The solar market in the U.S. installed 32.4 GW capacity in 2023, a 51% increase from the previous year, according to the Solar Market Insight Report for 2023 by the Solar Energy Industries Association (SEIA).

2023 was the U.S. solar industry’s best year yet.

Solar energy also accounted for 53% of all new electricity-generating capacity added to the U.S. grid, which, for the first time, made up over half of the new generating capacity.

Residential Segment

With an installation of 6.8 GW, the residential segment in the U.S. set an annual record for the fifth consecutive year, registering a 13% increase from 2022. Across the country, the residential segment installed 1,533 MW in the fourth quarter of 2023, a 13% YoY increase from 2022.

Installation backlogs from a robust sales year in 2022 propelled growth at the beginning of 2023, but high-interest rates throughout the rest of the year hindered sales and significantly impacted the installation volumes.

While the first nine months saw an uptick in California’s solar installations, the state experienced a 35% quarterly drop in capacity in Q4.

Q4 was the lowest quarter of capacity volume since Q2 2022. This was attributed to the installers’ depleted backlogs of sales made under the Net Energy Metering (NEM) 2.0. They also experienced a more distinct seasonal dip in sales than in recent years.

While installers reported steady pricing and financing terms, the report found that delayed milestone payments and permitting and interconnection delays in some areas of the country strained their cash flow.

However, apart from California, the residential segment remained flat quarter-over-quarter. SEIA estimates a 40% reduction in California’s installed capacity in 2024, leading to a nationwide contraction of the residential solar market.

Despite this, solar prices dropped 35% to $2.80/W in the second half of 2023, as the residential solar market was affected by high inflation and changes to net metering policies.

Commercial Solar

The commercial solar segment broke an annual record that has stood since 2017, with 1,851 MW installed and showcasing a 19% growth since 2022. Fourth quarter volumes in California, which accounted for 35% of the national installed capacity, doubled from their typical range as the commercial sector started to see the same surge of installations caused by the switch to net billing.

The segment also grew 71% quarter-over-quarter (QoQ) in the fourth quarter, mainly due to the surge of NEM 2.0 installations in California. Commercial solar growth has typically come from a few key markets, such as California, New Jersey, New York, Illinois, and Massachusetts. However, both large and small markets contributed to the segment’s growth last year.

In 2023, the installation volumes in 19 states grew by over 50% YoY. The developers have found non-traditional states such as Georgia and Texas due to their low development costs, low building penetration, and vast tracts of land.

Due to a predicted drop in California’s installations, increased market penetration in certain mature markets, and prevailing wage and apprenticeship requirements, SEIA estimates a dip in commercial installations in 2025.

Community solar

Community solar installations increased by 3% in 2023, resulting in 1,148 MW of new capacity. For the third consecutive year, community solar additions broke 1 GW national annual capacity. The states of Maryland and New Jersey experienced strong growth as capacity additions increased by 169% and 608% compared to 2022, respectively.

Despite installation volumes in New York decreasing last year, the state amounted to 45% of total national installations. The installed capacity in Massachusetts saw a decline as developers continued to wait on siting, permitting, and interconnection reform.

For the long-term, Solar for All funding and the availability of the ITC adders will support lasting growth in this segment. As per SEIA’s estimates, the national community solar market will grow by 7% annually on average through 2028.

Utility-scale segment

Following a downward turn in 2022, the utility-scale solar segment rebounded in 2023 with a total of 22.5 GW interconnected in 2023, registering a 77% YoY growth in installed capacity.

The acute growth in Q4 was attributed to module supply chain stabilization within the past year and the subsequent buildout of delayed projects. Despite this, high interest rates, tighter financing conditions, and interconnection uncertainty slowed contract negotiations, resulting in a 64% decrease in contracted capacity in 2023 compared to 2022.

In Q4 of 2023, only 693 MW of projects were contracted, reaching a record low that translated to the project pipeline slipping below the 90 GW threshold to 83 GW.

The utility-scale segment will add 148 GW of installed capacity between 2024 and 2028 and 383 GW over the next decade, according to estimates by Wood Mackenzie.

Solar Pricing

The pricing for solar photovoltaics went down across segments. It fell YoY by 2% and 6% for the residential and commercial systems, respectively. For the utility-scale segment, the prices went up by 9% for fixed-tilt and 11% for single-axis tracking. The decline of the former was due to the partial drop in module costs, which was partially offset by increases in customer acquisition costs.

The system cost decreased annually and quarterly for both the residential and solar segments due to a rapid decline in module prices for the distributed generation segments. As residential solar demand declined faster throughout 2023, the segment experienced an oversupply of modules.

This resulted in a YoY decrease of 43% and 34% in average module pricing for the residential and commercial segments, respectively. The average residential PV system price was down by 2%.

The U.S. added 42 GW of renewable energy capacity in 2023, with solar contributing the most.

In the third quarter of 2023, the U.S. installed 6.5 GW_dc of solar capacity, a 35% YoY increase and a 1% rise from the previous quarter, according to a Wood Mackenzie and SEIA report.