US Community Solar Market To Hit 14 GWdc By 2029 Amid Growth Challenges, Says Report

The US community solar market is set to reach a cumulative 14 gigawatts direct current (GWdc) by 2029, according to a recent report by Wood Mackenzie in collaboration with the Coalition for Community Solar Access (CCSA). The report anticipates that 7.3 GWdc of new community solar installations will come online in existing state markets by 2029.

Program pipelines in mature state markets are currently robust, supporting near-term growth. However, these mature markets are approaching saturation, which poses a challenge for sustaining long-term growth. Wood Mackenzie forecasts that the national community solar market will grow at an average rate of 5% annually through 2026 but will see an average annual contraction of 11% from 2026 to 2029. Expanded program capacity and the establishment of new state markets could provide additional growth beyond 2026.

“The US community solar market has tripled in size since 2020, but growth is beginning to slow in existing state markets,” said Caitlin Connolly, senior research analyst at Wood Mackenzie and lead author of the report. “Additionally, the May 2024 decision on California community solar resulted in a significant 14% reduction to Wood Mackenzie’s five-year national outlook. Without a major market entrant like California, long-term community solar growth will largely depend on the enactment of legislation to enable new state markets.”

Under a bull case forecast scenario, Wood Mackenzie’s five-year outlook increases by 21% in existing markets compared to the base case, while there is a 20% decrease under a bear case. The report notes that alternative scenarios do not account for the establishment of new state markets, such as Ohio, Pennsylvania, Michigan, and Wisconsin, all of which have significant interest and pre-development project pipelines.

Wood Mackenzie estimates that proposed legislation in Ohio, Pennsylvania, Michigan, and Wisconsin, along with four additional potential state markets, could result in at least a 17% uplift from the base case. Considering a bull case forecast for existing markets and the successful passage of legislation in all potential markets, the cumulative national outlook could reach 17.1 GWdc by 2029.

Community solar developers are also navigating federal incentives. Connolly explained, “The fruits of the Inflation Reduction Act are numerous but difficult to count on. Community solar stakeholders are navigating a steep learning curve while trying to secure tax credit adders. Additionally, awards from the $7 billion ‘Solar for All’ fund were announced in April 2024. Final implementation plans are not confirmed, but developers hope to utilize federal funds to expand into new state markets even in the absence of official state programs.”

The report also highlights that 3.6 GWdc of community solar will serve low-to-moderate income (LMI) subscribers by 2029. As of Q1 2024, an estimated 829 MWdc of community solar directly serves LMI subscribers. The share of community solar capacity serving LMI subscribers grew from 2% in H2 2022 to 12% in H1 2024. With the availability of the LMI tax credit adder, Solar for All funding, and evolving state-level LMI requirements, the share of community solar dedicated to LMI subscribers is expected to grow to nearly 25% by 2025.

Jeff Cramer, CEO of CCSA, emphasized the unique benefits of community solar, stating, “One of community solar’s defining and unique benefits is its ability to deliver meaningful bill savings to small businesses and working families who need it most. Not only is the community solar industry delivering on that promise, but it’s doing so on pace with our goal to provide 4 GWdc of dedicated capacity to low-income residents by 2030. We’re also excited to see how Solar for All will positively impact our vision even faster than we had hoped.”

The report concludes by noting that the top three subscriber management companies handle 56% of the total community solar subscribers and 71% of LMI subscribers. LMI subscribers remain the most costly to acquire, averaging $113 per kilowatt, which is 27% higher than the cost to acquire non-LMI residential subscribers. Developers can reduce costs by outsourcing subscriber acquisition and management to third-party companies.