US solar market sets Q1 record but pandemic mutes Q2 outlook

Note: The Q2 2020 U.S. Solar Market Insight covers installation volumes in Q1 2020 and forward-looking trends. Given the timing of the coronavirus outbreak in the United States, only a handful of states had begun to implement stay-at-home orders by the end of Q1, meaning that the impacts of coronavirus on Q1 2020 installations are marginal and are expected to be seen primarily in Q2. The forecasts for this report now account for the coronavirus, but they are subject to uncertainty based on the unprecedented health, social and economic conditions in the United States.

WASHINGTON, D.C. and HOUSTON, TX – The U.S. solar market installed 3.6 gigawatts (GW) of new solar photovoltaic (PV) capacity in Q1 2020, representing its largest first quarter ever and 40% of all new electric generating capacity additions in the United States.

According to the U.S. Solar Market Insight Q2 2020 report, released today by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, the coronavirus pandemic is having a significant impact on the U.S. solar industry. Construction has been delayed, customer demand has dropped and access to financing for projects of all sizes has been challenged. 

“The solar industry has certainly been impacted by the pandemic, resulting in uncertainty for businesses and 65,000 Americans out of a job, per most recent SEIA survey40,” said Abigail Ross Hopper, SEIA’s president and CEO. “Our industry remains one of the fastest-growing industries in the country, and with simple policy action now, we are ready to lead our economic recovery and provide new hope for out of work Americans in the second half of this year.”

Forecasts show that in 2020 the residential and non-residential markets will see 25% and 38% decreases in year-over-year installation volumes, respectively, as the segments face challenges posed by work stoppages, permitting delays and drops in consumer demand. Distributed markets will see a combined 32% less solar installed in 2020 than forecast before the pandemic.

“Despite a very strong Q1, distributed solar will be the most immediately impacted by the coronavirus pandemic in 2020,” said Austin Perea, senior research analyst and lead author of the report. “State-level quarantine orders have severely hampered sales, permitting, and construction of projects in the near-term, while an expected decline in consumer spending and sentiment will also dampen the outlook for the remainder of the year as the recession takes hold.”

Overall, however, Wood Mackenzie forecasts 33% growth in 2020, owing entirely to the strong performance of the utility-scale segment, which is expected to account for more than 14 GW of new installations this year.

Record utility-scale procurement totals in 2019 and Q1 2020 were the result of a growing project pipeline which positioned the segment for a record year, even as large-scale projects face some construction delays and challenges in financing and developing early-stage projects.

Ravi Manghani, Head of Solar at Wood Mackenzie, said: ““While the utility segment shows promise with sustained levels of procurement so far, lower energy demand due to productivity loss and wholesale electricity market price drops will add to the uncertainty.

“All in all, the pandemic and the ensuing economic slowdown will weigh heavily on the solar industry in the coming months if the economy is slow to recover and financing dries up.”

Beyond 2020, all market segments face considerable uncertainty caused by the pandemic, resulting in a downward revision of 3.6 GW to the 2020 – 2025 forecasts relative to last quarter. Growth will be contingent on economies reopening, recovery of consumer and business demand, financial market stability and a resumption of growth in electricity demand.  

Key findings from the report:

• The first quarter of the year was largely unaffected by the pandemic, but impacts are expected to appear beginning in the second quarter.
• In Q1 2020, solar accounted for nearly 40% of all new electricity generating capacity added in the United States, the largest annual share in the industry’s history.
• In Q1 2020, the U.S. solar market installed 3.6 GWdc of solar PV, the largest Q1 on record by nearly a gigawatt.
• The impact of coronavirus has been felt most acutely in distributed solar, which is expected to see 31% fewer installations than 2019 as installers face work stoppages and sales strategy transitions and the impending recession reduces consumer and business appetite for large investments.
• Wood Mackenzie forecasts 33% annual growth in 2020, with nearly 18 GWdc of installations expected. Due to the coronavirus pandemic, there is now a 9% reduction (1.7 GW) to the previous market outlook, where nearly 20 GW of solar was forecast for 2020.
• In total, the U.S. solar market will install 113 GW of solar from 2020-2025, a loss of 3.6 GW relative to our 2019 Year-in-Review report.

Learn more about the report here.