Solar fell against some rocks recently, but forecasters promise a strong recovery, according to a new report.
The industry installed 43.2 GW last year, a 14% drop since 2024, according to the latest US Solar Market Insight report by Wood Mackenzie and the Solar Energy Industries Association.
No end-of-year surge
An expected surge in home solar at the end of the year didn’t materialize, despite a push to install projects before federal tax credits expired. Installers either couldn’t get equipment or just ran out of time, nearly flattening sales for the year. The industry added 4.6 GW, a 2% rise over 2024.
Community solar suffered even more, with a 25% decline in installations last year, which the report attributes to a lack of new state programs and a slowdown in the powerhouse states of New York and Maine due to market saturation. The industry is exploring new ways to leverage community solar in these states.
Virginia looks promising for community solar
Community solar advocates are urging more states to follow the policy playbook established in Maine and New York. In Virginia, they found a receptive legislature that recently voted to move the state’s two investor-owned utilities beyond community solar pilot programs
The bills (SB 254/255 and HB 807/809) would raise the community solar cap to 725 MW for Dominion Energy and provide a similar boost for Appalachian Power. Lawmakers also allowed consolidated billing – rather than separate bills from the utility and the community solar provider – to make it easier for customers receiving bill credits from community solar. The bills now await Gov. Abigail Spanberger’s signature. Newly elected, the Democrat ran on a pro-green energy platform.
Virginians clearly like community solar. Waitlists grew for participation. Appalachian’s 50-MW program was oversubscribed almost immediately after launch, and Dominion’s program, capped at 200-MW, became fully awarded with 52 projects, according to Charlie Coggeshall, Mid-Atlantic director at the Coalition for Community Solar Access.
Coggeshall said the legislation comes at an important time for Virginia ratepayers, given that the state is a mecca for data center development, which is raising concerns about rising electricity costs.
Virginia is one of three emerging markets for community solar, cited in the WoodMac report. Others are New Mexico and Delaware.
Although community solar faltered nationally last year, it boomed in some states. New Jersey’s installations grew 31%. And investors remain bullish about the resource, with several developers recently announcing new financial backing.
The WoodMac report projects that community solar will grow in 2026 and 2027 before declining in 2028 due to the loss of tax credits. The market, however, remains a state-by-state, with potential upside should new states adopt community solar programs.
Post 2026 boom for home solar
Home solar, on the other hand, continues to grow steadily over the next decade, after a drop this year. WoodMac attributes an expected 60 GW addition to falling equipment costs, grid resiliency concerns, and expanding opportunities in grid services that will offset the loss of incentives.
WoodMac also expects commercial solar to decline in 2026, but begin rising again in 2027.
“Over the long term, we expect growth to resume at a steady but slower pace, driven by projects with safe-harbored equipment coming online and rising retail rates that continue to support the economics of commercial solar. Our 2028–2030 forecast assumes that projects in mature markets will be financially viable even without ITC incentives. Overall, we forecast average annual growth of around 2% over the next five years,” the report says.
Confidence about the market also came through in a survey conducted late last year by Energy Changemakers with Xendee and Factor This Renewables. Despite last year’s rollback in federal funding for solar, companies expect to boost their use of the resource over the next three to five years.
The WoodMac report is bullish on utility-scale solar, with 11% climb over the next five years. Energy demand from data centers accounts for about half of that increase. The Energy Information Administration recently offered an even more promising forecast for utility-scale solar, forecasting installations in 2026 to increase by 60% over 2025. The government agency also forecast that solar, batteries and wind will make up most of the 86 GW expected to be added to the grid this year, with solar making the biggest contribution.
The health of the distributed solar industry is important to the overall distributed energy sector, given the prevalence of solar and storage in new energy projects.
