This is an extract from a recent report “US Solar Market Insight” by Wood Mackenzie and Solar Energy Industries Association.
The US solar industry installed 11.7 GWdc of capacity in the third quarter of 2025, a 20% increase from Q3 2024 and a 49% increase compared with Q2 2025. After the tumult caused by the passage of the OBBBA in the summer, this robust quarter largely reflects utility-scale solar projects that were mostly complete in the second quarter. The distributed solar segments had a mixed quarter while utility solar saw substantial build out. Residential solar had another quarter over 1 GWdc – despite the industry-wide rush to sell and install projects before the Section 25D tax credit expiration, module availability has constrained project completions. Commercial solar grew year-over-year but declined from Q2 2025, with California’s NEM 2.0-driven pipeline starting to wane.
Meanwhile, the community solar segment continued its decline. However, the first community solar projects in New Mexico have come online after the program’s initial passage in 2021. Utility-scale solar installations increased notably, with nearly 10 GW installed compared to less than 6 GW in the second quarter. Projects that are well positioned for completion are moving quickly to come online while developers have safe harbored dozens of gigawatts of projects for expiring tax credits. Photovoltaic (PV) solar accounted for 58% of all new electricity-generating capacity additions through the third quarter of 2025, remaining the dominant form of new electricity-generating capacity in the US.
As the year comes to an end, industry constraints have moderated the anticipated solar installation rush
The passage of the OBBBA and other subsequent federal actions this summer created substantial uncertainty for the solar and storage industries. But one thing did seem certain: the earlier a project could come online or meet the legal requirements for “starting construction,” the better. Consequently, Wood Mackenzie predicted there would be a rush of activity to execute on well-positioned projects. And the exact timing of installation increases would differ based on the sector. Over the last quarter, industry constraints and supply chain bottlenecks have moderated this installation rush. This has been particularly acute for the residential solar segment, in which short project timelines and the year-end expiration of the Section 25D tax credit for customer-owned solar caused a surge in sales and permitting activity. But installers and distributors are reporting module shortages and delivery delays that will mean not all installers will be able to fulfill their sales pipeline by the end of the year. And module availability constraints are expected to continue through next year.
Many installers report that manufacturers and distributors are sold out of both domestic and imported modules through year-end 2026. As a result, the near-term residential solar outlook has been downgraded by 2% in 2025 and 8% in 2026. In the commercial and community solar sectors, constraints on labor availability continue to persist. These sectors were not expected to experience the same degree of demand pull-in as residential. These projects use the Section 48E credit and can utilize construction-start requirements to qualify for the tax credits and have four years to come online. But developers and asset owners continue to report limited EPC and labor availability as major impediments to further installation growth. Finally, supply and labor constraints have limited utility solar buildout despite a near term rush to complete projects. When the OBBBA passed, numerous industry players and forecasters anticipated a sudden and stark increase in utility-scale solar installations. Wood Mackenzie also expected a modest rush, and increased the near-term forecasts accordingly.
But the uptick prediction would ultimately be constrained by the same industry and supply chain bottlenecks that have limited solar growth for the past several years: interconnection queue wait times, labor and EPC availability, and long lead times for electrical equipment supply. Based on detailed project pipeline data, the outlook for 2025 installations was roughly in line with 2024. Third quarter installations appear to be validating this. A total of 41 GWdc of utility-scale solar is anticipated to be built in 2025. And while the 2026 outlook has increased by 9% to 36.1 GW, outlook for 2027 and 2028 has decreased by 10% and 5%, respectively, reflecting permitting risk for projects on federal lands. Overall, the five-year utility-scale solar outlook remained virtually unchanged from Q3 outlook. However, additional permitting risk remains for projects sited on private lands, given the broad scope of potential federal permitting actions.
Solar manufacturing industry reaches a new milestone amid continued uncertainty
In the third quarter, the US solar manufacturing industry reached an important milestone. Corning began production at its Michigan ingot and wafer factory, bringing the last remaining major piece of the solar module value chain to the US (polysilicon, ingot, wafer, cell, and module). This is the first time every major part of the module supply chain has been produced domestically in more than a decade. Additionally, the US brought another 4.7 GW of module manufacturing capacity online for a total of 60.1 GW. This is notable progress, especially considering the numerous policy risks currently facing the industry. There is still considerable uncertainty surrounding the FEOC requirements for manufacturing facilities to qualify for the Section 45X tax credits. US Treasury guidance is expected to be published early next year. Until more details and guidelines are provided, several manufacturers remain in limbo regarding their qualification for federal tax credits that would determine their profitability. This, combined with the rapid buildout of module manufacturing in the last few years, shapes expectations that factory expansions are going to slow down substantially.
And even more critically, the Department of Commerce’s ongoing Section 232 investigation into imports of polysilicon and derivative products could have major implications for the US solar industry. The investigation and any subsequent trade actions could be finalized by the middle of next year, but possibly much sooner given the current administration’s prioritization of similar investigations. It’s too early to tell where future tariffs levels, if any, might land. And the scope of applicable tariffs could be incredibly broad. Consequently, the results of this investigation could dramatically change the US solar supply chain. Lastly, the antidumping and countervailing (AD/CVD) investigations regarding imported solar cells and modules from India, Indonesia, and Laos are also ongoing. Final rates won’t be determined until next year. Tariffs on these countries could significantly constrain cell supply for domestic module manufacturers, creating another layer of uncertainty.
Nearly 250 GWdc of solar will be installed from 2025-2030, but the sector has more potential
Despite the changing market and policy conditions that the solar industry has faced this year, solar will remain the dominant power source added to the grid in the next five years. Nearly 50 GWdc are expected to come online in 2025, and almost 44 GWdc in 2026; then, annual installations will stabilize around 38-39 GWdc annually from 2027 to 2030. However, the sector has greater potential at a time when new power capacity is in short supply. Based on Wood Mackenzie’s tracking, utilities and grid operators around the country have about 160 GW of new large load requests that are already under construction or committed to. This equates to 22% of current US peak demand. The solar industry would be well positioned to meet more of this new demand if existing constraints were alleviated. This presents considerable upside to the current forecast.
Market segment outlooks
Residential PV
The residential solar market installed 1,088 MWdc in Q3 2025, marking a 4% decline year-over-year and quarter-overquarter. Based on the first three quarters of the year, total residential solar installed capacity dropped by 7% compared to the same period in 2024, with 27 state markets experiencing a contraction. California remains the top residential solar market by installed capacity so far this year. Meanwhile, Puerto Rico is poised to achieve its highest annual ranking ever (second place), solidifying its position as a major market in the residential solar sector. After the passage of the OBBBA, third-quarter efforts focused on preparing for the upcoming tax credit changes. With the Section 25D investment tax credit (ITC) eliminated after 2025, installers have prioritized selling as many systems as possible before the end of the year. However, this surge in sales has not yet translated into higher installation volumes, as the typical sales-to-installation cycle often spans several months. Many installers reported record-breaking sales months in Q3, which is expected to lead to a significantly stronger fourth quarter for installations.
However, some installers report that supply chain constraints, particularly for modules, could limit the number of systems they can complete before year-end, potentially jeopardizing customers’ tax credit eligibility. While larger, national companies have secured supply, smaller local installers are more constrained. In the near term, it is now expected to see a slight decline in installed capacity in 2025 compared to 2024. After the customer-owned ITC expires, residential solar installations will fall by 18% year-over-year in 2026, slightly lower than last quarter’s expectations. Equipment availability will limit build-out this year and next. However, continued TPO eligibility for the ITC and bonus adders will partially offset the contraction in 2026 and contribute to recovery beginning in 2027. Longer term, the residential solar market will grow at an average annual rate of 7% between 2027 and 2030. Rising retail rates and declining solar costs will drive a recovery in customer-owned systems. However, growth will slow slightly in 2030 as some states reach higher levels of market penetration.
Commercial PV
Commercial solar volumes remained strong in the third quarter, reaching 554 MWdc compared to 509 MWdc in Q3 2024. California and Illinois primarily drove this quarter’s installations, followed by Texas and Massachusetts. California NEM 2.0 projects continue to come online, with an 88%/12% split between the NEM 2.0 and net billing tariff (NBT) regimes. It is projected that California installations will decline as the NEM 2.0 electrical clearance deadline approaches in April 2026. Although capacity declined compared to last quarter, a strong year-end with over 2.3 GWdc of new commercial solar installations is projected to come online nationally in 2025, a record year for the segment. While federal policy changes remain a primary concern for many in the commercial solar sector, developers are still focused on streamlining their operations to bring projects online efficiently while keeping their pipelines full.
Corporations and real estate investors are increasingly entering the commercial solar market, in which the post-OBBBA environment requires more defined stakeholder frameworks to address elevated project risks. Post-ITC, commercial solar will continue to offer strong value for commercial customers through energy cost savings and grid resilience, with rising retail rates further strengthening project economics. The five-year national commercial solar forecast remains largely unchanged this quarter, with a 4% uplift compared to last quarter based on updated installation data. The outlook reflects a 13% decline in 2026 annual capacity, primarily driven by California’s regime change. This decline is followed by a surge anticipated in 2027 as developers rush to meet tax credit deadlines. Strong project volumes are expected for 2028-2030 and beyond, as retail rates increase and improve project economics without the ITC. The commercial solar segment is projected to grow at an average annual rate of 6% per year from 2027 through 2030.
Community solar PV
Community solar installations declined 21% year-over-year in Q3 2025, resulting in 267 MWdc of new capacity. Capacity additions continue to be concentrated within a few state markets. New York and Illinois comprised 68% of Q3 2025 volumes, totalling 115 MWdc and 55 MWdc, respectively. Third quarter installations in Maine and Massachusetts dropped significantly compared to Q3 2024, but six state markets, including New York and Illinois, saw an increase in year-over-year volumes. Notably, the first community solar projects in Delaware and New Mexico reached completion last quarter, adding 9.8 MWdc and 5.7 MWdc, respectively. National installed capacity in 2025 is expected to contract by 28% compared to 2024, reaching 1.4 GWdc. Several state markets, including California, Massachusetts, Oregon, and Virginia, will install less capacity in 2025 than in 2024. Maine and New York, however, will drive most of the anticipated national contraction.
In Maine, Q3 2025 volumes declined 84% year-over-year, driven by changes to the state’s community solar program and the Net Energy Billing incentive value. In New York, the largest community solar state market, programmatic changes, rising development costs, and long interconnection timelines are slowing the buildout of the state’s existing pipeline and deterring new development. Overall, the national community solar market is expected to contract by an average of 8% annually through 2030. Several top community solar developers have safe harbored equipment for their current development pipelines, with estimated operational dates extending out through 2029. This safe harbored pipeline will support the segment’s near-term growth in 2026 and 2027. The five-year outlook includes only state markets with active, legislation-enabled programs and excludes those with proposed program legislation, leaving room for potential upside to the forecast if new legislation is passed. As new development opportunities for traditional community solar continue to decline, community solar developers report increased interest in exploring community-scale solar and storage development outside of traditional program models.
Utility PV
In Q3 2025, the utility-scale solar sector set a third-quarter record with 9.8 GWdc of installed capacity, a 26% year-over-year increase. Installations rose 68% from the previous quarter, driven primarily by a rebound in Texas, which had over 3 GWdc come online compared to 1.5 GWdc in the second quarter. Overall, installation activity was concentrated in Texas, California, and Utah. Nearly all projects met their planned commercial operation dates, and 70% of installations came online 2–3 months ahead of schedule. Although installations grew strongly, contracting activity continued to decline as developers maintained a cautious “waitand-see” approach. Since Q3 2023, when the contracted pipeline peaked at 96 GWdc, installations have consistently outpaced contracted projects, reducing the pipeline to 66 GWdc. In Q3 2025, 4.1 GWdc was contracted, representing a 27% decrease year-over-year. Georgia Power led in contracting activity, with 1.9 GWdc signed across five projects. Wood Mackenzie projects 197 GWdc of new utility-scale solar to be built between 2025 and 2030, but uncertainty remains due to the Department of Interior’s memorandum on permitting and environmental reviews, especially for projects on federal lands.
When the memorandum was issued in July, it was estimated that it could impact a total of 44 GWdc of planned projects either sited on federal land or with associated transmission on federal lands, representing roughly 5% of the early-stage, prepermitted pipeline – a risk already incorporated into last quarter’s forecast. Out of this estimate, 18 GWdc of projects have been identified on federal lands that were cancelled or delayed, which will be incorporated into the near-term outlook. But federal permitting actions still pose risks to projects on private lands, given the broad scope of some permits. While it’s still too early to assess the scale of these possible impacts, a recent SEIA analysis estimates that over 73 GWac of solar projects still lack all necessary permits, many of which are at the federal level. As a result, the utility-scale sector is still vulnerable to project delays or cancellations. The most significant state-level changes to the forecast occurred in Nevada.
US solar PV forecasts
National solar PV system pricing
Module prices have declined by 12% year-over-year, on average, across all segments. This dip was driven by the expansion of manufacturing capacity and higher module power output as the industry transitioned to Topcon cell technology in 2025. Residential system prices fell 3% year-over-year to $3.35/Wdc as declining module and inverter prices offset the increase from the balance of cost categories. In contrast, system pricing for the commercial segment rose by 9%, landing at $1.71/Wdc in Q3 2025. The uptick was largely due to balance of electrical system costs and racking costs surging 50% year-over-year, offsetting the savings from declining module prices. Utility-scale fixed-tilt system costs increased by 9% to $1.16/Wdc, while single-axis tracking systems increased by 10% to $1.32/Wdc, year-over-year. This price increase is driven by the balance of electrical system costs, which increased by 8% year-over-year as a result of new tariffs imposed on commodities. Labor costs increased by 15% annually and EPC overhead costs and margins jumped by nearly 40%, reflecting heightened project risk premiums amid policy and tariff uncertainty.
Access the report here