While utility-scale solar provides sources of income for electric utilities, customer-owned solar generates competition for these utilities. As such, it is important for utilities to be aware of what is happening in these customer-owned markets.

One of these is community solar. According to a new report from Wood Mackenzie and the Coalition for Community Solar Access (CCSA), U.S. community solar installed capacity declined 16 percent in 2022 compared to 2021, primarily driven by interconnection delays hindering growth in key state markets. Industry-wide supply chain constraints also pushed project timelines into 2023.

However, despite the short-term market contraction in 2022, Wood Mackenzie forecasts that the U.S. community solar market will grow 118 percent over the next five years, with at least 6-gigawatts direct current (GWdc) of community solar capacity expected to come online in existing markets between 2023 and 2027, bringing the total to 11.5 GWdc. (Current total installed capacity for 2022 is estimated to be 5.27 GWdc.)

CCSA’s new target of 30 gigawatts (GW) of community solar by 2030, announced in January 2023, will require an acceleration of installed capacity in existing markets and continued establishment of new state markets. As noted, Wood Mackenzie’s current forecasts, based on existing markets and a conservative forecast of new market opportunities, show that 11.5 GWdc of community solar is expected to be installed by 2027.

“Any upside to our existing forecast will require strong policy and market reforms that release pipeline backlogs in existing markets, as well as additional capacity from new state markets,” said Caitlin Connelly, a research analyst at Wood Mackenzie. “The newly passed state-wide program in California, for example, has the potential to yield a significant number of megawatts in the coming years.”

In addition, she said, the Inflation Reduction Act (IRA) is cause for optimism for the community solar market. “Community solar developers are well-positioned to take advantage of the new and extended investment tax credits once guidance is released in 2023, with many developers interested in qualifying projects for the low-to-moderate income and domestic content adders,” she said.

“To meet policymakers’ economic, social, and environmental goals, state legislatures and regulators must move community solar projects swiftly through interconnection queues and remove red tape to get as much capacity installed as possible,” said Jeff Cramer, CEO of CCSA. “Doing so will move us closer to what we all want — jobs, economic development, and a decarbonized, cost-effective grid that works for all of us.”

If program proposals are enacted, new state markets will provide upside to the national forecast starting in 2024. Wood Mackenzie’s preliminary forecasts (which are inherently conservative) project a 605 MWdc boost by 2027 from potential new state markets including Michigan, Ohio, Wisconsin, Pennsylvania, and Washington.