The demand for solar panel installations is at the highest it’s ever been. You may have seen more and more solar panels appearing on homes in your community, in retail parking lots, and in many other places. Lately, the requests for solar installations across residential, commercial, and utility markets have sometimes outpaced manufacturing capabilities.
This decade-long rise in solar panel demand can’t be attributed to one concrete factor, but one thing is clear: Currently, the conditions are ideal for a boom in the solar energy industry. These conditions are frequently fluctuating, and there are some temporary circumstances hampering a balance between solar panel supply and demand, but there are more favorable signs that the next decade of solar production will set new records for this form of renewable energy.
How High is the Demand for Solar Panels?
The US broke solar industry records in the first part of 2023, with installations higher at the start of the year than at the start of any other year on record. There was a 47% increase in installations from a year before, and it would’ve reached even higher if not for temporary setbacks (which we’ll discuss more below). Currently, installed solar panels contribute 149 gigawatts of power to the overall generating capacity in the US. With current solar energy growth projections, energy research experts Wood Mackenzie expects the market to triple in the next five years.
The solar panel demand for homes, commercial properties, and community solar projects has steadily increased, but the biggest demand has been coming from utility-scale solar projects. Utility-scale projects require a much larger amount of panels than are used for residential projects, meaning that this majority share of demand is very substantial.
Lower Installation Costs are Driving Demand
One of the solar energy benefits driving the current increase in solar panel demand is historically low installation costs. From 2012-2022, there was a nearly 60% drop in installation costs for residential areas, a nearly 38% drop for commercial properties, and a 37% decrease for utility-scale projects.
It’s likely no coincidence that installation costs have fallen over the last decade when you consider that the number of US solar workers nearly doubled from 2012-2021. The majority of these workers are installers and developers, and as more people join this growing field, the overall cost of solar systems is likely to fall even further.
Higher Energy Bills are Causing Frustration
Home and business owners have been frustrated by rising energy costs from traditional utility companies lately. Despite many of these companies claiming that the increase was caused by higher inflation across the country, the average cost of electricity for consumers in 2022 increased by 14.3% from 2021 despite the annual inflation rate decreasing from 7% in 2021 to 6.5% in 2022. That means that electricity price increases were double the annual inflation rate. As more and more people are financially impacted by price increases from traditional methods of energy production, solar energy growth projections also tend to increase.
While the sharp increase in energy prices is expected to slow in the next few years, it shows no signs of stopping altogether. As consumers across the country notice that the cost of their electricity bills is increasing year after year while the cost of installing solar panels is steadily decreasing, switching to solar power seems to be the smarter and easier choice for many.
Inflation Reduction Act Extends Incentives
The Inflation Reduction Act (IRA) that was signed into effect in 2022 offered many Americans relief from a struggling post-COVID economy, but it also contained provisions that have driven solar panel demand by consumers. The act extended the Investment Tax Credit’s 30% rate, which was set to be reduced to 10% over the next few years. This credit will be replaced with an even broader renewable energy incentive program, the Clean Electricity Investment Credit, in 2025.
The IRA also introduced 30% tax credits for standalone commercial energy storage projects, extended previously introduced per kilowatt-hour tax credits to solar production and sales, and created additional credits for solar and wind energy projects in low-income communities and Indigenous lands. Many of these renewable energy credits have been phased out or reduced, but the IRA’s passage is reinforcing both solar panel supply and demand.
What Lies Ahead for Solar Energy
The demand for solar panels is at the highest it’s ever been, but many companies are struggling to meet consumers’ needs. Solar panel supply chain issues caused by the Invasion of Ukraine, extreme weather in the US, post-pandemic recovery, and the passage of the Uyghur Forced Labor Prevention Act have caused a material shortage and shipping constraints.
However, the solar panel supply chain is already improving, largely thanks to the Inflation Reduction Act. Another provision of the law temporarily eliminates tariffs on imported solar panel materials while companies and governments around the world are working to improve global supply chains. Once these temporary setbacks are resolved, the cost of solar system parts should better reflect low installation costs, reduce overall costs, and make buying solar panels an easier process.
With the cost of switching to solar energy declining all the time and solar panel cost projections looking even cheaper in the future, home, and business owners interested in solar energy may want to sign up for solar power plans before supply chain issues are fully resolved. The solar industry outlook is bright and looks like it will only get brighter in the future, so learn about Gexa Energy plans today.