Inflation Reduction Act increases US solar installation projections by 40%
The Inflation Reduction Act (IRA) is expected to help the U.S. solar market grow by 40% from base projections through 2027, equivalent to 62 GW of additional solar capacity, according to new forecasts in the US Solar Market Insight Q3 2022 report released today by the Association of Solar Energy Industries (SEIA) and Wood Mackenzie.
According to Wood Mackenzie, the utilities sector will lead the growth of the solar industry over the next five years with 162 GW of new capacity. Cumulative solar installations across all market segments will nearly triple, from 129 GW today to 336 GW in 2027.
“This report provides an early look at how the Inflation Reduction Act will transform the U.S. energy economy, and its forecasts show a surge in clean energy investment and manufacturing that will improve communities across the country,” said Abigail Ross Hopper, president and CEO of SEIA. “With this incredible opportunity comes a responsibility to clearly address concerns about forced labor and ensure we have ethical supply chains around the world.”
Solar plant forecasts for 2022 have fallen to 15.7 GW, the lowest total on the market since 2019, mainly due to a tariff survey by the Commerce Department; and supply chain problems persist due to the Uyghur Forced Labor Prevention Act, which came into effect on June 21, among other trade restrictions.
The Wood Mackenzie report predicts that the UFLPA could limit solar deployment until 2023 due to limited module availability, affecting the IRA through 2024 and beyond.
“The Inflation Reduction Act has given the solar industry the most long-term security it has ever had,” said Michelle Davis, chief analyst at Wood Mackenzie and lead author of the report. “Ten-year investment deductions are in stark contrast to the one, two, or five-year extensions that the industry has experienced over the past ten years. It is no exaggeration to say that the IRA will usher in a new era for the U.S. solar industry.”
Demand for rooftop solar is at an all-time high due to power outages and rising electricity prices. The residential solar segment set a record for the fifth consecutive quarter with nearly 180,000 U.S. households installing solar in the second quarter. The IRA will generate an additional 7.3 GW of residential solar capacity over the next five years, and the new standalone storage tax relief in all market segments is expected to improve grid reliability.
Even as supply chain constraints slowed the market, solar accounted for 39% of all new additions to electric generating capacity in the first half of 2022. The U.S. solar market now represents about 4.5% of the electricity mix of the country.
News item from SEIA