In 2023, this upward trend persisted, albeit at a more modest pace compared to some previous years. Wood Mackenzie's analysis revealed a 24% increase in installations during the first three quarters of 2023. The relaxation of supply chain challenges from 2022 and a significant jump in installations in California, spurred by customers eager to lock in the existing NEM 2.0 rates, were notable contributors.
Four significant trends in rooftop solar, as reported by PV magazine USA this year, were:
The U.S. Federal Reserve's significant interest rate hikes, a move to curb sharp inflation, posed a unique challenge for the rooftop solar industry. These higher rates pressured solar financiers to either increase loan rates or impose upfront dealer fees, diminishing the value proposition for customers and leading to a challenging year for solar company valuations and a slowdown in installations.
Soaring Utility Rates
While financing solar projects became more costly, utility rates also surged, adding another reason to consider solar. In California, for instance, electricity rates have soared, significantly outstripping inflation, with an additional 13% hike anticipated in 2024. This led to a shift in perspective towards solar plus storage as a hedge against unpredictable and sharply rising electricity rates.
Across the U.S., numerous policy changes, particularly those reducing the value of net metering, have impacted rooftop solar. Net metering has been a cornerstone in the growth of U.S. rooftop solar, but advocates argue that recent rate cuts have been too severe and rapid.
The Rise of Virtual Power Plants
With the phasing out of net metering, the value of standalone solar arrays has diminished. The integration of home battery energy storage systems with rooftop solar is becoming more common, allowing homeowners to store and use their clean energy and avoid peak demand charges. These solar-plus-battery systems, part of broader distributed energy resources, are forming virtual power plants (VPPs), which offer stability to the electricity market and combat the “duck curve” phenomenon. In VPPs, participants can monetize their solar and battery systems.
Looking ahead to 2024, there is cautious optimism for recovery. Challenges like high interest rates are expected to ease somewhat, and the industry is looking to clear excess inventories from the recent slump in demand. Raghu Belur of Enphase Energy anticipates a gradual recovery, though not to the levels of growth seen in 2022.
These trends and predictions paint a comprehensive picture of the rooftop solar industry's current landscape and its potential trajectory in the near future.
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