The US solar industry has experienced a roller coaster of events in recent years, with the pandemic, supply chain issues, and policy changes impacting the market. However, as we go deeper into 2023, the solar landscape is poised for significant transformation. The recently passed US Inflation Reduction Act of 2022 has allocated $369 billion towards climate and energy measures, paving the way for a "Solar + Decade." This article will discuss the expected trends in the solar industry in 2023, focusing on the impact of Net Energy Metering (NEM) policy changes and the opportunities presented by the Inflation Reduction Act.
The California Case Study: NEM 3.0 and its Impact on the Residential Solar Market
California has long been a bellwether for the US solar industry, and 2023 will be no exception. The recent approval of NEM 3.0 by the California Public Utilities Commission (CPUC) has dramatically changed the dynamics of the residential solar market. Under the new policy, homeowners installing solar projects after April 15, 2023, will receive 75% less compensation for their excess solar generation, compared to the previous NEM structure.
This reduction in value has led analysts to predict a 30% year-over-year decrease in residential solar installations in California. However, before the April deadline, a surge in installations is expected as homeowners rush to secure the more favorable NEM 2.0 rates for the next 20 years.
Learning from Nevada's experience in 2017, California's residential solar industry will need to adapt quickly to the new policy landscape. The CPUC anticipates that solar-plus-battery systems will become more popular as NEM rates decline, but recent analysis suggests that the current policy changes may hinder adoption.
The Battle for NEM Across the United States
While California serves as a testing ground for new solar policies, other states will undoubtedly face similar challenges in 2023. Last year, NEM policy changes were either implemented or blocked in several states, including Florida, Georgia, Idaho, Michigan, and Vermont. As the solar industry continues to grow nationwide, debates over NEM will likely become more contentious and widespread.
Unlocking the Potential of the Inflation Reduction Act
The record-breaking $369 billion allocated by the Inflation Reduction Act for climate and energy measures presents immense opportunities for the solar industry. However, the implementation of these funds will be a complex process. Companies will need to navigate the requirements of the act to qualify for tax credits and other incentives.
The Biden administration is working closely with industry stakeholders to facilitate this process, releasing a guidebook to help companies understand the various offerings of the act. By working together, the government and the solar industry can unlock the full potential of this funding and drive significant growth in the sector.
As we move further into 2023, the US solar industry will face both challenges and opportunities. Changes to NEM policies, such as those in California, will require adaptation from the residential solar market. Simultaneously, the Inflation Reduction Act presents a wealth of potential for growth and innovation. By navigating these complexities and seizing the opportunities presented, the solar industry can continue its upward trajectory and usher in a new era of clean, renewable energy.