Dive Brief:

• The latest U.S. Solar Market Insight report, released last week by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, shows a 6% decline in overall solar installations from the first quarter of 2020 to the second, representing a temporary slowdown in the industry’s long-term growth.
• Residential and non-residential installations saw sharp drops, while the utility market experienced minimal impact from the pandemic. States hit hardest initially by COVID-19 implemented strict restrictions on activity that cut dramatically into their solar capacity growth, particularly hindering the residential market in early spring.
• The unpredictability of the pandemic and its effect on the overall economy creates uncertainty for the solar market’s immediate future, according to the report’s authors, but forecasts for the rest of 2020 have improved since COVID-19’s disruptions began in March.

Dive Insight:

The solar industry navigated the initial months of the COVID-19 pandemic with relative success, seeing a decline in overall installations but avoiding a more severe slowdown, according to SEIA and Wood Mackenzie. Report authors pointed to a strong utility market and the ability of solar companies to quickly adapt to new social distancing restrictions as keys to limiting the pandemic’s impact.

Overall, the U.S. solar sector installed 3.5 gigawatts direct current (GWdc) of new solar photovoltaic (PV) capacity in Q2 2020, a decrease of 6% from Q1. Residential installations dropped 23% from the first quarter, while non-residential installations declined 12%. But utility-scale installations rose 9% compared to the previous quarter and represented 71% of all solar capacity brought online during Q2.

Despite the overall drop from Q1, the solar market’s performance in April, May and June represented a 52% increase year-over-year in installed capacity and the largest Q2 ever for the industry, according to the report.

Even with COVID-19’s challenges, Wood Mackenzie forecasts 37% annual growth with over 18 GWdc of installations expected in 2020 — up from the 33% annual growth projected after the first quarter when the pandemic had just begun.

"Despite the impacts from the pandemic, solar continues to see strong demand across all sectors," said Michelle Davis, a senior solar analyst with Wood Mackenzie. "While residential solar had the worst declines to quarterly deployments (compared to non-residential and utility-scale), sales have since recovered and in many instances exceeded pre-pandemic volumes. The utility-scale solar pipeline of contracted projects continues to grow and is currently the highest it has ever been."

Shawn Rumery, director of research for SEIA, said the solar industry proved capable of adjusting swiftly to the new reality imposed by the pandemic.

"Every step of the process required the industry to make changes, but for the most part companies have been able to adapt pretty quickly," Rumery said. "It doesn’t mean that there weren’t hiccups or problems or that there wasn’t any short-term pain — there certainly was — but the results for Q2 were higher than expected and I think it’s a testament to that resilience."

The report revealed the extent to which state restrictions tied to the pandemic affected the solar market. California and the Northeast, which were hardest hit by the virus in the early going, imposed the strictest limits on businesses and consumers and saw quarterly solar installation declines ranging from 25% to 75%. States that later experienced an increase in virus cases, such as Arizona, Texas and Florida, imposed less-restrictive orders and experienced minimal changes in residential solar installations in Q2.

For now, the solar market’s upward trajectory is expected to continue. Wood Mackenzie projects the U.S. solar market to install nearly 100 GWdc from 2021-2025, a 42% increase in the amount of solar installed over the last five years.

In the event of another surge in COVID-19 cases, Rumery said the solar industry should be better positioned to adapt than it was in March due to adjustments solar companies and local permitting authorities made this spring and a better understanding of COVID-19’s risks by public health and government officials.

Still, another surge in outbreaks could severely hamper the economy and lead to problems for the solar market, Davis said.

"If a recession impacts a large swath of upper middle class residential solar customers, or commercial businesses are hurt even further by economic impacts, then demand for distributed solar in particular could decrease substantially," Davis said.