US solar installs facing flat growth — and that’s before Trump

The U.S. solar industry is facing a shift toward a leaner cycle, as the pace of new installations is expected to plateau through the end of the decade. This represents a significant slowdown following years of rapid growth. 

For much of the past decade, the solar sector in the U.S. enjoyed a period of frenetic expansion, characterized by double-digit growth in new deployments in four out of the last five years. However, projections for 2024 suggest a slight decrease in installation numbers, with the total expected to drop by 1.8% to 40.5 gigawatts (GW), according to a recent report by Wood Mackenzie and the Solar Energy Industries Association (SEIA). 

Looking ahead, the U.S. solar industry faces a period of stagnation, with expansion expected to be essentially flat over the next five years. Average annual growth during this period is forecasted to hover around 2%. While this growth rate may still seem positive, it represents a sharp deceleration compared to the rapid pace of previous years. This slowdown is attributed to several internal and external challenges facing the industry.

Michelle Davis, the head of solar research at Wood Mackenzie and lead author of the report, emphasized that installation forecasts would be higher if not for the numerous obstacles developers are currently encountering. Labor shortages, for instance, are a significant problem, with the solar industry struggling to find a sufficient number of skilled workers to meet the growing demand. 

Moreover, developers continue to face lengthy delays in connecting new projects to the grid, which exacerbates the challenge of maintaining a rapid growth rate. These issues, combined with logistical challenges and inflationary pressures on the cost of materials, are contributing to the stagnation.

One of the most significant factors contributing to this leaner cycle in the U.S. solar industry is political uncertainty. As President-elect Donald Trump prepares to take office, questions abound about how his administration will impact the solar sector. Throughout his campaign and in his earlier tenure as president, Trump has been known for his opposition to renewable energy and his preference for fossil fuels. 

He has made clear his intentions to pull back on many of the climate-focused policies put in place by the previous administration under President Joe Biden. One of Trump’s primary targets has been the climate agenda of the Biden administration, which he has labeled a “green new scam.” Trump has also expressed his opposition to clean energy incentives, which could further affect the solar sector's growth prospects.

Another area of concern for solar developers is the potential for increased tariffs on renewable energy components, which could increase costs for U.S. solar manufacturers and suppliers. During Trump’s earlier presidency, he imposed tariffs on imported solar panels, which led to increased prices for solar projects. The impact of these tariffs was particularly significant for domestic developers who rely on imported components for the production of solar energy systems. 

The fear is that further tariffs could disrupt the supply chain and make solar power projects less economically viable, thus inhibiting growth in the sector. While Biden’s administration has worked to ease some of these concerns through trade agreements and efforts to boost domestic manufacturing, the continued uncertainty about future tariffs adds to the overall challenges the solar industry is facing.

Despite these challenges, there is a bright spot in the U.S. solar industry: the revival of domestic manufacturing. President Joe Biden's climate policies have had a positive effect on U.S. panel production, helping to increase the domestic manufacturing capacity. Currently, U.S. panel-production capacity is approaching 40 GW, which is close to the level needed to supply the entire U.S. solar market. 

This domestic capacity could help reduce reliance on imports and mitigate the potential impact of tariffs. However, even with the rise of domestic manufacturing, the industry still faces hurdles in meeting growing demand for solar energy.

In conclusion, while the U.S. solar industry has made significant strides in the past decade, the forecasted slowdown in growth suggests a more challenging future for the sector. Factors such as labor shortages, grid connection delays, political uncertainty under a new administration, and potential tariffs on imported components all contribute to this shift. The industry must adapt to these challenges and find innovative solutions to maintain its momentum. 

Despite these hurdles, the growth of domestic manufacturing capacity provides some optimism for the future of the solar industry in the U.S., especially if it can help reduce dependency on imports and lower costs for developers. Still, for the solar industry to continue growing at previous rates, both policy support and private sector innovation will be key.