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Increased manufacturing capacity supports the growing solar generation capacity, with solar and storage accounting for 82% of all new generation capacity added to the grid. However, the House bill, along with rising tariffs, threatens this trajectory. The 8.6 GW of new solar module manufacturing capacity added in the first quarter of 2025 marks the third-largest quarter of new manufacturing capacity on record, according to the US Solar Market Insight Q2 2025 report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie. In addition to the growth in module capacity, U.S. solar cell production capacity doubled in the first quarter to 2 GW with the opening of the ES Foundry factory in South Carolina. Increased manufacturing capacity supports growing solar generation capacity, which the report said grew by 10.8 GW in the first quarter, with solar and storage accounting for 82% of all new generation capacity added to the grid. Although solar manufacturing and deployment continue to drive U.S. energy independence and growth, new tariffs and potential changes to federal tax credits pose significant business uncertainty for the industry and threaten its long-term growth, according to the reports authors. The SEIA and Wood Mackenzie industry forecast, which takes into account tariffs imposed in the second quarter but not potential cuts to federal tax credits, projects declining deployment nationwide, which could result in lost investments in local communities, energy shortfalls, and higher energy bills for Americans. “Cuts to energy tax credits, in addition to the recently imposed tariffs, would unequivocally worsen the damage to the solar industry,” the authors said. A separate SEIA analysis of the impacts of the House bills potential passage projects devastating energy shortages for the U.S. economy. That analysis found that if Senate lawmakers do not change course, 330,000 current and future U.S. jobs could be lost, 331 factories could close or never come online, and $286 billion in local investments could disappear. If Congress cuts energy tax incentives, SEIAs analysis projects that energy production will fall by 173 TWh, leaving the United States unable to meet demand or compete with China in the global race to supply artificial intelligence. The report notes that several factors are affecting various market sectors, such as high interest rates “and other market headwinds” that will continue to negatively impact the residential market. The US residential solar market has been in decline for some time, initially in response to high interest rates, but also due to net metering cuts, as seen in California. Recently, the market saw the bankruptcies of leading national installer SunPower, residential lender Mosaic, and a subsidiary of Sunnova Energy. The report finds that in the first quarter of 2025, the residential solar market added 1.1 GWdc, representing a 13% year-over-year decline and a 4% quarter-over-quarter decrease. Compared to the first quarter of 2024, 22 states experienced declines in installed capacity. In contrast to the declining residential sector, the commercial solar market reached its first-quarter installation capacity record in the first quarter of 2025, adding 486 MWdc, a 4% year-over-year increase. Community solar requires state policies, but with less than half of states having enacted supportive policies, the sector is in jeopardy, according to the SEIA/Wood Mac report. The first-quarter report forecasts that without additional state programs, community solar growth will stagnate through 2030. In the first quarter of 2025, community solar installations declined 22% year-over-year, resulting in 244 MWdc of new capacity. Some states fared worse than others. For example, in Maine and Massachusetts, installed capacity fell 85% and 78% year-over-year, respectively. Utility-scale solar has been on an upward trajectory, but political uncertainty is causing the cancellation of some large projects. The report finds that the utility-scale sector installed 9 GWdc of projects in the first quarter of 2025, representing a year-over-year decrease of 7%. The five states with the largest installations are Texas, Florida, Ohio, Indiana, and California, which account for more than 65% of total installations this quarter. Perspectives While there is much uncertainty surrounding federal policy and tariffs, there is much certainty about accelerated demand growth due to the proliferation of data centers. The authors of the SEIA/Wood Mac report believe the primary drivers of solar growth are impending demand growth coupled with corporate sustainability goals. In the reports base case, the US solar market is projected to add more than 250 GW/dc by 2030, subject to political and tariff risks. This base case incorporates the latest tariff announcements. “In addition to the 25% tariffs on Canada and Mexico, we are assuming the tariffs will be resolved within the next 90 days, including a 30% tariff rate for China in 2025 and 2026, and a 10% tariff rate for all other countries,” the report’s authors said. However, the outlook does not take into account the budget reconciliation bill. Overall, the uncertainty caused by potential changes in tax credit and tariff policy will cause the U.S. solar industry to contract by 2% annually through 2030 in the reports base case scenario. Other factors hindering growth include labor shortages and interconnection delays. However, even with the contraction, the report expects an average of 43 GW/dc to be added to the grid each year through 2030. |
