The U.S. added a record 42 GW of renewable energy capacity in 2023, with solar installations accounting for the majority, according to a recent report by Bloomberg New Energy Finance (BNEF).

Large-scale and rooftop solar additions in 2023 came at 35 GW, while wind additions were the lowest since 2015, at a mere 7 GW and declining for four years straight.

Renewables contributed 23% to the total electricity generated during the year.

Renewable energy capacity additions helped emissions fall by 1.8% to 6,229 million metric tons of carbon dioxide equivalent in 2023 when compared to the previous year, according to BNEF estimates. It was the first year since 2020 that emissions fell year-over-year. Ignoring 2020, the last time U.S. emissions were this low was back in 1987.

As renewable energy’s share in the country’s total energy mix is rising, it is also witnessing a decline in coal generation capacity. From January 2018 to December 2023, operational coal capacity fell by 81.5 GW. Current plans by plant owners to retire facilities show another 43 GW lined up to retire by 2030.

Source: BNEF

Costs of debt and permitting issues posed challenges for renewable energy last year, but strong demand from corporations and utilities, along with more stable tax credits, outweighed these obstacles. Wind and solar energy, however, were impacted differently by these factors.

Solar Surge

Despite higher costs and supply chain uncertainty, the solar market benefitted from a waiver on tariffs imposed on cells and modules imported from Southeast Asia, which supplied 78% of the country’s photovoltaic module imports in 2023.

This led to imports almost doubling, year-on-year, with 50 GW of modules imported in 2023. High demand and a beneficial tax credit regime also led to strong growth, according to BNEF.

U.S. regulations aimed at preventing imports of goods linked to forced labor in Xinjiang forced big Chinese solar module makers to open wafer plants in Vietnam and source polysilicon from non-Chinese suppliers. Manufacturing wafers outside China makes it easier for companies to show the U.S. Customs and Border Protection agency that polysilicon from Xinjiang has not entered the supply chain of modules destined for the U.S.

However, a surge in polysilicon exports from China to Vietnam in 2023 raised concerns that these supply chains may not be as separate as claimed. Polysilicon exports from China to Vietnam soared from 639 MT in 2022 to 4,970 MT in 2023.

Source: BNEF

Battery Storage

The U.S. commissioned an estimated 7.5 GW of battery storage in 2023, a 62% rise year-on-year, to bring total installed capacity to 19.6 GW. Despite record new additions for the fourth year in a row, the U.S. was eclipsed by China as the largest energy storage market in the world and stood in second place in 2023.

Tax credits and other incentives passed through the IRA spurred storage deployments and investment in the sector. Funding to increase the duration, and therefore the grid benefits, of storage also picked up in 2023, with the Department of Energy announcing $13 million for advanced pumped hydro storage and $505 million towards long-duration energy storage, or projects that can deliver electricity for 10 hours or more.

Wind Woes

Delays in connecting new wind projects to the power grid slowed down the growth of onshore wind farms built in the U.S. in 2023. At the same time, the Inflation Reduction Act’s recent tax credits that help support building new wind farms are expected to take time to translate into capacity addition.

Also, the places where the tax credits would help the most are areas that already have a lot of wind power. That means there can be congestion on the power lines in those places, which holds back building more wind farms there.

Offshore wind projects also struggled last year. Some projects were canceled, and contracts were renegotiated because costs were high for developers. There was inflation, supply chain problems, and uncertainty about whether projects would qualify for tax credits.

About half of the offshore wind capacity that had been contracted in the U.S. faced these economic challenges.

However, there were also some efforts last year to keep expanding offshore wind. States kept procuring offshore wind projects, more areas of the ocean were leased out for projects, regulators made decisions to support projects, and companies kept investing in offshore wind.

The U.S. installed 6.5 GW_dc of solar power project capacity in the third quarter of 2023, a 35% year-over-year increase and a 1% rise from the previous quarter, according to the U.S. Solar Market Insight Q4 2023 report by Wood Mackenzie and Solar Energy Industries Association.