February 8, 2022
The community solar sector is poised for continued growth in the years ahead, with national 5-year forecasts expected to grow by 9%. That is according to the report released this week by leading energy research firm Wood Mackenzie.
Driven by expanding programs in New York, New Jersey and Illinois and new programs in Delaware and New Mexico, the Community Solar Market Outlook report finds the U.S. community solar market is on pace to exceed Wood Mackenzie’s own 2021 forecasts by 9%. The report reflects policy and market conditions as they exist today, so there is potential for even bigger growth, depending on the passage of various pieces of federal and state legislation that are currently being considered.
“A report like this helps stakeholders understand what’s happening at a macro level in a burgeoning industry and on the micro level in the markets,” said Rachel Goldstein, a solar analyst at Wood Mackenzie, who authored the report.
The data analyzed in the report is based on the results of survey responses from dozens of developers, owners, and operators of community solar facilities around the country, and quarterly state-by-state solar installation data from interconnection program managers and community solar program administrators.
The report underscores what strong community solar markets have in common: state-level policies that create third-party programs, long-term market certainty, and effective regulatory frameworks.
“Community solar is, for many people, a new way to think about how energy is delivered to customers,” Goldstein said. “The states where community solar is thriving are those with supportive policies in place that break down barriers and drive investment.”
New York is the leading growth market for community solar, with a robust project pipeline and strong commitment from state officials. The state’s Community Distributed Generation program has brought high volumes of community solar online for the past three years and is expected to be a driver of growth for the industry overall in the years ahead.
New Jersey and Illinois are also predicted to be drivers of growth for the industry in the next five years. New Jersey is making significant investments to expand its community solar program, including making the program permanent one year ahead of schedule, ensuring the state’s minimum 150 MW of annual capacity.
In Illinois, passage of a monumental energy omnibus bill will usher in a broad expansion of the state’s community solar program. The legislation, passed in 2021, brings long-term stability to the program and opens the door for a backlog of waitlisted projects to move into development.
The growth in community solar comes as the Department of Energy (DOE) is forging ahead with its goal to enable enough community solar to power 5 million homes by 2025, an initiative that would mean increasing capacity by an additional 700%. This target demonstrates support from national leaders, but meeting it will require significant commitment from state and federal policymakers. The industry recently committed to developing 20 GW of capacity by 2025 to support the DOE’s goal.
“The community solar industry continues to be on a strong growth trajectory as evidenced by the latest Wood Mackenzie projections,“ said Jeff Cramer, president and CEO of the Coalition for Community Solar Access, a national coalition of businesses and nonprofits working to expand access to community solar. “But there is still a significant gap between how much community solar is being deployed today, and what will be necessary if we’re going to meet DOE’s ambitious targets. We urge state policymakers to remove barriers to developing or expanding community solar programs in their states and for federal policymakers to implement the first-ever federal funding and tax incentives for community solar.”
In addition to growth, the report outlines challenges for community solar in states like Maine, Massachusetts and Maryland. While those states have sizable program capacites, they are each contending with factors that are slowing deployment such as zoning restrictions, interconnection delays, and cost uncertainty.
The report highlights interconnection as a leading impediment to industry growth. With more clean energy projects coming online, especially on the distribution side of the grid like community solar, states must figure out how to interconnect these projects to the grid more quickly and cost-effectively. Some states are already looking at how to address these issues, including integrating distribution and transmission planning, adopting more efficient interconnection procedures, more fairly compensating and incentivizing utilities to expeditiously integrate distributed resources, and appropriately allocating grid upgrade costs among customers.
The report also provides a look at future opportunities for growth, citing community solar legislation moving forward in states like Delaware and New Mexico.
“Where we might not see capacity coming online for these states just yet, these bills help us see where there may be some upside to the forecast,” Goldstein said.
And in other states, legislation signals the potential for new markets. Recently introduced bills could open the door to state-led community solar programs in Wisconsin and in Michigan. A bill in Ohio would pave the way for building community solar projects on distressed land, and legislation introduced in Pennsylvania in 2021 could unlock hundreds of megawatts of solar projects across the state.
With continued commitment from legislators and regulators across the country, including the Department of Energy, the projections outlined in the Wood Mackenzie report could double or triple by 2025, according to Cramer.
“We’re just scratching the surface of how much community solar is needed to meet customer demand and state and federal energy goals,” he said.