Solar Market Drops Quarterly, But Industry Is ‘Too Strong To Be Set Back For Long’

Showing resiliency in spite of the new tariffs on imported modules, the U.S. solar market added 2.5 GW of solar PV in the first quarter of the year, representing an annual growth of 13% but a 37% drop from the previous quarter, according to the latest U.S. Solar Market Insight Report from GTM Research and the Solar Energy Industries Association (SEIA).

Solar PV accounted for 55% of all U.S. electricity capacity added during the quarter – the second consecutive quarter in which solar accounted for the largest share of new capacity additions. In addition, it added more than 2 GW for the 10th straight quarter, according to the report.

Overall, the report estimates that solar’s growth in 2018 will mirror 2017’s 10.6 GW before growing more robustly in 2019 and then accelerating in the early 2020s.

Solar Market Drops Quarterly, But Industry Is 'Too Strong To Be Set Back For Long'
U.S. Solar Market Insight, Q2 2018 (Source: GTM Research / SEIA)

​​​“The solar industry had a strong showing in the first quarter,” says Abigail Ross Hopper, president and CEO of SEIA. “This data shows that solar has become a common-sense option for much of the U.S. and is too strong to be set back for long, even in light of the tariffs. States from California to Florida have stepped up with smart policies that will drive investment for years to come.”

According to the report, the solar industry installed 1.4 GW of utility-scale PV in Q1, representing the 10th consecutive gigawatt-scale quarter for the U.S.’ largest solar market segment.

GTM Research says utility-scale solar projects thus far have been relatively insulated from tariffs, but analysts expect the tariffs to have a bigger impact on the segment in 2019. However, they forecast growth for the market: The report increased the forecast for utility-scale solar to 6.6 GW in 2018, which is slightly higher than the 6.47 GW predicted in March.

With 509 MW installed, the non-residential solar segment posted its fourth-highest installation total ever. This represents year-over-year growth of 23%. However, coming off its largest quarter ever, non-residential PV fell 34% quarter-over-quarter, despite posting the big year-over-year growth. Regulatory demand pull-in from looming policy deadlines in California and the Northeast – in addition to the continued build-out of a robust community solar pipeline in Minnesota – are the leading growth factors.

Minnesota alone added more than 100 MW of community solar in Q1. Further, the U.S. has now surpassed 1 GW of cumulative community solar capacity.

On the other hand, new additions of residential PV remained flat quarter-over-quarter and year-over-year in Q1 2018, following a 15% contraction in 2017.

“This is a promising indicator that constraints to residential PV growth like segment-wide customer acquisition challenges and national installer pullback are abating,” says Austin Perea, GTM senior analyst. “However, these problems are not entirely solved, as we’re seeing slowdowns in states with a relatively high penetration of PV installations.”

The report notes that three of the top five residential solar markets in 2017 – Maryland, New Jersey and New York – are expected to contract in 2018 for a second consecutive year as a function of persistent customer-acquisition challenges.

“The decline in some major state markets will be offset by growth in emerging markets,” Perea explains.

GTM Research and SEIA highlight Florida as a standout state in this quarter’s edition of the report. Florida added more solar than it did in all of 2016, representing the second most capacity after California. It was also the first time ever that Florida was ranked among the top five for quarterly installations.

Compared to last year, GTM Research anticipates the U.S. market in aggregate will be flat this year, with 10.8 GW of new PV installations expected.

However, the U.S. market can again expect to see growth exceeding 10% in the early 2020s, driven in part by California’s recently announced policy requiring solar on new homes. The report forecasts that within five years, California’s new home solar market alone will be larger than the No. 2 state residential solar market, New Jersey, by 100 MW.

The report says total installed capacity is expected to more than double over the next five years, and by 2023, more than 14 GW of solar will be installed annually.

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