America’s Solar Outlook and Opportunities
The author is Michelle Davis, Global Head of Solar at Wood Mackenzie
The growth trajectory of the US solar industry is incredibly strong. Within a few years, the industry will regularly install 40-50 gigawatts (GW) of capacity, according to our latest outlook. That’s quite a feat when you consider that the most the industry has installed so far was 25 GW in 2021. Over the next decade, the annual average growth will be 11%. And the installed base of projects will multiply nearly fivefold – from 150 GW installed today to nearly 700 GW installed by 2033.
This growth represents an enormous amount of capital investment. Today’s solar market represents approximately $45 billion in capital expenditures annually for solar projects. By 2033, that number will nearly double to $72 billion a year.
As the U.S. solar industry grows, it will evolve to account for the largest share of generation capacity in the country. According to a Wood Mackenzie analysis, utility-scale solar power will account for 40% of US generating capacity by 2050 – and that doesn’t even include distributed solar power serving behind-the-meter electricity.
Huge growth comes with challenges
However, high growth rates also present challenges. The solar industry has had its fair share of challenges (hence the “solar runway”), but they won’t go away as the industry grows.
The most pressing challenge today is connecting the project with the transmission system. The time required to connect a project to the grid from the date it enters the connection queue has been extended to four years. For comparison, that was roughly two years ago ten years ago. Transmission capacity has become more limited as more projects have been built and very few new transmission lines have been built in the last decade.
There are also political challenges. Distributed solar projects typically face clean energy metering (ie offsetting retail solar generation rates) challenges as market penetration increases. Most states with large amounts of distributed solar (for example, Hawaii, California, Arizona, and Nevada) have moved away from net energy metering, changing the way distributed solar is compensated.
However, the challenges present new opportunities for investment
Given these challenges, there are many opportunities for investment in solar projects that look different than today.
The best opportunity, and perhaps the most obvious, is to pair solar projects with storage much more often than is done today. This will help curb the low-value midday solar exports that are already wreaking havoc on highly-penetrated grids and increasing curtailment (a.k.a. waste). About half of utility-scale solar projects in the pipeline are paired with battery storage—that’s good, but it could be higher. And for distributed solar, the numbers are much lower – in most markets, less than 10% of distributed solar projects are installed with batteries. This presents an opportunity to build solar projects that are of much greater value to the grid.
There are also many other areas of opportunity – grid-forming inverters, greater penetration of energy management systems in homes and buildings, cost-effective revenue-grade meters that enable participation in the wholesale market – the list goes on! And we’ll need it all as we watch the energy transition.
The solar industry is one of the most critical for the US as it moves forward with the energy transition. Later this month I will be presenting at Wood Mackenzie’s Solar and Energy Storage Summit in San Francisco. The event will look at the latest growth forecast, the challenges that growth presents and the opportunities that exist for the wider industry. If you want to join us, please Register here.