Commodities
US Solar Faces Growth Ceiling as Trade, Tax Credit Pressures Offset Strong Demand, Wood Mackenzie Says
US solar installations fell 27% to 7.8 gigawatts direct current in Q1 2026 as seasonal slowdown weighed on activity, though policy and trade uncertainties are emerging as longer-term growth risks, Wood Mackenzie strategists said in a Wednesday note.Installations also declined 42% from Q4 2025, but solar still contributed 60% of all new US power-generation capacity added during the quarter, according to Wood Mackenzie.Solar and battery storage together accounted for 91% of total new capacity additions in Q1, underscoring their dominant role in the country's expanding electricity system, the report said.Wood Mackenzie said trade policy changes, tighter financing conditions, expiring tax credits and permitting delays are creating barriers to faster growth across the sector.The firm estimates that 216 GWdc to 240 GWdc of utility-scale solar projects have secured safe-harbor status, with most projects qualifying before FEOC requirements took effect at the end of 2025.That pipeline should support strong utility-scale construction through 2030, even after normal project cancellations and delays.Developers signed contracts covering 6.3 GWdc in Q1, up 15% over the year, with Texas projects and demand from data center and technology companies driving activity.Project execution remained strong, with developers completing nearly all projects on schedule, highlighting continued demand for utility-scale solar capacity, Wood Mackenzie said.The Department of Commerce recently imposed preliminary anti-dumping and countervailing duties on solar cells and modules from India, Indonesia and Laos, the report said.Those countries, together with Malaysia, Thailand and Vietnam, supplied 78% of US solar cell imports last year, raising concerns about future supply availability.Domestic module production has expanded to about 70% of 2025 installation levels, but the US still operates only 3 GWdc of cell manufacturing capacity, leaving manufacturers reliant on imports.Wood Mackenzie expects US solar installations to average about 43 GWdc annually from 2026 through 2031, enough to double total solar capacity over five years, though annual deployment levels will remain largely flat.The firm forecasts a 21% decline in residential solar in 2026 following the expiration of the Section 25D tax credit, while California's transition away from Net Energy Metering 2.0 will weigh on commercial installations. Residential demand should recover in 2027 and commercial demand in 2028.Wood Mackenzie raised its 2026-2031 outlook by just 1.4% from last quarter, citing interconnection delays, permitting hurdles, expiring federal incentives and trade uncertainty as key constraints on future growth.
