Growth Forecasted for 2020 Despite the Pandemic
2020 Promised to be Record-breaking Year for US Solar Energy
2020 was set to be another record-breaking year for utility solar energy installations on top of the boom we saw in residential solar. Now nearly halfway through the year, the US solar industry is grappling with reduced business activity, severe curtailing of consumer purchasing capacity, as well as permitting and interconnection delays.
Much remains to be seen on what the effects of the coronavirus pandemic will be on residential and utility-scale solar, but we do know that all is not as bleak as it seems. In fact, 2020 U.S. solar energy is still forecasted to grow though considerably less.
Utility Solar Growth Steady During the Pandemic
The renewable energy industry in particular has been relatively less affected by the 2020 pandemic than other energy sources, pointing to the resilience of renewables in the face of black swan events. Moreover, US solar energy accounted for roughly 40% of all new electricity-generating capacity in 2020 so far, an astonishingly high number considering the circumstances.
Despite recent economic and public lockdown measures, the industry is still on a growth trajectory with 30% projected for solar in 2020, according to the 2020 U.S. Solar Market Insight report by Wood Mackenzie and the Solar Energy Industries Association. That number already takes into account the effects of the pandemic through a 9% drop from the previous projection, meaning solar energy US projections for 2020 are doing better than suspected.
Move Over Coal – Solar is the Future
The Short-Term Energy Outlook released by the U.S Energy Information Administration also forecasted that renewable generation is set to overtake coal this year. In fact, a recent report by the Rocky Mountain Institute found that the cost of renewables has fallen so much that it is now cheaper than coal plants around the world.
With over 100 GW estimated to be installed in the US from 2020-2025, the solar industry outlook for 2020 is positive. We broke down the most important solar energy US projections for 2020 into two main categories, residential and utility-scale projects.
Residential Solar Outlook
- In the first quarter of 2020, US residential solar saw its largest installation volumes on record.
- Residential solar is expected to see 31% fewer installations due to state ordered lockdown measures. However, once the stay-at-home orders are lifted, residential solar growth is expected to increase.
Utility Solar Outlook
- Utility-scale solar projects have been less affected by the pandemic than residential, with delays in ongoing construction and project development from construction stoppage and stay-at-home orders.
- In particular, the costs of utility PV have continued to decrease, solidifying the demand for utility PVs up to five years in the future.
- U.S. PV installation rates are growing the fastest for utility solar compared to residential and non-residential.
Despite these positive outlooks, the US solar industry is facing significant challenges as a result of the pandemic. As with nearly every other industry, US solar energy workers have been hit hard with high unemployment numbers. The industry was set to employ more than 300,000 Americans by June 2020, according to an analysis by the Solar Energy Industries Association (SEIA), but that number is now expected be 114,000 fewer.
The contraction in the job market is further complicated by the gradual sunsetting of the solar Investment Tax Credit (ITC) and other policy decisions. At the end of 2019, the extension of the ITC was not included in the US budget and on January 1st the credit was reduced to 26 percent. It is set to completely disappear within the next 5 years. The ITC has been a proven market mechanism to encourage industry growth and coupled with other stimulus plans, can mean a quick economic recovery for when the U.S. is ready to fully reopen.
Other Challenges Solar Must Face
Another challenge that the industry faces are the recent import tariffs on solar panels placed by the Trump administration that has caused roughly 62,000 people to lose their jobs and US$20 billion to be lost in private investments. Fortunately, the new Moving Forward Act (MFA) is a US$1.5 trillion infrastructure package that includes major support for solar and other renewables. It includes extending tax incentives for renewable energy that would soften the blow of the declining ITC. Around 90% of all Americans support the transition to a clean energy future, so if the MFA is passed into law, we could sit tight knowing that the future of US solar energy and the health of the environment is in good hands.
Solar Energy Projections Strong
Even with the economic repercussions of the coronavirus pandemic, renewable energy is capable of simultaneously helping the economy get back on its feet while addressing the need to move away from carbon intensive energy sources. While many projects have been delayed, few have been canceled – and US solar energy projections continue to be strong. This in itself shows that the future of the US solar energy industry is weathering the pandemic as well can be expected during these unprecedented times.