The Future of Solar Energy: Industry Trends for 2023

Reflecting on 2022 and looking ahead to 2023, we share some thoughts on where the solar industry is headed based on patterns and advances we’ve observed this year. This exercise is not for the faint of heart, given the “solar coaster” journey that the industry has been on for the last decade-plus; however, recent developments have set the industry on a more reliable growth trajectory for the years ahead.

Setting the Stage for a Bright 2023

The Commercial and Industrial (C&I) sector received a major boost in 2022 from the Inflation Reduction Act (IRA). The momentous legislation was passed in September and is expected to transform the U.S. solar industry in terms of solar deployment and manufacturing. Revised outlooks from SEIA project that the IRA will add more than 2 gigawatts of additional commercial solar between 2023 and 2027.

In addition to the boost received from the IRA, the U.S. solar sector also rebounded significantly from the supply chain constraints due to the anti-circumvention investigation regarding solar panel imports from Southeast Asia. The rebound was largely a result of the executive branch’s decision to waive tariffs on solar panels through 2024 and invoke the Defense Production Act to spur domestic manufacturing. These actions provided much-needed business certainty for U.S. solar developers which enabled them to resume developing solar projects, improved global supply chain gridlock, and helped stabilize project costs.

Another important trend affecting the C&I space this year was the increased attention on ESG reporting. Solar is linked to ESG because it provides a straightforward solution to achieve the environmental component ESG goals. The proposed SEC emission disclosure rules led many new businesses and property owners to consider adopting solar energy for the first time. 

All of these trends will have impacts on the C&I solar industry in 2023 as further decisions on these policies are made.

2023 Solar Trends to Expect

Now that the stage has been set, here are the top industry trends we expect to see in the new year.

Greater Access to Solar through the IRA

The passing of the IRA created excitement in the solar industry by solidifying available tax credits for solar projects and creating new provisions intended to enable more solar deals. For example, companies can now sell their tax credits to another taxpayer for cash with no caps, phaseouts, or limitations. Additionally, the interconnection costs of solar projects with a capacity of up to five megawatts are now covered by the ITC.

Perhaps most important of all, though, is that the value of the ITC will now stay the same for the next ten years. Under the IRA, the investment tax credit (ITC) for solar projects was increased to 30% with bonus credits that can add up to 60%. The value of the ITC has never been set-in-stone for so long before, which greatly improves the certainty of tax benefits when developing solar projects. Overall, these recent changes to the ITC will enable greater access to solar energy in 2023 for C&I and community solar customers.

There is still some “fine print” in the IRA that requires clarification from the federal government. For example, on November 30, 2022, the Internal Revenue Service (IRS) and the Department of the Treasury released initial guidance on the new prevailing wage and apprenticeship requirements that taxpayers must meet in order to qualify for clean energy tax credits. Although this guidance provides a starting point for solar developers, more stringent definitions are still needed to fully understand the requirements of the legislation.

Though there are still many questions about how the new requirements will be enforced, this unprecedented extension of the ITC is already making an impact on solar projections across the U.S. and shows no signs of slowing next year.

Increased State Action on Solar

2022 was a monumental year for the solar industry and climate action at the federal level. 2023 is likely to see the focus shift to state action, as states face upcoming decisions on important energy policies.

As real estate development and construction continue to ramp up after the halting effects of Covid-19, many states are putting “solar-ready” legislation into place. The specifics of these solar-ready laws vary by state, but in general, they mandate that new commercial buildings must install solar and/or energy storage as part of their development. California, New Jersey, and Maryland have all implemented solar-ready legislation, and we may see other top-ranking solar states follow suit while incentives are at an all-time high.

Speaking of incentives, it will be important to keep an eye on state-level renewable energy legislation in states where solar has not traditionally been a priority. Federal tax credits may spur new policies or solar programs across regions of the Midwest, for example, that will create new opportunities to deploy clean power in areas that were previously inaccessible.

Focus on ESG and Improved ESG Reporting

We foresee ESG being an increasingly important topic in 2023. The SEC is expected to release the new rules about ESG reporting for publicly traded companies sometime early in the year. If the SEC decides to make greenhouse gas emission reporting mandatory, we’re likely to see increased demand for solar energy from businesses of all sizes.

Some ESG solutions can be complicated to implement, and results can be hard to quantify. This is one reason why “greenwashing” is prevalent in the corporate world and why the SEC is trying to combat it with stronger standardization. Solar can address the “E” in ESG because it is an immediate, visible, and economically viable solution.

We’ve also been hearing that educating leadership on proactive response and action will be a top priority in 2023 for companies working to achieve their ESG goals. Safari Energy will be attending the top commercial real estate and ESG events hosted this year to discuss how to leverage solar as an ESG solution.

Technology: Community Solar, Solar EV Charging & Battery Storage

As renewable energy rapidly advances, there are a variety of new products and services to look out for in 2023 including community solar programs and initiatives, electric vehicle (EV) charging, and battery storage.

Community Solar

Community solar refers to local solar facilities shared by multiple community subscribers (homeowners, businesses, etc.) who receive credit on their electricity bills for their share of the power produced. According to SEIA, 5.1 gigawatts of community solar have been installed in the U.S. through Q3 of 2022.

Community solar projects are expected to increase in 2023 as they continue to be rapidly adopted nationwide, and according to Wood Mackenzie the sector will nearly double in capacity by 2027. The IRA helped accelerate the growth of this sector primarily by offering bonus credits for projects serving or located in qualified low-to-moderate income communities. With the passage of the IRA, the time has never been better for state and local governments to move on implementing community solar programs in their state.

Electric Vehicle Charging:

According to market research from Wood Mackenzie, electric vehicle (EV) sales in the U.S. were expected to double to roughly 1.03 million in 2022. This statistic echoes the global trend towards electrification in the transportation sector, a market that is expected to accelerate at a CAGR of around 28% between 2023-2027.

As more EVs enter the highways, businesses and property owners will be taking a closer look at how to implement EV charging stations in 2023, and we expect to see more companies with solar panels invest in onsite EV charging infrastructure and vice versa.

Battery Storage:

As the demand for solar energy increases, we will also see more C&I customers adopting battery storage solutions. The Inflation Reduction Act made it so that energy storage systems are now covered by the ITC, meaning there will likely be a renewed emphasis on storage moving forward.

Battery storage will be crucial to achieving the nation’s climate goals as well as improving the reliability of the electric grid and the resiliency of the businesses that depend on it. 

Going Solar in 2023? We Can Help.

We help businesses successfully make the switch to solar. We provide end-to-end services for solar projects including development, finance, design, build, operation and more.

We serve as a long-term partner for our clients, helping them navigate the evolving industry landscape and integrate the newest technology solutions on the market.

If your business is ready to go solar, get in touch today:

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