part 3 of 4
1,281MW in Q1 2024
Down 25% from Q1 2023
Down 18% from Q4 2023
The residential solar market recorded its lowest quarter of installed capacity in two years.
The challenges from 2023 continued to plague the residential solar industry in the first quarter of 2024. These include high interest rates, the transition to a net billing tariff in California, and increasing customer acquisition costs. This has led to a two-year low in quarterly installed capacity. In Q1 2024, the segment added 1,281MW, a 25% year-over-year and 18% quarter-over-quarter decline. While a first-quarter installation slowdown is typical for residential solar, some industry players report a more pronounced slowdown than in past years as high interest rates persist. The drop in installed capacity in California contributed to the national decline this quarter, as installations from sales made under NEM 2.0 dwindled.
In the first quarter of 2024, 28 states experienced quarter-over-quarter and year-over-year installed capacity declines due to the ripple effects of sustained high financing costs. Notably, installed residential capacity in Texas fell for the fifth consecutive quarter in Q1, as the top installers in the state experienced more than 60% reductions in installation volumes compared to Q1 2023. Many installers reported using creative ways to maintain revenue, like serving solar co-op programs or diversifying their offerings to include system servicing, storage retrofits, and roof replacements.
Low first-quarter volumes align with our expectations of a residential solar market contraction this year as macroeconomic headwinds continue and installations in California fall by nearly 40% compared to 2023. Some states will still grow this year, fueled by lower module prices, a rapidly growing third-party ownership segment, and significant retail rate increases. However, interest rates remain high, and when they may begin to decline is still being determined. This contributes to our expectations of a 2% contraction for all states other than California, with a 14% reduction in installations at the national level. But looking ahead, we expect recovery starting in 2025, with the residential solar market growing by 10% on average over the next five years as retail rates trend upwards, increasing potential savings for residential customers.
Reprinted from SEIAs report and edited by Robert Benedict
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