Solar’s Big 2019 Reviewed
U.S. Solar Market Insight Executive summary 2019 Year in review
March 2020 (Solar Energy Industries Association and Wood Mackenzie)
Please note this edition of Solar Market Insight does not account for impacts of the coronavirus outbreak.
At the time of publication, the full impacts of the coronavirus outbreak on the solar industry were still developing. Given the dynamic nature of the outbreak, it is too early to incorporate any changes into our outlooks with enough certainty. Wood Mackenzie’s solar team is tracking industry changes closely as they relate to solar equipment supply chains, component pricing and project development timelines, taking these impacts into consideration for future publications.
• Solar accounted for nearly 40% of all new electricity generating capacity added in the U.S. in 2019, the largest annual share in the industry’s history.
• In 2019, the U.S. solar market installed 13.3 GWdc of solar PV, a 23% increase from 2018.
• Cumulative operating photovoltaic capacity in the U.S. now exceeds 76 GWdc, up from just 1 GWdc at the end of 2009.
• The U.S. saw record-setting residential solar capacity added in 2019, with more than 2.8 GWdc installed.
• A total of 30.4 GWdc of new utility PV projects were announced in 2019, bringing the contracted utility PV pipeline to a record high of 48.1 GWdc.
• Non-residential PV declined slightly in 2019 with 2 GWdc installed, as policy shifts in states including California, Massachusetts and Minnesota continue to impact growth.
• Community solar continues to expand its geographic diversification, and it experienced a third consecutive year of more than 500 MW installed.
• Wood Mackenzie forecasts 47% annual growth in 2020, with nearly 20 GWdc of installations expected. In total, more than 9 GW were added to the five-year forecast since last quarter to account for new utility-scale procurement.
• Total installed U.S. PV capacity will more than double over the next five years, with annual installations reaching 20.4 GWdc in 2021 prior to the expiration of the federal Investment Tax Credit for residential systems and a drop in the commercial credit to 10% (under the current version of the law).
• By 2025, one in every three residential solar systems and one in every four nonresidential solar systems will be paired with energy storage.
A note about the impacts of the coronavirus outbreak: At the time of publication, the full impacts of the coronavirus outbreak on the solar industry were still developing. Given the dynamic nature of the outbreak, it is too early to incorporate any changes into our outlooks with enough certainty. Wood Mackenzie’s solar team is tracking industry changes closely as they relate to solar equipment supply chains, component pricing and project development timelines, taking these impacts into consideration for future publications.
2019 recap: In 2019, the U.S. solar market installed 13.3 gigawatts-direct current (GWdc) of solar photovoltaic (PV) capacity, a 23% increase year-over-year. Residential solar continues to see healthy installation volumes, growing 15% over 2018 levels – the highest annual growth rate since 2016. Conversely, total non-residential PV (which includes commercial, government, nonprofit and community solar) declined relative to 2018 due to policy transitions and persistent interconnection issues in key commercial markets. More than 8.4 GWdc of utility-scale PV capacity came online in 2019, up 37% from 2018, with new procurement growing the contracted pipeline to 48.1 GWdc. Across all market segments, solar PV accounted for nearly 40% of all new electricity-generating capacity additions in 2019 – its highest-ever share of new generating capacity.
Public-safety power shutoffs associated with California wildfires, new-build home solar and emerging market growth combine for a record-breaking close to the decade in residential solar
After years of steady double-digit-percentage growth through 2016, the U.S. residential sector contracted from 2016 to 2017 as national installers pulled back across critical geographies in California and the Northeast. On a national level, 2019 exhibited a return to pre-2016 growth for residential solar as the segment saw annual growth of 15% while achieving its highest installation volumes in history.
A crucial driver of growth for residential PV has been the public-safety power shutoff (PSPS) events in California. Beginning in H1 2019, these power shutoffs provided a key incentive for homeowners to purchase solar, increasingly paired with storage. With PSPS events leaving hundreds of thousands of utility customers without electricity, solar-plusstorage as a resiliency measure has catalyzed the residential solar market.
Meanwhile, California saw increased activity in the new-build home solar space as installers geared up for compliance with the recently enacted state mandate. These combined factors materialized into record-breaking installations in Q4 2019, making California the first U.S. state to install more than 300 MW in a single quarter and ending the year with more than 1 GW of residential solar installed for the third time in history.
Beyond strong growth in California and stable volumes across Northeast markets, 2019 also demonstrated the ongoing trend of geographic diversification. In 2010, California was the only state to deploy more than 100 MW of residential installations. By the middle of the last decade, six states had reached that threshold. In 2019, that number increased to eight with Texas and Nevada joining the list. Meanwhile, Florida cemented its place as the secondlargest residential market in 2019 – the first time a low-penetration, non-incentivized market has achieved that designation.
Non-residential PV enters a second consecutive year of annual decline
In contrast to the growth trajectory of the residential market, non-residential installations continued to be hampered by a handful of state-specific regulatory cliffs and policy reforms in 2019. Major policy shifts continued to hinder development in the core non-residential markets of California, Massachusetts and Minnesota. In the case of California, installations declined year-over-year stemming from the transition to new time-of-use rates and the resulting damage to the favorability of project economics. In Massachusetts, non-residential deployment numbers continue to be limited by interconnection delays and the ongoing National Grid cluster study, despite a pipeline of mechanically complete projects that aren’t yet producing power. As a result, the Bay State had its lowest annual non-residential PV installed capacity total since 2013.
Positive policy developments in New York, Maryland, Maine and New Jersey over the first half of 2019 will boost the non-residential market from 2020 through 2022 before a decline in 2023 begins in response to the step-down of the solar Investment Tax Credit under current federal law.
New utility procurement breaks records; 100% renewables targets and offsite corporate demand boost long-term outlook
Utility PV maintained the largest share of 2019 installed capacity in the U.S., representing 63% of all PV capacity installed during the year. A total of 4.4 GWdc came online in Q4, resulting in 8.4 GWdc of capacity additions for the year.
A total of 10.0 GWdc of projects are currently under construction. While this falls short of the record high of 10.4 GWdc, the fact that 4.0 GWdc of new projects began construction and 4.4 GWdc were completed in Q4 is a testament to the strong demand for U.S. utility PV. With 30.6 GWdc of new projects announced in 2019, the utility PV development pipeline has reached 48.1 GWdc, another record high. It is likely that not all projects announced in 2019 were able to qualify for the 30% investment tax credit (ITC). Going forward, the abnormally high rate of new project announcements will likely start slowing down given that many developers were closing deals prior to the 2019 year-end decrease in the ITC.
The U.S. utility PV market is poised to see 83.2 GWdc installed from 2020 to 2025, more than double what was installed over the last five years. The high demand for utility solar is sustained by several factors. With power-purchase agreement prices ranging from $16 to $35/MWh, the economic competitiveness of solar with other generation sources is driving new procurement in established markets such as Texas and Florida; it is also driving new procurement in markets like Pennsylvania and Oklahoma.
Although the Trump administration’s tariffs on solar modules and other component parts have imposed additional costs, utility PV has continued to be cost-competitive with other generating sources in the U.S. Additionally, the number of states and utilities pledging renewable-energy or carbon-reduction targets continues to rise. Twenty-eight states have formally established clean-energy or carbon-reduction targets, 23 states have signed the U.S. Climate Alliance pledge to reduce economywide emissions by 28% by 2025, and eight governors have issued executive orders mandating increases in renewable or cleanenergy targets in their states. While some of these state pledges are not legally binding, they have created demand and pressure for additional renewables in more state markets...
Market Segment Outlooks…Component Pricing…