest quarterly installation volume since Q1 2022.

The residential segment faces significant challenges, such as high interest rates and California’s transition to net billing. The persistent high financing costs have adversely affected installation volumes, particularly in states like Texas, where top installers reported over 60% reductions compared to Q1 2023.

Many installers are adopting creative strategies to maintain revenue, such as participating in solar co-op programs and diversifying their offerings to include system servicing, storage retrofits, and roof replacements.

Despite these challenges, some states are expected to grow this year due to lower module prices, a rapidly growing third-party ownership segment, and significant retail rate increases.

However, the overall outlook for the residential solar market in 2024 remains subdued, with an anticipated 14% YoY contraction.

Commercial Solar

The commercial solar segment added 434 MWdc in Q1 2024, reflecting a 1% YoY decline and a 38% drop from the previous quarter. Solid installation volumes in mature markets such as California, Illinois, and New York largely support the stability of the commercial solar market.

California installed 152 MWdc of commercial solar capacity during the quarter, driven by projects submitted under NEM 2.0. Thanks to the Illinois Shines program, Illinois saw a significant 212% increase YoY, with 61 MWdc installed.

New York also had a strong quarter of installations due to its efficient interconnection processes.

Despite these positive trends, developers face challenges with interconnection timelines and high development costs.

The commercial solar market is expected to grow by 14% in 2024, driven by the buildout of NEM 2.0 projects in California and the Illinois Shines program.

However, national installations are expected to decline in 2025 due to the completion of the NEM 2.0 pipeline and increasing market saturation.

Community solar

Community solar installations remained relatively flat YoY in Q1 2024, with 279 MWdc of new capacity, but a 32% decrease from Q4 2023.

New York led the segment with a 17% YoY growth, accounting for 46% of the national installed capacity. States like Illinois, Colorado, and Virginia also contributed to the national installations.

However, the overall growth of the community solar market is expected to be modest, with a projected 4% increase in 2024. The recent decision by the California Public Service Commission to reject the widely backed Net Value Billing Tariff proposal has significantly impacted the long-term growth prospects of the community solar market.

As a result, the five-year outlook for community solar in California has been drastically reduced. The national community solar market is expected to grow at an average rate of 5% annually through 2026 and then contract by 11% on average through 2029.

U.S. solar forecasts

The U.S. solar industry is expected to install about 40 GWdc of capacity in 2024, similar to the record growth achieved in 2023. This represents an annual installation volume double the size of just two years ago, according to the report.

US forecast

However, growth patterns vary across different segments. Residential solar is expected to shrink by 14% YoY, driven by a 40% decline in California installations due to the net billing tariff.

Commercial solar is expected to grow by 14%, primarily driven by growth in California and Illinois.

Community solar is expected to grow by 4% in 2024 as some states, such as Illinois and Virginia, are seeing growth.

Due to various constraints, utility-scale solar growth is expected to remain flat in 2024 and 2025. The pipeline is strong, but a lack of labor availability, high voltage equipment constraints, and continued trade policy uncertainty suppresses buildout.

From 2026-2029, annual growth will average single digits as the various segments balance each other out. In this timeframe, residential solar will grow by 9%, and commercial solar will grow by 11% on average. By contrast, community solar will shrink by 8%, and utility-scale solar will only increase by 3% on average.

Manufacturing

Domestic module manufacturing capacity increased to 26.6 GW in Q1 2024 compared to 15.6 GW in Q4 2023. Once this capacity fully ramps up, it will be sufficient to supply about 70% of domestic demand, according to the report.

Solar pricing

In Q1 2024, residential and commercial solar system costs decreased by 4% and 12% YoY due to a decline in module prices. Residential system pricing fell due to lower module prices and reduced system costs. Commercial system pricing also saw a significant reduction due to similar factors.

However, utility-scale system costs increased by 5% for fixed-tilt systems and 4% for single-axis tracking systems, primarily due to higher transformer costs and rising labor and engineering costs.

The transformer supply shortages and increased costs contributed significantly to the rise in utility-scale solar system pricing, according to the report.

The solar market in the U.S. installed 32.4 GW capacity in 2023, a 51% YoY increase.

Recently, the U.S. proposed new incentives under the Inflation Reduction Act by offering tax credits for electricity produced with low or zero greenhouse gas emissions, aligning financial assistance with environmental objectives.

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