US community solar installations experienced a decline of 6% year-over-year in 2022 and a further 13% in Q1 of 2023, according to a recent joint report by Wood Mackenzie and the Coalition for Community Solar Access (CCSA). The setbacks were primarily attributed to supply chain uncertainties over the past year and challenges related to interconnection and siting, particularly impacting key state markets like Massachusetts and Maine.
However, the report anticipates a resurgence in community solar growth commencing in 2024 and extending over the next five years. Wood Mackenzie’s projections suggest that existing markets will witness an average annual growth rate of 8%, resulting in nearly 14 gigawatts (GW) of cumulative capacity by 2028. This forecast does not account for the potential impact of new initiatives, which could further elevate these figures.
Caitlin Connelly, a research analyst at Wood Mackenzie, highlighted the factors contributing to the near-term expansion, including successful programs in states such as New York and Illinois, coupled with positive policy developments in Maryland, Minnesota, and New Jersey. She also noted that California’s proposed program could represent a significant portion of the national growth between 2024 and 2028.
Regarding regulatory matters, the Inflation Reduction Act (IRA) has introduced guidelines for investment tax credit (ITC) bonus adders. The report suggests that while community solar developers may qualify for any of the three ITC bonus adders, the emphasis is likely to be on the low-income communities (LMI) adder.
Furthermore, the $27 billion Greenhouse Gas Reduction Fund (GGRF) offers fresh avenues for community solar. The ‘Solar for All’ initiative within the GGRF, which allocates up to $7 billion in funds, is particularly geared towards supporting community solar programs, with a focus on aiding low-income communities.
Matt Hargarten, VP of Campaigns at CCSA, emphasized the robust long-term trajectory of community solar’s growth, with expectations of more than doubling capacity within existing state markets over the next five years. He underscored the potential for further expansion, especially if regulatory and legislative support continues.
The report’s alternative forecasts encompass potential variations in community solar outcomes, accounting for market uncertainties like supply chain dynamics, changes in retail rates, and shifts in state and federal policies. In the most optimistic scenario, the national forecast increases by 13%, while the pessimistic projection foresees a 24% reduction.
Lastly, the report highlighted that subscriber management companies, including Arcadia, Perch Energy, and Ampion, now manage over 50% of the total community solar market. These firms leverage software tools to streamline subscriber acquisition and management, particularly focusing on effectively reaching low-income populations.
