Facing economic and political headwinds, the U.S. solar PV industry is expected to slow in both the residential and utility-scale segments, dimming the industry’s prospects of leading the country’s power generation in the coming years. two years.
In its latest Short-Term Energy Outlook report, the U.S. Energy Information Administration (EIA) forecast that solar photovoltaics will lead the country’s electricity generation growth over the next two years.
The agency made its estimate based on the planned addition of 36 gigawatts (GW) of new solar photovoltaic capacity in 2024 and 43 GW in 2025.
However, U.S. solar growth is expected to slow this year amid economic challenges facing both residential solar installations and utility-scale projects.
California is the largest solar market in the United States. In the first three quarters of 2023, California led the country with 3,216 megawatts (MW) of new solar photovoltaic energy installed.
But over the past week, solar PV developers in California have revealed financial difficulties, and approximately two-thirds of residential solar installers face challenges maintaining their operations.
The California Solar and Storage Association (CALSSA) found that 63 percent of its approximately 400 members reported significant cash flow problems, said CALSSA Executive Director Bernadette Del Chiaro. The group was worried about the next two months because “many more consequences could come.”
The groups’ concern echoed a report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie last month, which said high interest rates across the United States and changes to state regulations in California would lead to a decline in 2024.
Across the country, residential solar companies have struggled with declining sales as higher interest rates have slowed the market.
Borrowing has become more expensive since 2022 as the Federal Reserve tries to calm inflation by raising rates. This affects all loans, from mortgages to leasing solar panels. Since installations can cost tens of thousands of dollars, higher prices put the brakes on some customers’ investment plans.
California installers face increased challenges due to a change in the “net energy metering” policy. This adjustment has reduced the profits of homeowners who sell excess electricity generated by their rooftop solar systems to the grid.
It means a 75 percent drop in compensation homeowners receive, according to the SEIA report, adding that from “net metering” to “net billing,” the policy change will depress the No. 1 solar state. on roofs of the country.
As a result, Ohm Analytics, a research firm that monitors the solar market, has seen a decline in sales ranging from 67 to 85 percent for private residential installers in California since the policy change went into effect in April. of 2023.
For the utility sector, higher financing costs, transformer shortages and interconnection bottlenecks have led to the lowest level of new contracts signed in a quarter since 2018, according to the SEIA report.
To boost American manufacturing of clean energy technology, such as solar panels, the government has maintained high tariffs on imported solar products. As a result, the United States now experiences some of the highest prices globally for solar modules and utility-scale solar power.
In response to the tariffs, Asian manufacturers have established a different and expensive supply chain. Rather than making domestic companies more competitive, U.S. solar tariffs have simply increased costs for U.S. developers and consumers.