Solar Energy Leads US Power Generation With No Signs Of Slowing Down

US Solar Market Insight 2024 Year In Review was published by Wood Mackenzie and the Solar Energy Industries Association (SEIA) on March 11 and includes data about the US solar energy market from nearly 200 utilities, state agencies, installers, and manufacturers.

The report found that solar accounted for a whopping 66% of all new electricity-generating capacity added to the US grid in 2024. 50 GW of direct current (DC) solar capacity was added to the grid in 2024, a 21% increase compared to 2023.

 

 

The solar industry is thriving despite shifting politics, governmental pressures on renewable energy, and high interest rates. Domestic module manufacturing capacity grew 190% year-over-year from 14.5 GW to 42.1 GW and then surpassed 50 GW earlier this year. 17 GW of capacity came from Texas and Georgia. Texas was the top-ranked state for new solar capacity installed for the second consecutive year.

The bulk of capacity additions came from the utility-scale segment, which installed a record 41.4 GW, a 33% increase from 2023. 16 GW were installed in the fourth quarter of 2024, likely as developers raced to secure incentives. Texas contributed over a quarter of the nation’s installed capacity.

The commercial segment installed 2.12 GW DC, which was an annual record with 8% year-over-year growth. California, Illinois, New York, and Maine all had strong deployments.

Despite excellent results from commercial and utility-scale solar, residential solar continues to show significant weakness, likely impacted by high interest rates, a weak housing market, and a downturn in home improvement spending. The report indicated that the residential segment installed just 4.71 GW of DC solar in 2024, a 32% decline from 2023 and the lowest year of installed capacity since 2021. The report said that company bankruptcies, sustained high interest rates, and the election impacted the slowdown. California, a haven for residential solar, was particularly weak with a 45% year-over-year decline.

Even with a decline in the residential market, the community solar industry had surprising success, with 1.75 GW DC of installed capacity, the largest ever recorded, and a 35% increase from 2023. Roughly half, or 861 MW of installations came out of New York thanks to interconnection condition improvements, marking a 66% increase compared to 2023.

 

10-Year Forecast – Base Case

Looking ahead, Wood Mackenzie and SEIA forecast cumulative US solar capacity to more than triple from 236 GW installed at year-end 2024 to 739 GW installed by 2035. The forecast is based on average annual capacity additions of more than 45 GW.

 

The report also included two alternative scenarios based on different outcomes related to tax credit and tax equity availability, supply chain dynamics, interconnection, retail rate trends, federal and state policy, and the trajectory of interest rates.

 

10-Year Forecast – High Case

The high case assumes that tax credits and policy under the Inflation Reduction Act remain unchanged. It also assumed that Investment Tax Credit bonus adders, such as the energy community bonus, domestic content bonus, and low-income community bonus credits, remain at full value.

Additionally, the high case expects easier financing for renewable energy projects. Interest rates are forecasted to reach the Federal Reserve target range of 2.75% to 3% by the end of 2027, which would make project financing less expensive, lead to higher availability of solar products, and a less limiting supply chain.

The high case also assumes that transmission projects are fast-tacked, stare-level collaboration promotes the construction of large interregional projects, and that grid operators implement reforms that address queue backlogs faster than anticipated so that approvals are expedited.

All told, the high case results in a 24% increase in total solar installations through 2034 relative to the base case, or 118 GW of additional installation. However, the bulk of additional installations are expected to come in the early 2030s, and the next five years are only expected to average 13% growth. Whereas annual capacity increases are expected to reach 30% per year by the end of the forecast range.

 

10-Year Forecast – Low Case

The low case essentially assumes that everything that was going well in the high case doesn’t go as planned. Tax credits are phased out early, the transferability market declines, supply chains are constrained, permitting is an ongoing issue, and that interest rates don’t come down as hoped. The low case also assumes that the Federal Energy Regulatory Commission (FERC) rejects proposed interconnection queue reforms and doesn’t address backlogs. In other words, lead times that are already challenging get even more extended. Putting added pressure on lead times is the assumption that solar product supply is limited because imports fall, domestic production is lower due to a lack of incentives, and the supply chain operates poorly.

The low case pencils in a 25% decrease in total solar installations through 2035 compared to the base case, which would be a reduction of 127 GW. Similar to the high case, the annual decreases are smaller in the near term but result in more than 40% lower capacity in some of the latter years of the outlook.

Add it all up, and the low case assumes that installed solar capacity goes from 236 GW from year-end 2024 to 612 GW by 2035, the base case assumes 739 GW by 2035, and the high case forecasts 857 GW. So even during challenging conditions, solar capacity is still expected to increase substantially over the next 10 years.

 

Looking Ahead

Data and predictions from the US Solar Market Insight 2024 Year In Review provide an upbeat outlook on the future of the solar industry. However, the report is also a cautionary tale on the importance of interest rates, policy and regulations, supply chains, and permitting. If those factors do more to hurt than help the industry, it could stunt growth in the long run. Even the high case forecasts fairly slow growth over the next five years followed by a ramp up after 2030, which reflects challenging economic conditions and political uncertainty.

 

About Solar Market Insights

US Solar Market Insight is a quarterly publication of Wood Mackenzie and SEIA. Each quarter, the organizations collect granular data on the US solar market from nearly 200 utilities, state agencies, installers, and manufacturers. This data provides the backbone of this US Solar Market Insight report, in which the organizations identify and analyze trends in US solar demand, manufacturing, and pricing by state and market segment over the next five to 10 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, Washington, DC, and Puerto Rico.