The U.S. installed 6.5 GW_dc of solar power project capacity in the third quarter (Q3) of 2023, a 35% year-over-year (YoY) 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 (SEIA).

While there is a moderate lag in module supply for the utility-scale segment, the sector experienced a recovery in installation volume due to increased imports, the report said.

Solar accounted for 48% of all new power capacity added to the US grid in the first nine months (9M) of 2023. Cumulative installed solar capacity now stands at 161 GW_dc.

Utility-scale solar installations totaled 12 GW_dc in 9M 2023. Diversification of suppliers and release of detained modules by customs and border protection have increased solar module imports, according to the report.

Although global regions face module oversupply, the U.S. market, insulated by tariffs and restrictions, maintains a tight module supply, primarily sourced from Southeast Asia.

While module availability has improved during the quarter, other electrical equipment, such as transformers and high-voltage circuit breakers, is becoming a concern, affecting utility-scale solar growth.

Residential Solar

Residential solar installations, particularly in California and some Northeast states, set a quarterly record in Q3, with an anticipated 13% growth for the year. In California, the shift to net billing in mid-April boosted sales, resulting in a backlog and substantial installation growth.

The report expects this trend to continue into Q1 2024, with a subsequent decline in installations once the backlog is exhausted. In the Northeast, retail rate increases from the previous year drove the growth, fueled by higher gas rates and opportunities for customer savings.

The growth in the residential solar market is facing headwinds from rising interest rates, notably impacting price-sensitive markets like Texas, Arizona, and Florida, where sales volumes, especially for solar loans, began declining in late 2022, noted the report. This decline has already affected installation volumes in Arizona and Texas in the first half of the year and Florida in the third quarter.

The report suggests that despite these challenges, solar remains a pivotal technology in the U.S. energy transition, with expectations that it will become the largest category of generating capacity on the U.S. grid by 2050.

In Q3 2023, the U.S. residential solar market grew by 12% YoY, with a record 1,832 MW_dc installations. Third-party ownership (TPO) installations surged due to their resilience against interest rate fluctuations.

However, major markets like Arizona, Florida, and Texas saw declines—installers adapted with operational efficiencies and pricing adjustments. Wood Mackenzie expects a 13% growth in 2023, revised upward by 3% due to California’s boost.

Commercial Solar

In Q3 2023, commercial solar installations totaled 363 MW_dc, down 3% from the same period in 2022 and 6% from the previous quarter. Despite this, cumulative installations support a 9% growth in 2023.

According to the report, mature markets like New York, New Jersey, and Massachusetts are slowing, prompting developers to focus on states with lower costs and increasing electricity rates, signaling potential growth in 2024.

Nontraditional states like Ohio and Florida are growing, driven by increased energy demand and rising electricity rates. Established markets like New York and Massachusetts are experiencing declines.

Modest demand is expected next year due to Investment Tax Credit requirements, and long-term growth is projected to increase gradually due to the IRA and higher electricity rates.

Community Solar

In Q3 2023, community solar installations reached 274 MW_dc, a 14% increase from 2022, maintaining consistency with the previous quarter. Overall, the 2023 community solar outlook improved by 13%, surpassing 1.1 GW_dc.

Key states like New York and Maine drove growth, with Maryland experiencing a 176% increase in installation volumes from Q1 to Q3 2023 compared to 2022.

However, challenges, particularly in interconnection, hindered the long-term outlook, affecting projects in states like Maine and Massachusetts. Monitoring progress in newer markets, including California, New Mexico, Virginia, and Delaware, is crucial, comprising 30% of the outlook from 2024 to 2028.

Community solar developers are expected to benefit from the Investment Tax Credit incentives, starting as early as next year, supporting sector growth.

Utility-Scale Solar

In Q3 2023, the utility-scale solar sector saw unprecedented growth, with a record-breaking 4 GW_dc installations, up 58% from Q3 2022.

Limited availability of engineering, procurement, and construction services due to a shortage of trained personnel and administrative complexities affected project timelines.

Wood Mackenzie forecasts 171 GW_dc in utility-scale solar installations from 2023 to 2028, a 1% increase from the previous forecast. The 2023 outlook sees a 2% increase, totaling 484 MW_dc, driven by robust installations in the first three quarters.

Solar System Cost

Residential system pricing demonstrates a 3% YoY increase, with module prices for residential systems decreasing by 12%.

Commercial system pricing reflects a 2% YoY decrease, and module prices for commercial systems declined by 6% in the past year.

Utility segment system pricing showed a 6% increase for fixed-tilt systems and a 5% increase for single-axis tracking systems YoY.

Elevated module pricing in the utility segment is attributed to a one-year lag in module procurement.

Despite declining module prices in residential and commercial segments, the utility segment experienced higher module pricing due to procurement dynamics. In distributed solar, decreasing module costs were offset by a rising balance of equipment and soft costs.

Labor, engineering, and equipment component costs have increased across segments due to factors such as inflation. Overall, national PV system prices increased across all segments except the commercial segment, which saw a 2% YoY decrease.

The U.S. solar industry installed 5.6 GW_dc of new capacity in Q2 2023, a YoY increase of 20%, according to the U.S. Solar Market Insight Q3 2023 report released by SEIA and Wood Mackenzie.