This is an extract from a recent report “US Solar Market Insight” by Wood Mackenzie and Solar Energy Industries Association.
More than 200 GWdc of safe harbored solar capacity is estimated that underpins near-term installations
• The US Treasury Department and IRS released guidance on the Prohibited Foreign Entity (PFE) provisions enacted under the One Big Beautiful Bill Act (OBBBA) in February. It was highlighted that this partial guidance provided essential, but not full, clarity. The industry anticipates full guidance may not be published until next year. Given the approaching July 4th deadline to safe harbor projects, it’s highly unlikely there will be further clarity before then.
• This is more consequential for the solar manufacturing sector. Many manufacturers with ties to China have had to reorganize under American ownership.
• Despite this uncertainty, Wood Mackenzie’s recent quantification* of the utility-scale safe harbored pipeline indicates that most of this pipeline safe harbored by year-end 2025, before FEOC requirements applied. A total pipeline of 216 – 240 GWdc supports strong utility-scale buildout through 2030, even when accounting for attrition.
Trade actions and tariffs continue to challenge portions of the US solar manufacturing industry
• Solar module manufacturing has ramped up substantially in the last several years, with production reaching about 70% of 2025 installations. But trade actions continue to create constraints: domestic module manufacturers currently rely heavily on imported cells. Currently, the US only has 3 GW of cell capacity. While several new cell factories are in development, these are not expected to be enough to supply all domestic module factories. In the spring, the Department of Commerce announced high preliminary countervailing (CVD) and anti-dumping (AD) tariff rates for solar cells and modules from India, Indonesia, and Laos. These nations, together with Malaysia, Thailand, and Vietnam (which are already subject to tariffs) were the source of 78% of cell imports last year.
• Additionally, Section 232 trade action on solar-grade polysilicon and derivative products is anticipated to be announced this summer. Much depends on the announcement, but given the broad applicability of action, it could severely constrain manufacturing activity for some domestic producers.
Strong pipelines will ensure average additions of 43 GW in the next five years, but market challenges constrain growth
• US solar additions will be flat over the next five years despite the need for more power supply in the US. Interconnection queue timelines have improved slightly but permitting bottlenecks and lengthy equipment timelines continue to serve as headwinds. Demand growth projections remain strong, which has started to translate into higher solar procurements in utility resource plans (particularly after 2030), but with considerable variability across the country. And while the solar industry has strong market fundamentals, it will take time to adjust to a post-tax-credit world, particularly for the distributed segments, which is forecasted will decline in 2026.
Residential PV: 1,179 MWdc installed in Q1 2026, up 6% from Q1 2025, down 15% from Q4 2025
• The residential solar market grew 6% year-over-year in Q1, marking one of its strongest quarters in the past two years other than Q4 2025
• Customer-owned projects had to be installed (not interconnected) by the end of 2025 to qualify for the Section 25D tax credit. As a result, overflow interconnections and demand supported solid installations in Q1, which is typically the weakest quarter based on residential solar seasonality.
• California, Florida, and Illinois led the residential solar installed capacity rankings in Q1 2026. Florida and Illinois both recorded their strongest quarters since the end of 2024.
• The bankruptcy of the second largest national installer, constraints in tax equity availability, and updated permitting data contribute to expectations of a starker drop off in capacity in the next quarter or two and an overall 21% market contraction in 2026.
• The segment will return to growth starting in 2027, fueled by continued third-party ownership (TPO) project tax credit eligibility, and momentum in prepaid TPO offerings, though growth will be tempered by weak loan and cash demand.
• Safe harboring activity before July 2026 will allow TPO projects to remain eligible for the tax credits through 2030. However, growth is expected to slow starting in 2029, reflecting balance sheet limitations for some TPO providers and the challenges of companies forecasting demand that far into the future.
Commercial PV: 523 MWdc installed in Q1 2026, down 4% from Q1 2025, down 25% from Q4 2025
• California led new commercial solar capacity with 201 MWdc installed in the first quarter, representing 38% of national installations. NEM 2.0 projects continue to come online, but these projects are expected to decline substantially as the deadline to install was April 2026.
• Other top performing commercial solar states in Q1 were Illinois and Pennsylvania. Illinois added 49 MWdc of capacity, supported by incentives like Illinois Shines. Pennsylvania added 40 MWdc, driven by businesses mitigating rising retail rates.
• Developers continue to lean on regional expertise, open communication, and trusted relationships to navigate interconnection queue congestion and permitting delays.
• A near-term contraction is projected in 2026, primarily driven by California’s transition to its new tariff regime. Other legacy markets, such as New York and Massachusetts are expected, to install less new commercial solar capacity in 2026, driven by lengthy interconnection delays and decreased pipeline volumes.
• The commercial solar market will stay relatively flat in 2027 and rebound from 2028 to 2030 as developers race to energize safe harbored projects within the four-year window. By 2031, rising retail rates and an increased focus on bill savings in the commercial and industrial spaces will become dominant drivers of sustained market growth.
Community solar PV: 247 MWdc installed in Q1 2026, down 4% from Q1 2025, down 67% from Q4 2025
• New York drove most of the year-over-year contraction in Q1 2026, with new installations totaling 61 MWdc, a 46% decline compared to Q1 2025.
• The national community solar market is expected to grow by 1% this year, reaching approximately 1.7 GWdc. Near-term growth is driven by an 8.2 GWdc project pipeline.
• Top developers safe harbored equipment for their project pipelines ahead of the December 2025 deadline, partially shielding them from FEOC exposure risk. – Improving queue efficiency in top markets including Illinois and New York, in addition to program expansions in New Jersey and Virginia, resulted in a 13% increase to our five-year outlook compared to last quarter.
• Overall, the community solar market is expected to contract by an average of 7% annually through 2031. Beyond the build-out of ITC-eligible projects in the pipeline, state-level market saturation and less favorable project economics will limit new development to just a handful of markets.
• In the absence of new traditional community solar programs, developers are broadening their business models to capture the emerging opportunities to deploy small utility-scale solar, typically up to 20 MWdc, and storage projects connected to the distribution grid.
Utility solar PV: 5.9 GWdc installed in Q1 2026, down 34% from Q1 2025
• Q1 is typically a slower installation period, and the 2026 project pipeline is heavily weighted towards projects scheduled to come online in Q2 and Q4. Despite lower first quarter volumes, project execution remained strong, with nearly all projects completed on schedule or two to three months ahead of plan.
• Installation activity was primarily concentrated in Texas, Florida, Indiana, and Ohio.
• Contracting activity remained strong with 6.3 GWdc of capacity signed in Q1 2026, representing a 15% increase year-over-year. Contracting activity was driven primarily by projects in Texas, with offtake agreements led by data and technology companies.
• Permitting continues to constrain near-term capacity additions, in part due to the Department of the Interior’s memorandum on solar and wind development. This is affecting roughly 30% of the early-stage solar project pipeline.
• Improved visibility into safe harbor pipelines led to a modest increase in expected capacity in our outlook, with gains largely concentrated in 2028. These increases are happening mostly in Florida, Michigan, Arizona, and Arkansas, predominantly through aggressive safe harbor strategies.
National solar PV system pricing: PV system prices fell for all segments except commercial in Q1 2026
• Residential system pricing is down 7% year-over-year.
• Commercial system pricing is up 4% year-over-year.
• Utility-scale system pricing is down 3% for fixed-tilt and single-axis tracking year-over-year.
• The decline was driven by module prices decreasing across all segments and lower residential customer acquisition costs
• This relief stems primarily from the repeal of International Emergency Economic Powers Act (IEEPA) tariffs, which had ranged from 20–50% for some sourcing regions, such as Indonesia and Laos.
• Despite module prices falling to $0.34/Wdc in Q1 2026, compared to $0.43/Wdc in Q1 2025, commercial system prices increased by 4% year-over-year to $1.67/Wdc.
Access the report here