U.S. solar capacity grew 29% in the second quarter of 2024 and 21% in the third quarter, contributing 64% of new generation.
Domestic solar module manufacturing has grown dramatically, with new factories built in major states such as Alabama and Texas.
Despite the growth, challenges such as tariffs, grid constraints and skilled labor shortages may affect future expansion.
In recent years, U.S. solar power generation has reached record highs, supported by the Biden administration's Inflation Reduction Act (IRA) and more green financing channels. As more solar projects are added to the grid across the country, the Solar Energy Industries Association (SEIA) recorded a record increase in solar power generation last year.
In the second quarter of 2024, the U.S. solar market added 9.4GW of new capacity, up 29% from the same period in 2023. In the third quarter, 8.6GW of new capacity was installed, up 21% from 2023. During this period, solar energy accounted for 64% of the new generation capacity added to the U.S. grid. Solar projects currently generate enough electricity to power 37 million homes.
The states with the highest solar generation are Texas and Florida, at 7.9GW and 3.1GW, respectively, and while commercial solar generation will increase significantly in 2024, the Solar Energy Association SEIA expects residential solar generation to shrink by 26% by the end of this year.
The United States is also investing in strengthening its domestic solar module manufacturing industry, which has been funded by the IRA and the bipartisan infrastructure bill (BIL). In the second quarter, domestic module manufacturing capacity increased by more than 10GW to 31.3GW, and in the third quarter it increased by another 9GW to nearly 40GW. This marks a significant increase from mid-2022, when domestic manufacturing capacity was only 7GW. The first US cell manufacturing plant also opened in the third quarter of this year. The sharp increase in capacity shows the impact of the IRA and BIL on the industry, which provide more funding for green energy projects and provide tax breaks and other financial incentives.
The United States is subsidizing domestic manufacturing to support the localization of solar companies. According to SEIA and WoodMackenzie's U.S. Solar Market Insights Q4 2024 report, five new or expanded manufacturing plants were built in Alabama, Florida, Ohio, and Texas. The report also states that at full capacity, the U.S. can now produce enough solar panels to meet nearly all of its domestic demand.
While the future policy outlook for President-elect Donald Trump remains uncertain, there is a strong pipeline of solar projects across the U.S. SEIA currently expects the U.S. solar industry to install 40.5GW in 2024 and average annual installations of at least 43GW between 2025 and 2029. Some of the key industry constraints SEIA highlights include aging transmission infrastructure (not ready for the influx of new solar), a lack of skilled labor, and project grid delays.
The American Clean Power Association (ACP) expects U.S. utility-scale solar installations to hit a new high of more than 32GW by the end of this year. "The U.S. solar market is expected to grow at a compound annual growth rate of 6.6% between 2025 and 2030, reaching 37GW of annual capacity additions in the last year of the century," the ACP said. The group cited falling polysilicon prices as a driver of the positive short-term outlook, but warned that tariffs could increase costs.
A November report from the ACP noted that while the incoming Trump administration could "change or remove certain parts of the IRA and related guidance… the IRA is unlikely to be repealed outright."
After record growth in several sectors, the solar industry is expected to suffer from high import costs under the Trump administration. Last November, Trump said he planned to impose "an additional 10% tariff on imports from China, above and beyond any additional tariffs" and 25% tariffs on imports from Canada and Mexico.
This year, U.S. trade officials also set preliminary tariffs on solar cells from four major Southeast Asian exporters after U.S. manufacturers complained that unfairly cheap products were flooding the market. The U.S. Department of Commerce has set preliminary anti-dumping duty rates of 53.3% to 271.28% on solar cell imports from Vietnam, 125.37% on Cambodia, 77.85% to 154.68% on Thailand, and 21.31% to 81.24% on Malaysia. China currently dominates global solar supply and has large-scale operations in all four countries. A final decision on the anti-dumping duties is expected in April 2025.
Despite the expected tariffs on solar cells and the potential for a reduction in green funding under the Trump presidency, the solar project pipeline remains strong. This year, commercial solar power generation hit a record high. However, to encourage utility-scale additions in the coming years, greater investments must be made to improve the U.S. electric grid to prepare for the influx of solar power generation.