Solar Energy Boom in the U.S.

The U.S. solar energy industry is flourishing following several favorable climate policies and greater consumer interest in solar power. The public and private sectors have invested heavily in the uptake of solar energy installations over the past five years, with significantly more growth expected to come over the next decade and beyond. 

Growing U.S. Solar Power Capacity

Solar energy is the fastest-growing and most affordable renewable electricity source in the U.S. The Energy Information Administration (EIA) expects wind and solar power to contribute the most new energy capacity in the coming years, as the country reduces its dependence on fossil fuels in favor of renewable alternatives. Recent public opinion polls have demonstrated that Americans overwhelmingly support new solar energy projects, with the 2023 Yale Climate Opinion Maps showing that 79% of U.S. adults support funding research into renewable energy. 

In 2023, the U.S. added 32.4 GW of solar capacity, which is far above the previous 2021 record of 23.4 GW. Solar power contributed 52% of all energy capacity added in the U.S. last year, with natural gas coming second at 18%. While solar power currently only contributes 5% of the U.S. energy mix, this figure is expected to grow rapidly over the coming decade thanks to greater interest in the sector. The EIA expects the U.S. solar power capacity to increase by 75% over two years, from 163 billion kWh in 2023 to 286 billion kWh in 2025. Based on the current rate of rollout, experts predict that solar capacity could increase to 500 GW by 2034. 

Encouraging Further Growth 

There are several reasons for this boom, including the Biden administration’s push for a green transition, supported by climate policies offering financial incentives, as well as an increased uptake of solar energy in the private sector. Biden’s 2022 Inflation Reduction Act (IRA) provides a wide array of financial incentives for the development of the country’s renewable energy capacity. It introduced tax credits and other financial incentives for utility-scale, commercial, industrial, and residential solar power installations, which have encouraged public and private companies, as well as individual consumers, to invest heavily in solar power over the last two years. 

The price of solar installations has fallen dramatically in recent years thanks to significant improvements in the technology and the mass uptake of solar power. Solar panel prices have decreased by around 20% each time global capacity has doubled, showing just how much greater uptake contributes to the price. Solar photovoltaic costs have decreased by around 90% over the last decade as the technology has improved. Solar panels have also become much more efficient than early versions of the technology, making them suitable for a much wider range of locations.  

Greater investment in the solar energy sector is expected to drive further innovation in the coming decades, with several promising new technologies already emerging. For example, scientists at the University of Würzburg in Bavaria, Germany recently announced the discovery of a new structure that is expected to dramatically enhance solar power production. The use of a URPB system – standing for ultraviolet, red, purple, and blue, which is based on the photosynthetic antennae in plants and bacteria that are capable of efficiently capturing sunlight, is expected to boost solar power production in new solar panels. This is just one of several new technologies that could contribute to the development of highly efficient solar power installations in the coming years.  

California, Texas, and Florida are leading the U.S. when it comes to solar power. In 2023, Texas had around 18,364 MW of installed solar power capacity, surpassing California as the solar champion. According to the California Independent System Operator, the grid operator for 80% of California and part of Nevada, the region had 17,277 MW of installed solar power capacity on its grid by the end of September last year. California has been the U.S. leader in utility-scale solar for the past decade, but other states are quickly catching up as they roll out massive new solar power installations.

Sectoral Challenges

Nevertheless, there are still challenges in the sector, as several U.S. solar companies lag behind their Chinese counterparts in manufacturing. The construction of U.S. solar manufacturing plants by Chinese firms is rapidly increasing, and American factories are finding it difficult to compete. Chinese companies are expected to own at least 20 GW of annual solar panel production capacity in the U.S. within the next year, which could serve around half of the U.S. market. 

The industry is currently dominated by seven players, Jinko Solar, Trina Solar, JA Solar, Longi, Hounen, Runergy, and Boviet. Chinese companies are aided by heavily subsidized supply chains for raw polysilicon and unfinished solar modules, making it difficult for American firms to compete, even with the subsidies introduced under the IRA. To become more competitive in the coming years, the U.S. government will likely have to introduce further subsidies to support sectoral growth. 

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