Inflation Reduction Act boosts five-year US solar outlook by 62 GW

The Inflation Reduction Act (IRA) will significantly improve the five-year outlook for the US solar industry, although the market is expected to remain constrained by supply difficulties through the end of 2023, according to a new report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.

Thanks to the IRA, solar deployment is expected to increase by 40%, or 62 GW DC, over baseline projections through 2027. Cumulative solar installations will reach 336 GW by 2027, up from 129 GW now, with the utility-scale sector adding 162 GW in the next five years.

Ongoing supply constraints such as shipment delays as a result of the move to new rules under the Uyghur Forced Labor Prevention Act (UFLPA), however, could delay the near-term effect of the IRA.

According to the Solar Market Insight Report 2022 Q3, the US installed 4.6 GW DC of solar in the second quarter of 2022, down 12% year-over-year, with the market held back by supply chain constraints and uncertainty from a Commerce Department tariff investigation. There was some relief in June when the White House paused new solar tariffs for two years.

The market segments showed mixed performance. With demand fueled by power outages and higher power prices, residential solar set a record for the fifth consecutive quarter with 1.36 GW DC installed, equal to nearly 180,000 residential customers getting solar. Utility-scale solar, on the other hand, experienced a 25% year-over-year decline to 2.7 GW DC. Commercial and community solar installations were relatively stable, at 336 MW DC and 228 MW DC, respectively.

Wood Mackenzie’s Michelle Davis, lead author of the report, said that the IRA has provided the solar industry with long-term certainty and will lead to a new era for the sector. “Ten years of investment tax credits stands in stark contrast to the one-, two-, or five-year extensions that the industry has experienced in the last decade,” the analyst noted.

In addition, the US solar industry will for the first time have access to production tax credits and an investment tax credit for domestic manufacturing across the solar value chain.

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