The community solar market of the United States will add 4.5 GW of new solar capacity in the next five years, according to a recently released report by Wood Mackenzie, a global research and consultancy firm.
The report noted that expanded state-level programs enacted in the last six months would significantly boost the U.S. community solar market. In addition, new state legislation to implement or expand community solar programs could provide a further upside.
Community solar refers to a local solar project shared by multiple community subscribers like homeowners, renters, and businesses. Each subscriber receives credit on their power bills for the share of the power produced.
The researchers expect a peak in installations over the next few years. However, community solar installations are expected to decline after 2023 once pipelines under existing incentive regimes start to reduce and the investment tax credit (ITC) declines to 10%.
The report forecasts that 901 MW, 936 MW, and 935 MW of community solar capacity will be installed in 2021, 2022, and 2023, respectively. However, installations are expected to decline to 795 MW, 841 MW, and 805 MW in 2024, 2025, and 2026, respectively.
The report increased its forecast by 9% due to the expansion of existing community solar programs in New Jersey and Illinois. New York would account for around 30% of growth by 2026.
The researchers said some states would struggle to match this growth without policy reforms that remove market constraints and concerted efforts to address interconnection challenges. So, the new community solar capacity addition in states like Minnesota and Maryland, Massachusetts, and Maine may see a decline.
Several states have passed or proposed legislation for community solar programs. Delaware and New Mexico recently signed legislation into law, and each state is expected to yield around 200 MW(DC) of community solar capacity over the next few years. States like Wisconsin, Pennsylvania, Michigan, and Ohio have bills proposing state-led community solar programs.
The report stated that ITC extension could lead to significant gains in other solar markets. However, it would moderately enhance community solar projects deployment from 2023 onwards.
“The U.S. Department of Energy’s (DOE) new distributed generation goal calls for the equivalent of five million homes to be powered by community solar by 2025. While achieving this goal would be a boon to developers, the market is currently on pace to miss the target by a significant margin,” the researchers said.
The report noted that grid updates are necessary to interconnect community solar projects. However, utility interconnection studies in Massachusetts and Maine led to significant delays and uncertainty for cost allocations. The challenges could be replicated in all markets across the U.S. To overcome these barriers, regulators, power utilities, and community solar developers should address these issues proactively.
Last month, the U.S. Energy Information Administration, in its short-term energy outlook, stated that solar capacity would grow by 21 GW in 2022 and 25 GW in 2023 in the United States. The country is also expected to install 7 GW of new wind capacity in 2022 and another 4 GW in 2023.
Mercom had earlier reported that DOE announced a new National community Solar Partnership target to enable community solar systems to power the equivalent of five million households by 2025 and create $1 billion in power bill savings.