Global Solar PV Market Report

In the US, both national and state-level financial incentives support the development of the photovoltaic market, although the forms and magnitude of these incentives vary. An executive order signed by President Biden in late 2021, Executive Order 14057, establishes a national level Executive Branch goal of achieving carbon pollution-free electricity by 2035 and net zero emissions economy-wide by 2050. A renewable portfolio standard (RPS) has also been established in 29 states by November 2022, which requires or encourages electricity suppliers to provide their customers with a minimum share of electricity produced by eligible renewable resources (11 of which mandate 50% or  more renewable energy).

Historically, national incentives for renewables deployment had been provided primarily through the US tax code, in the form of an Investment Tax Credit (ITC) and accelerated 5-year tax depreciation. In this regard, the Inflation Reduction Act (IRA), implemented in August 2022, has allocated a record amount of capital to the climate and energy sector, resulting in significant changes to renewable energy credits. Most of IRA’s record $369 billion investment into renewables will be in the form of tax credits for deployment and manufacturing. The IRA extends the ITC at 30% through at least 2032, then drops to 26% in 2033, and 22% in 2034, before expiring in 2035.

A major boost for solar power producers was provided by the reinstatement of the Production Tax Credit (PTC) under the IRA. It is now possible for solar projects to choose between the PTC and the Investment Tax Credit (ITC) to maximize efficiency, while large land-based wind projects are only eligible for the PTC. Companies like AES Corporation, NextEra Energy, and Xcel Energy plan to increase solar development and are poised to take advantage of the benefits.

Commercial solar adoption has been boosted by corporate clean energy goals. Through June 2022, US businesses have installed nearly 19GW of on-site and off-site solar capacity, which is double the 9.4GW installed through 2019. This recent growth is due to the rapid expansion of off-site corporate solar procurement which now represents 55% of all commercial solar use.

After experiencing a relatively lower capacity addition in 2022 with respect to the previous year, the solar industry is expected to return to growth at an accelerated pace from 2023 onwards. Several projects, delayed by procedural roadblocks in 2022, are expected to obtain module supply and come online. And by 2024, the real impacts of the IRA will begin to come to fruition as various ambiguities related to IRA tax credit would have been addressed by then.

Power purchase agreements will be a key instrument for enhanced deployment of renewables in the country. Although historically the PPA prices for wind and solar power remained competitive compared to other sources of energy, the prices have risen considerably recently due to increased capital costs, and supply chain challenges. In 2022 Solar PPA prices were up 8.5% YoY to $49.52/MWh. However, there has been some stabilizing influence in all renewable energy sectors due to the IRA, and supply chain constraints are likely to become less onerous as a result. A higher level of future energy price uncertainty will also inevitably drive corporations and off-takers to seek long-term contracts to ensure stability.

A significant role is played by energy storage in the US renewable industry. In order for the US to achieve its economic and climate goals over the next decade, standalone storage and solar + storage installations must be ramped up dramatically. EIA estimates that battery capacity in the US will more than double by 2023. Developers have reported plans to add a further 9.4GW of battery storage to the existing 8.8GW of battery storage capacity accounted  for in recent years.

The US government is actively encouraging indigenous solar manufacturing and recycling to strengthen America’s domestic solar supply chain and increase energy security. In April 2023, the Department of Energy (DOE) announced $52 million for 19 such projects, including $10 million from the Bipartisan Infrastructure Law and $30 million in funding for technologies that will help integrate solar energy into the grid. The US is now on track to increase domestic solar panel manufacturing capacity 8-fold by the end of 2024. Further, the DOE envisages the domestic supply chain for solar energy to generate $20 to $40 billion in new investments.