Solar Energy Trends To Watch For In 2023

Despite previous projections, 2022 didn’t end up being a banner year for solar energy deployment. In fact, new solar capacity decreased by 16% from 2021, due largely to supply chain issues and market uncertainty. However, the residential solar segment was an exception and grew by an impressive 40% over 2021. In 2022, a record-breaking 700,000 homeowners added solar panels.

According to projections from U.S. Solar Market Insight, the solar energy market is expected to grow by 41% in 2023. However, there are many uncertainties, such as if supply chain issues will persist and Treasury guidance on the Inflation Reduction Act (IRA) on qualifying for solar tax credits and adders. In addition, many other trends will impact the renewable energy transition in 2023.

Component Costs Uncertain

Although the cost of solar panels has fallen dramatically in the last couple of decades, the supply chain shortages did cause a recent increase in solar equipment costs. According to an analysis of solar installations from Q1 2022 published by the National Renewable Energy Laboratory (NREL) in November 2022, “extreme market conditions in 2021 and the early months of 2022 may have added some 13-15% in costs to solar prices beyond what long-term trends would have predicted.”

There have been particular issues regarding the supply of solar PV modules, yet increased domestic manufacturing will likely start coming online in 2024 and beyond. Greater supply will help prices to fall, but it is difficult to determine when exactly this will happen.

The London-based market observer IHS Markit forecasts cost reductions for residential solar. The most conservative model predicts a 4-20% decline in costs between 2022 and 2038, with other models anticipating the cost of solar to go down by more than 50% from 2022 to 2038.

Orphaned Projects Will Become More Prevalent

Some solar energy companies have gone out of business recently, leaving orphaned solar systems in their wake. For example, Pink Energy recently went bankrupt, leaving many rooftop solar systems that don’t work properly and without a solar company that is responsible for them. Although this can certainly hurt the reputation of the solar industry, it does create an opportunity for reputable solar companies to repair these solar projects.

In fact, GreenLancer’s field service partners are already starting to service numerous orphaned PV projects throughout many states.

Higher Electricity Costs Make Solar Energy More Attractive

Electricity rate hikes have impacted numerous residential and commercial customers. Although average U.S. electricity rates increased from 13.72 cents per kWh in 2022 to 15.47 cents in 2023, they didn’t go up evenly across the country. For example, in New England, the average retail price per kWh increased by almost 7 cents but increased less than a penny per kWh on average in the mountain states.

Electricity rates rose in part due to volatile fossil fuel costs, especially natural gas and coal. This is partially due to the energy crisis that was created from international conflict and also from general inflation that most industries are experiencing.

Rising electricity costs shorten the payback period of a residential or commercial solar system, making solar energy even more cost-effective. In fact, the cost of grid electricity is a variable in determining the sun number of a given property. In states with legislation supporting community solar farms, some residents and business owners are purchasing solar energy for less than from their utility companies.

Supply Chain Issues Likely to Ease

The Uyghur Act has impacted imported solar panels and created supply chain disruptions. 2023 could be a record-shattering year for solar installations, depending partially on how many imported solar modules can enter the U.S. and if domestic manufacturing can ramp up quickly and diversity. Utility-scale solar relies more on imported solar modules than the residential solar market, so there is less impact on this segment.

New Regulations Will Influence Solar Adoption

Numerous pieces of legislation have been passed across the U.S. that either promote or discourage new solar energy projects. Although too numerous to highlight them all, here are a few examples that will impact the clean energy sector and renewable power generation.

Laws Encouraging Solar Installations

California recently enacted a community renewable energy program intended to increase access to renters and low-income households. Illinois passed a law that prevents counties from banning solar energy and wind power projects. The New Jersey public utilities commission created a solar incentive program for grid-scale solar PV and energy storage and nonresidential solar projects larger than 5 MW.

Legislation Discouraging Solar Power Deployment

California leads the nation in solar energy capacity, but recent changes in net metering laws will likely slow residential and commercial solar installations, especially for solar photovoltaic systems without battery backups. Net energy metering (NEM) 3.0, which recently went into effect, will decrease the amount that California utility companies compensate new solar system owners for surplus power they feed to the power grid. This will likely slow both the residential and commercial solar markets but will encourage installations of solar with battery storage.

Emphasis On U.S. Manufacturing Will Continue

The Inflation Reduction Act was designed to spur investment in clean energy and decrease the consumption of fossil fuels and carbon emissions to slow climate change. It encourages procuring solar panels and equipment and batteries for electric vehicles domestically or from free-trade partners of the United States. Thus, the IRA is expected to spur domestic solar and battery manufacturing, creating numerous jobs, including many in manufacturing.

Due largely to the IRA, U.S. solar manufacturers are eligible for one of two tax credits that promote domestic clean energy manufacturing. The Advanced Manufacturing Production Tax Credit (45X MPTC) provides tax credits for clean energy components. Alternatively, the Advanced Energy Project Investment Tax Credit (48C ITC) offers a tax credit for purchasing and commissioning property to build a solar manufacturing facility.

Increased solar manufacturing incentives are expected to promote job growth. According to the Solar Energy Industries Association, “Over the next decade, industry employment will more than double, from 255,000 today to 538,000 by 2032. Solar manufacturing jobs will swell to over 100,000 by 2032.”

2023 Likely A Strong Year For The Solar Industry

Although many energy experts are expecting solar energy deployment to increase significantly from 2022 numbers, uncertainty exists. Supply chain issues are expected to decrease in 2023, which will help promote growth, but to what extent? Likewise, solar tax credits and grants from the IRA make projects more profitable and attractive in all solar markets, but further Treasury guidance is needed to understand how to take advantage of them.

The economics of most solar energy systems are still highly favorable, thanks in part to the federal tax credits and grants in the IRA, which will help spur sustainable energy development. This growth will help create a variety of jobs from renewable energy sources. Numerous solar energy providers and manufacturers are preparing for short- and near-term industry growth.