Solar Industry Achieves Record First Quarter Growth Amid Projections of Long-Term Decline

Solar Industry Achieves Record Q1 Growth but Faces Long-Term Challenges
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In the first quarter of 2025, the U.S. solar industry installed a total of 10.8 GW of new solar generation capacity. This figure is 7% lower than the installations during the same period in 2024 and 43% lower than the previous quarter, yet it still ranks as the fourth-largest quarter for solar deployment on record, according to the Solar Market Insight report by Wood Mackenzie for the Solar Energy Industries Association (SEIA).

The U.S. solar cell manufacturing capacity doubled, and an additional 8.6 GW of solar module manufacturing capacity was added during this quarter, marking it the third-largest quarter for new solar manufacturing capacity on record, as reported by Wood Mackenzie for SEIA. Despite these impressive figures, Wood Mackenzie forecasts a contraction of approximately 2% annually in the solar industry from 2025 to 2030, predicting an average addition of 43 GW of new solar generation capacity per year during this timeframe. Notably, new solar installations are expected to decline by 7% between 2025 and 2027.

These projections do not account for the proposed reduction in clean energy tax credits that have already passed in the House. SEIA’s Senior Vice President of Policy, Sean Gallagher, warns that cutting these tax credits could lead to project cancellations and potential energy shortages.

Despite the growing demand for energy, the solar industry faces significant challenges in the coming years, particularly if the Senate agrees to the tax credit cuts passed by the House, as highlighted in the latest report from Wood Mackenzie and SEIA. Although solar manufacturing showed remarkable growth in the first quarter of 2025, Wood Mackenzie notes that the upstream manufacturing of solar components, particularly polysilicon and wafers, is experiencing slow or stagnant growth.

While the new solar generation capacity of 10.8 GW represents a decline compared to previous quarters, it is still significant, ranking as the fourth-largest quarter for deployment ever recorded. Gallagher mentioned that the surge in first-quarter records does not suggest that the industry rushed to complete projects ahead of new tariffs or tax credit cuts. Most of these initiatives had been in development for months, meaning any last-minute efforts will likely not be felt until later.

The increasing demand for electric generation is expected to support new solar projects in the long term. Wood Mackenzie is tracking a remarkable 140 GW of new demand from data centers, a significant increase from just 50 GW one year ago. While data center operators are considering other energy sources like nuclear and natural gas, Gallagher explains that the long development timelines and supply chain constraints make solar the only viable option to meet immediate demand.

However, Gallagher cautions that changes to federal tax credits could jeopardize near-term solar development. Many upcoming solar projects have already secured contracts based on the assumption that tax credits will remain available. A sudden reduction in these credits could make these projects economically unfeasible, potentially leading to cancellations or delays as contracts are renegotiated.

The growth of domestic solar manufacturing also heavily depends on federal incentives, not only for manufacturers themselves but also for projects that utilize U.S.-made components. Gallagher argues that the current legislation before the Senate could dismantle one of the most significant industrial revivals in the U.S. in decades, and by stifling the installation of new solar and energy storage resources, it could trigger a dangerous energy shortage.