The States are Shining: Predicted Surge in US Community Solar by 2029, According to Wood Mackenzie

Global energy consultancy Wood Mackenzie recently released a comprehensive update on the present and future landscape of community solar in the United States. According to the report, the installed capacity of community solar facilities is predicted to magnify twofold in five years.

Understanding the Community Solar Model

The model of community solar typically involves a customer subscribing to a share of the energy generated by a remote solar facility. The resulting power production from the facility is then reflected as credits applied to the subscriber’s utility bill.

Projected Growth: Doubling Capacity by 2029

The latest projections from Wood Mackenzie anticipate an additional 7.3 GW of community solar setups by 2029, pushing the comprehensive total to surpass 14 GW by that year. The company also foresees a steady national growth rate of 5% until 2026, followed by an 11% decline until 2029.

A Threefold Increase Since 2020

Since 2020, the US community solar sector has catapulted threefold in size. However, Wood Mackenzie notes that the momentum is starting to slow in current state markets.

The Golden State’s Muted Impact on Community Solar’s Future

Notably, a May 2024 decision concerning California's involvement in community solar resulted in a significant 14% cut from the national five-year estimate by Wood Mackenzie. Caitlin Connolly, senior research analyst at Wood Mackenzie and the primary author of the report, suggests that without the entry of a major player like California, long-term community solar growth will heavily depend on new legislative acts to stimulate emerging state markets.

Potential Market Scenarios: Bullish vs. Bearish

The report includes two varying scenarios: a bullish forecast predicts a 21% increase in current markets, while a bearish estimate anticipates a possible 20% decline. These predictions overlook the emergence of new state markets like Ohio, Pennsylvania, Michigan, and Wisconsin, which all demonstrate significant interest and pre-development project pipelines. Such markets could result in a 17% increase from the base projection, translating to 17.1 GW of installed capacity by 2029.

Community Solar Developers and the Socioeconomic Divide

Community solar developers continue to explore and capitalize on federal incentives. However, Connolly remarks that assessing the benefits of the Inflation Reduction Act is complex. Stakeholders are navigating a steep learning curve as they aim to secure tax credit adders. They also hope to leverage funds from the $7 billion 'Solar for All' initiative, announced in April 2024, to enter new state markets lacking official state programs.

Serving Low- to Moderate-Income Households

Wood Mackenzie expects a significant portion of community solar to serve households with low to moderate income (LMI). Currently, approximately 829 MW of community solar is dedicated to LMI customers.

Rising Proportion of LMI Subscribers

The report reveals that between H2 2022 and H1 2024, the proportion of community solar capacity serving LMI subscribers increased from 2% to 12%. With the availability of the LMI tax credit adder, Solar for All funding, and the advancement of state-level LMI requirements, this figure is expected to reach nearly 25% by 2025.

Top Community Solar Subscription Managers

The top three community solar subscription managers collectively manage 56% of total subscribers and 71% of LMI subscribers. However, it is worth noting that LMI subscribers are the most expensive to acquire, with average costs amounting to $113/kW—a 27% surcharge compared to the average cost of onboarding non-LMI residential subscribers, according to the report from Wood Mackenzie.