What Is The Solar Industry Forecast For 2023?

The solar power industry has experienced massive growth over the past two decades, with global solar PV installations rising from 1.5 gigawatts in 2000 to over 1,000 gigawatts in 2022 (Solar Industry Research Data | SEIA). Solar energy is becoming an increasingly important part of the global energy mix as countries and companies look to reduce carbon emissions and mitigate climate change. Understanding where the solar industry is headed is crucial for businesses, policymakers, and consumers looking to adopt solar technology or invest in the space.

Solar industry forecasts provide valuable insights into projected installations, cost trends, demand drivers, and market challenges over the next 5-10 years. These forecasts allow solar companies to make informed business decisions, investors to identify growth opportunities, and governments to properly plan energy infrastructure and policy support. Given the fast pace of change in solar technology and energy markets, having accurate projections is key for all solar industry stakeholders. This article will provide an in-depth examination of the most recent projections for the solar PV industry in 2023.

Global Solar PV Installations

Global solar PV installations are projected to reach 413 GW in 2023, representing a 58% increase from 2022, according to Solar Surging 58% in 2023, 413 GW of Installations Expected Globally. This represents a significant acceleration in growth compared to the 23% increase seen from 2021 to 2022. Driving this growth is rising energy prices, government incentives, and improved economics as solar costs continue to fall. The 413 GW forecast for 2023 would set a new record for annual global solar PV deployment.

Solar PV Cost Trends

Solar PV system costs are projected to continue decreasing in 2023 according to recent analyses. According to the National Renewable Energy Laboratory (NREL), the inflation-adjusted cost benchmark for utility-scale solar PV systems is expected to decrease by 10% in 2023 compared to 2022 levels [1]. For residential solar PV systems, costs are projected to fall by 5-15% in 2023 owing to economies of scale and technological improvements in panel production [2].

These projected cost declines for 2023 continue the overall decreasing trend in solar PV costs over the past decade. According to NREL, costs have fallen by more than 70% for utility-scale solar and by over 50% for residential solar between 2010 to 2022 [1]. The continued cost declines can be attributed to technological improvements leading to higher efficiencies and economies of scale in global production and installation. If current projections hold, 2023 will see a further acceleration in the cost competitiveness of solar PV versus conventional power generation sources.

Major Markets

In the U.S., solar is expected to continue strong growth, with over 30 GW of new installations forecasted in 2023, up 20% over 2022, according to the Solar Energy Industries Association (SEIA) Solar Market Insight Report Q4 2023. California remains the top state for solar installations, followed by Florida, Texas, New York and Massachusetts The Best And Worst States For Solar Energy 2024. Emerging state markets like Illinois, Virginia and New Jersey are also seeing rapid growth.

China continues to lead globally, with over 60 GW of new solar PV forecasted in 2023. However, growth is slowing due to policy changes and COVID-related delays according to Wood Mackenzie. India is expected to be the next major growth market, with the government targeting 280 GW of solar by 2030. Other emerging markets to watch include Vietnam, Saudi Arabia, Spain and Australia.

Policy Trends

Government policies and incentives continue to be a major driver of solar energy growth in 2023. According to the Solar Energy Industries Association’s Solar Market Insight Report Q4 2023, 29 states plus Washington D.C. and Puerto Rico have enacted renewable portfolio standards (RPS), which require utilities to source a percentage of their electricity from renewables. Many of these policies have been expanded or strengthened in recent years. For example, California increased its RPS requirement to 60% renewable energy by 2030, while Virginia adopted a RPS of 100% clean energy by 2050.

In addition to RPS policies, federal and state tax credits as well as rebate programs provide financial incentives for residential and commercial solar adoption. The federal investment tax credit (ITC) continues to allow homeowners to deduct 26% of solar installation costs from their federal taxes. Some states like New York also offer additional tax credits on top of the federal ITC. Net metering policies in many states make rooftop solar financially viable by allowing system owners to sell excess energy back to the grid.

According to the SEIA, robust policy support was a major factor behind the 47% year-over-year growth in U.S. solar installations in Q1 2023. Continued policy momentum around decarbonization and renewable energy is expected to spur further solar growth in the coming years.

Technological Innovations

Several new solar technologies are entering the market in 2023 that will impact costs and efficiency. Multi-junction solar cells made of multiple layers of semiconductor materials can achieve higher efficiency by absorbing different wavelengths of light. Commercial production is accelerating for perovskite solar cells, which are thin, lightweight, and flexible. Perovskite cells layered over silicon have reached efficiency over 25%. Thin-film technologies like cadmium telluride and copper indium gallium selenide solar cells are gaining traction for their flexibility and low costs. Emerging technologies like organic solar cells and solar paint aim to enable any surface to generate solar power.

These innovations are driving down costs and improving efficiency. The National Renewable Energy Lab estimates solar panel costs could fall an additional 40% by 2030. The average solar panel efficiency has increased from 15% to over 22% in the last decade, with prototypes reaching over 47%. As new technologies reach commercial scale, they will expand applications for solar energy and support its continued growth.

Challenges

The solar industry faces ongoing challenges related to grid integration and regulations, even as capacity expands. One major issue is that the current electricity grid infrastructure in many regions is not equipped to handle large amounts of variable renewable energy from solar and wind sources. Significant grid upgrades and modernization will be needed to enable high solar penetration levels (Solar Market Insight Report Q4 2023).

Another challenge is responding to changing regulations and policies, which can impact solar project economics and incentives. For example, the pending expiration of the solar investment tax credit (ITC) in the U.S. could slow market growth if it is not extended (3 Key Solar Energy Trends from 2023). The industry must continue regulatory advocacy to maintain strong policy environments.

There are also ongoing challenges around land use constraints, permitting processes, and community objections that can hinder large-scale solar development. Public education and stakeholder engagement will be key to overcoming these issues and enabling solar to scale up rapidly while maintaining social license to operate.

Solar Storage Market

The solar plus storage market is expected to see significant growth in 2023 and beyond. According to BloombergNEF, the global energy storage market is forecasted to surge 34% in 2023 in gigawatt hours compared to 2022. The U.S. in particular is predicted to install approximately 63 GW of storage between 2023-2027 across all segments.

Lithium-ion batteries continue to dominate energy storage due to their falling costs and versatile applications, though new battery chemistries are emerging. For example, sodium-ion and zinc-ion batteries are gaining interest as lower cost, safer alternatives. Flow batteries utilizing vanadium are also growing for large, long-duration storage needs. On the residential side, solar+storage systems are becoming more popular to provide backup power and maximize self-consumption.

Outlook

The overall outlook for the solar industry in 2023 and beyond is very positive, with projections showing continued strong growth. According to the Solar Energy Industries Association (SEIA), the U.S. solar market is expected to add a record 33 gigawatts (GW) of new solar capacity in 2023, representing a 24% year-over-year increase (SEIA). Many factors point towards long-term expansion of solar energy, including declining costs, supportive policies, technological improvements, and rising energy demands.

In the long run, SEIA forecasts that the U.S. will install nearly 5 times as much solar capacity over the next 5 years compared to the previous 5. Total solar installations are projected to nearly triple by 2028 to over 500 GW, up from 178 GW at the end of 2022. Key drivers enabling this growth include the Inflation Reduction Act, which provides crucial tax credits, as well as state policies and utility procurements. The IRA will help the solar industry avoid the major market drops previously expected post-2023 as tax credits were set to phase out. With the policy certainty the IRA provides, most analysts predict strong solar growth for the next decade.

Globally, growth trends are similar, with total solar PV installations projected to reach over 3,000 GW by 2030, more than triple current capacity. As costs continue falling and solar reaches grid parity in more markets, the energy source is expected to account for over 10% of global electricity generation within this decade (Deloitte). While challenges remain, the solar industry outlook is overwhelmingly positive, with solar firmly established as a mainstream energy source poised for massive expansion.

Conclusion

The solar industry outlook for 2023 points to continued strong growth, driven by favorable policies, declining costs, and technological improvements. Key takeaways include:

• Global solar PV installations are expected to reach around 200 GW in 2023.
• Solar PV costs will continue to decrease, making it more competitive with conventional power.
• China, the US, India and Europe will remain major markets.
• Supportive policies like tax credits and net metering will further boost solar adoption.
• Innovations in solar panels, inverters and battery storage will unlock new applications.

Staying updated on solar industry trends is crucial for all stakeholders, from project developers to policymakers. The future is bright for solar power, but continued progress requires planning today for the opportunities and challenges ahead. With smart strategies and policies, solar can maximize its vast potential and play a leading role in the global energy transition.