part 2 of 4
434MW installed in Q1 2024
Down 38% from Q4 2023
Down 1% from Q1 2023
Note on market segmentation: Commercial solar encompasses distributed solar projects with commercial, industrial, agricultural, school, government, or nonprofit offtakers, including remotely net-metered projects. This excludes community solar (covered in the following section).
Consistent installations in traditional commercial solar markets continue to drive national stability.
Installations in the commercial solar segment were flat year-over-year in the first quarter, supported by solid installation volumes in mature markets such as California, Illinois, and New York. In California, 152MW of commercial solar capacity was installed in Q1 as NEM 2.0 projects continued to come online. This contributed to our expectations for 27% annual growth for the state. As the Illinois Shines program continued to attract developers in the near term, Illinois experienced a significant 212% increase year-over-year, with 61MW installed in Q1 2024. New York also had a strong quarter of installations, driven by its more efficient interconnection processes compared to other states.
Even though we expect growth this year, developers in many states continue to need help with interconnection timelines. Due to these interconnection issues, growing market saturation, and high development costs in established markets, developers are increasingly shifting focus to emerging commercial solar markets. Developers can benefit from lower costs and ample available sites in some nascent commercial solar markets, even those without formal net metering policies. Rising energy demand and retail rate increases also attract developers to these markets.
The commercial solar outlook remains mostly unchanged since last quarter. As an influx of California NEM 2.0 projects come online through the end of this year, we expect 14% year-over-year growth. However, national installations will decline in 2025 due to an expected drop in California installations as the NEM 2.0 pipeline gets built out and mature markets become more saturated. Prevailing wage and apprenticeship requirements will also contribute to a decline in 2025.
Since new projects larger than 1MW must meet these requirements to qualify for the full tax credits, developers likely began construction on a significant portion of their active pipeline before requirements took effect in January 2023. Much of this pipeline will have been built by 2025, resulting in slightly reduced volumes from 2025 through 2027. In the longer term, the national commercial solar market will grow by 15% annually in 2028 and 2029. Increased development activity in newer commercial solar markets, particularly in the Midwest and Southeast, will heavily contribute to this growth. ITC adder qualification and rising electricity prices will also drive national long-term growth, averaging 8% over the next five years.
Reprinted from SEIAs report and edited by Robert Benedict
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