Near-term solar installations are set to explode in the US
Head of Global Solar
The US solar industry’s growth trajectory is incredibly strong. Within just a few short years, the industry will be regularly installing 40-50 gigawatts (GW) of capacity according to our latest outlooks. This is quite the feat when you consider the most the industry has installed to date was 25 GW in 2021. Over the next decade, annual average growth will be 11%. And the installed base of projects will multiply nearly five times – from 150 GW installed today to nearly 700 GW installed by 2033.
This growth represents an enormous amount of capital investment. Today’s solar market represents about US$45 billion in capital expenditures annually on solar projects. By 2033, that number will almost double to US$72 billion per year.
As the US solar industry grows, it will evolve to make up the largest share of generating capacity in the country. According to our analysis, utility-scale solar will make up 40% of generating capacity in the US by 2050 – and that doesn’t even include any distributed solar serving electricity load behind-the-meter.
Enormous growth comes with challenges
But high levels of growth also present challenges. The solar industry has been through its fair share of challenges (hence, the “solar coaster”), but these will not abate as the industry grows larger.
The time it takes for a project to interconnect to the grid from the date it enters the interconnection queue has expanded to four years.
The most pressing challenge today is interconnecting a project to the transmission system. The time it takes for a project to interconnect to the grid from the date it enters the interconnection queue has expanded to four years. To compare, this was roughly two years a decade ago. Transmission capacity has become more limited as more projects have been built, and very few new transmission lines have been built in the last decade.
There are also policy challenges. Distributed solar projects typically face challenges to net energy metering (that is, retail rate compensation for solar production) as market penetration increases. Most states with a lot of distributed solar (think Hawaii, California, Arizona and Nevada) have shifted away from net energy metering, changing the way that distributed solar gets compensated.
But challenges present new opportunities for investment in solar and storage
Given these challenges, there are numerous opportunities for investment in the solar projects of tomorrow, that look different than they do today.
The best opportunity, and perhaps the most obvious, is to pair solar projects with storage much more frequently than is done today. This will help to limit low-value midday solar exports which are already causing havoc on highly penetrated grids and increasing curtailment (aka waste).
Roughly half of utility-scale solar projects in the pipeline are paired with battery storage – this is good, but it could be higher. And for distributed solar, the numbers are much lower – in most markets, less than 10% of distributed solar projects are installed with batteries. This presents an opportunity to build solar projects that have a much greater value for the grid.
There are many other areas of opportunity as well – grid-forming inverters, greater penetration of home and building energy management systems, cost-effective revenue-grade meters that enable wholesale market participation – the list goes on! And we’re going to need all of it as we pursue the energy transition.
Want to get closer to the detail?
Join us at the Solar and Energy Storage Summit:
The solar industry is one of the most critical for the US as it moves forward with the energy transition. At the Solar & Energy Storage Summit 2023 I’ll be presenting Wood Mackenzie’s most recent growth forecast, the challenges that growth presents and the opportunities that exist for the broader industry. If you’d like to join us, register here.
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