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Solar industry expected to keep setting records until 2024 tax credit step-down

Highlights

324 GW of solar additions expected over next decade

Utility solar additions jumped 30% over 2016 levels

Additions of 80 GW/year needed to reach Biden goal

The solar industry installed a record 19.2 GW in 2020, leading all technologies in new electric capacity additions, and is on track to more than quadruple in size during the next decade, officials said March 23 during a Solar Energy Industries Association webinar.

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Wood Mackenzie expects a cumulative 324 GW of solar capacity additions over the next decade, more than three times greater than what has been installed through 2020, according to the quarterly SEIA/Wood Mackenzie Power & Renewables US Solar Market Insight report. This growth will be spread across all market segments as distributed solar customers, utilities, states and corporations push to decarbonize the grid.

"Our current trajectory is in the ballpark, but it's not there," Shawn Rumery, SEIA senior director of research, said about reaching President Biden's goal of 100% clean energy by 2030. "More work is needed."

Additions of 80 GW a year are needed to reach the 2030 goal, Rumery said.

"The forecast is pretty bullish," Rumery said, adding that solar is expected to have record years through 2023 building up to the scheduled investment tax credit step-down.

2020 additions

Solar installations jumped 43% year on year in 2020 to account for 43% of all new electricity generating capacity added for the year, according to the report. Solar reached a record of more than 8 GW of solar PV in Q4 2020, up 32% year on year.

"The industry worked through massive backlogs of projects awaiting interconnection, while utility-scale projects rushed to meet the previously anticipated decline in the investment tax credit rate," according to the report.

The two-year extension of the ITC in the final days of 2020 led to a 17% increase in deployment in SEIA's 2021-2025 forecast, according to the report.

A historic 6.3 GW of utility-scale projects were installed in Q4 2020, bringing the annual total just shy of 14 GW, according to the report.

"Q4 really carried the bulk of the year," Rumery said.

The coronavirus pandemic ended up having a minimal impact on the utility solar market, said Colin Smith, Wood Mackenzie US utility PV senior analyst. Utility-scale solar added 14 GW in 2020, up 30% from 2016, the next largest growth year, and is expected to add 2 GW a quarter going forward.

"It's really being driven by a number of policy factors," Smith said, adding that solar is competitive in nearly every region, with many states pivoting to zero-carbon targets or 100% renewable goals.

In addition, utilities themselves are setting carbon-emission targets.

"We're now seeing the majority of utilities in those states [without a renewable portfolio standard] wanting to move toward renewables," Smith said, adding that major corporations are also pushing this trend. "The demand in itself is putting a great demand toward solar."

Residential vs. non-residential

Despite reaching a record 3.1 GW in 2020, residential installations were significantly impacted by the pandemic in the first half of 2020, coming in lower than the 18% annual growth seen in 2019, according to the report. Likewise, non-residential installations declined 4% from 2019, with 2 GW installed.

"The pandemic impacted this segment through delayed project interconnections and prolonged development timelines, but we expected a down year even before the pandemic as this segment has faced obstacles to sustained growth for many years," according to the report.

However, Q4 2020 is the highest quarter on record for residential solar growth, said Brian White, a Wood Mackenzie solar analyst.

"Q1 2021 is looking just as big," White said of 2020 projects spilling over, with the ITC extension bolstering growth.

The biggest states for residential solar are Arizona, Hawaii and California, while the biggest states for non-residential solar are New York and Massachusetts, Wood Mackenzie analysts said. In New York, there are limited remaining project sites, so growth is expected to slow, while Massachusetts has more of an up and down market in general, said Michelle Davis, a Wood Mackenzie solar senior analyst.