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Distributed Energy Resources

Community Solar Expected to Rebound Next Year, Wood Mackenzie Says

Supply chain issues have slowed the growth of community solar installation into the first quarter, but community solar growth is expected to return starting in 2024, according to a new report from Wood Mackenzie and the Coalition for Community Solar Access.

Community solar installation in the United States declined by 6 percent in 2022, compared with 2022 and by 13 percent in the first quarter of 2023, the report found.

The decline was primarily driven by the supply chain uncertainty of the past year as well as interconnection and siting issues that hindered growth in key state markets such as Massachusetts and Maine, according to the report.

However, community solar growth is expected to return starting in 2024 and continue through the next five years, the researchers said. Wood Mackenzie has forecasted existing markets will grow by an annual average of 8 percent with nearly 14 gigawatts of cumulative capacity expected by 2028. The forecast does not include the potential of new programs that could provide even stronger growth, Wood Mackenzie added.

“Near-term growth is driven by the continued success of programs in New York and Illinois as well as positive policy updates in Maryland, Minnesota, and New Jersey,” Caitlin Connelly, research analyst at Wood Mackenzie, said in a statement. “In addition, California’s newly proposed program has the potential to represent 20 percent of Wood Mackenzie’s national outlook between 2024 and 2028.”

On the policy front, recent guidance from the Internal Revenue Service regarding investment tax credit bonus adders under the Inflation Reduction Act has shown that qualifying for more than one adder will be difficult, Wood Mackenzie noted. Community solar developers can qualify for any of the three investment tax credit bonus adders but are most likely to seek the low-income communities adder first, according to the report’s findings.

In addition, the $27 billion Greenhouse Gas Reduction Fund also provides new opportunities for community solar, and the Environmental Protection Agency’s Solar for All fund within the Greenhouse Gas Reduction Fund will be particularly beneficial for community solar, granting up to $7 billion in funds to support the creation and expansion of community solar programs with an emphasis on supporting low-income communities, Wood Mackenzie said.