2023 has been a record-breaking year for solar, with an expected 33 gigawatts installed in the U.S. Following on that strong growth that happened even amidst a slowdown in venture capital (VC) funding and high interest rates, the solar industry looks set to continue expanding in 2024.

Growth in Solar Energy is Forecasted to Continue

Solar and wind power will be the primary drivers for the increase in renewables in 2024, the Institute for Energy Economics and Financial Analysis (IEEFA) said, with solar topping 234 billion kilowatt-hours (kWh) and wind climbing to an estimated 465 billion kWh. The rise in utility-scale solar generation is forecast to push solar energy’s market share to 4 percent in the US.

The US Energy Information Administration (EIA) similarly expects rapid growth to continue, with utility-scale solar generation expected to top 230 billion kWh in 2024, a rise of 838 percent in the past decade. The projected solar growth is even more notable since the EIA does not include facilities that are less than 1 megawatt in capacity, such as rooftop solar. Output from these smaller installations has also been growing rapidly and the EIA estimates that rooftop solar output alone will rise from 11 billion kWh in 2014 to 85 billion kWh in 2024, making total solar generation even higher. The EIA expects annual solar generation to surpass annual hydropower generation in 2024 for the first time.

US battery storage capacity is poised for a record year in 2024 even after installations reached a new record in the fourth quarter of 2023, according to S&P Global Commodity Insights, with batteries making up 8.6 GW of a combined 40.6 GW of capacity additions in 2024 from wind, solar and battery.  EnergyTrend also forecasted that global demand for large-scale energy storage installations will soar in 2024 while the US market’s large-scale energy storage installations are anticipated to maintain a stellar performance. 

Funding will be a Key Driver

Additional funding through the IRA (Inflation Reduction Act) and IIJA (Infrastructure Investment and Jobs Act) will continue to be a key drivers for solar energy industry growth.

The Solar for All component of that law includes $7 billion for solar energy projects in disadvantaged neighborhoods around the country, pledging to bring rooftop residential panels, off-site solar farm arrays (which produce power for multiple customers) and solar installation jobs to areas largely left out of the renewable energy revolution. In Washington, the State Department of Commerce has applied for a U.S. EPA’s Solar for All grant.  Awards will be announced in spring 2024 and funding will be distributed by fall 2024.

Federal tax credits are expected to support further solar and storage market growth in 2024, according to Deloitte. States and utility companies across the United States are expected to continue rolling out programs such as tax credits and rebates that make it increasingly attractive for homeowners and businesses to invest in solar storage systems, Solar Builder observed, leading to a surge in demand for energy storage solutions both for environmental reasons and also for the financial benefits that incentives provide.

Washington State’s tax exemption for solar energy systems such as rooftop solar panels, machinery, equipment, and installation adds to the federal tax credits in making solar more attractive. Supply chain constraints that started easing as historic clean energy and climate laws took effect, as well as falling solar panel prices, could magnify this trend.

In 2022 the Washington State Legislature provided $100 million in payments over 10 years for the development of community solar projects benefiting low-income individuals, low-income service providers, and qualifying tribal or public agencies. With an estimated $98 million still in the coffers, according to WSU, incentive funds will continue to be awarded upon the completion and certification of each project in the years to come.

Innovation to Bolster the Sector

Innovation will also play a significant part in the growth of solar in 2024 and beyond. Perovskite solar cells, bifacial modules, advanced energy storage and other solutions are paving the way for increased efficiency and reduced costs that will lead to unprecedented
growth and innovation, Nexamp wrote. Innovative technologies such as floating solar panels and solar windows could further boost adoption, EcoGreenEnergy added. Utility Dive also predicts significant developments in storage such as enhanced battery technologies and innovative storage systems that will add to the attractiveness of solar. In addition to making solar power more competitive, these breakthroughs are also expanding its applicability in various sectors. 

Along with technological innovations based more on hardware, changes in software and regulations can accelerate the growth of solar. According to Utility Dive, the integration of artificial intelligence is poised to revolutionize solar energy management by optimizing solar panel positioning, predicting energy production and enhancing system efficiency, which should lead to improved performance and overall system management. Government incentives such as tax credits, feed-in tariffs, and favorable regulations as well as even greater emphasis on sustainable practices are expected to drive adoption of solar and create a conducive environment for industry growth. Additionally, advances in microgrid technology and peer-to-peer energy trading platforms can enable individuals and communities to take more control over their energy production and consumption by generating, storing, and trading energy locally.

Wind power, on the other hand, has borne the brunt of labor and capital cost pressures, interconnection and permitting delays, and transmission limitations. While high costs of financing impact the entire energy value chain, they particularly affect the capital-intensive wind sector and planned investments into wind projects could be diverted to solar, according to S&P Global Market Intelligence.

Wider application of APP+ by Washington jurisdictions could also lead to more affordable home solar through permitting automation for eligible rooftop solar systems, while applying results from the Least-Conflict Solar Siting project for the Columbia Plateau will help faster identification of locations and streamlining of permitting and project assessment for utility-scale solar.  

Potential Red Flags

Despite the multitude of drivers of solar industry expansion, other factors could lead to growth being slower than forecast. Taking a contrarian view different from the many bright forecasts, Wood MacKenzie noted that, in addition to the California net billing transition that will cause a 38 percent statewide market contraction, high interest rates that more than doubled over the past year will lead to
nationwide residential-solar installations shrinking by more than 10 percent in 2024.

Solar Power World noted that,in addition to high interest rates, other major factors have been causing residential installers to close or lay off employees, such as higher cost of capital, significantly lower sales in some markets, higher customer acquisition costs and cash flow constraints from milestone payments being pushed later in the project lifecycle, The article, quoting experts at EnergySage and Wood Mackenzie, also suggests that some companies may have been overly optimistic about 2023 growth and may have over-hired or expanded too quickly, leading them to contract when the expected growth did not occur.  Nevertheless, operational efficiencies, making the most of their current markets instead of expanding, experimenting with pricing and product-offering tweaks and emphasizing product optionality for customers is likely to maintain some growth in that sector in 2024.

Politics and partisanship could also affect growth. At present, Innovation Energy communications director Silvio Marcacci wrote in Forbes, support for wind and solar in rural communities is growing and outweighs opposition in these areas. However, Marcacci noted that 2023 saw a rise in the politicization of renewable energy development, with clean energy opponents increasingly mobilizing in rural communities to build opposition. While the future impact of that mobilization is uncertain, he expects partisan divides to amplify opposition to renewable development and exploit renewable energy as a wedge issue to mobilize conservative rural voters in 2024.

Taking a broader management theory focus, Wood MacKenzie said, growth has climbed rapidly up the steepest part of the S-curve over the last few years to a point where the industry will be past the inflection point, so growth will slow starting in 2024. Even though total global solar capacity will continue to grow rapidly over the coming decade, Wood MacKenzie forecasts that the pace of growth in annual installations will start to slow in 2024. While average annual growth in capacity installations was 28 percent between 2019 and 2023, growth from 2024-28 will be about zero and there may be a few years with contractions.

Solar Energy Growth Seems Likely

While there are uncertainties, a combination of innovation, incentives and climate change create powerful forces to propel the solar industry. It thus appears that solar energy will continue its growth trajectory in 2024.