As 2024 draws to a close, it’s time to reflect on what we have seen for the U.S. Solar and Storage market and make some predictions for 2025! Here’s the four major market trends we see going forward for the residential and commercial solar and battery storage market.
1. Continued Growth of Residential Solar and Battery Storage
The economic fundamentals for switching to solar and storage are stronger than ever before. We are seeing 4–7-year paybacks in the top U.S. solar markets. Despite a contraction in California’s market from 2023 to 2024, due to its new NEM 3.0 policy, the overall U.S. residential solar market will grow in 2025, driven by three factors below.
First, electricity tariffs for all major U.S. utilities are increasing at an unprecedented rate, fueled by aging infrastructure, and rising distribution costs. Pacific Gas and Electric in California, the largest U.S. utility has had five rate increases in 2024, a new record. Dozens of other large utilities are following the exact same trajectory.
Second, battery prices continue to drop, improving the overall ROI of solar-hybrid projects. Cell prices have fallen below $100/kWh for new orders, with increased price competition driven by overcapacity and an influx of new entrants.
Third, U.S. household electricity demand is growing due to electrification. This is led by EV charging as well as heat pumps and other electric appliance trends that are more energy efficient. This further highlights the need for onsite solar and storage to procure cheaper electricity. Homeowners are increasingly pairing their systems with EV solar panels, which optimize charging for electric vehicles by directly utilizing solar power.
2. Commercial Business Adoption Will Continue to Expand in New U.S. Markets
Commercial Solar will see expansion in several new markets in the Midwest and South East. While large corporations continue to sign off-site solar PPA, the onsite solar market continues to grow for mainstream businesses. One of the emerging new trends for employers is to charge EVs with solar power, made possible with solar carports plus onsite storage. In California, EV charging stations are mandatory for all new car parking, and adding solar-plus-storage is now a straightforward choice with a compelling ROI.
The Solar Investment Tax Credit (“ITC”) is still an important consideration for such commercial (and residential) projects to achieve a desired ROI, and this ITC provision has always enjoyed bi-partisan support for the last 20 years. Originally launched by the George W. Bush Administration in 2005, the ITC has been extended multiple times by Congress, leading to job-creation for a large solar workforce across the nation and a massive manufacturing base which was further boosted by the IRA in 2022. We do not expect the ITC to be eliminated under the Donald Trump Administration, although provisions for domestic content requirements that avail extra 10% credit currently, might become a requirement. There is a substantial supply of U.S.-made panels and battery storage available to absorb demand even if new tariffs are imposed on Chinese-made panels.
3. Sales of Solar and Storage Will Increasingly Become More Complex
The primary trend we have seen the last few years is to replace net metering with net billing programs such as the California NEM 3.0, lowering the value of the energy exports and this trend will continue. This has led to a surge in storage attachment rates, now crossing 60% on new sales, further adding to the complexity of the sale. New states are following suit, with Illinois introducing the ‘Smart Solar Billing Tariff’, where exports value based on time-of-use pricing.
The additional driver of sales complexity is the varying levels of incentives and changing tariffs. For example, New Jersey is launching a Battery Storage Incentive, offering $400/kWh for small scale storage. North-east states like Connecticut and Massachusetts have similar incentives. Utilities will continue to incentivize storage adoption through additional rebates and usage incentives such as VPP schemes, as they entice consumers to pay and subsidize the aging grid infrastructure.
4. Solar and Storage Owners Need Support due to Growing Asset Management Needs
Estimates suggest over a million U.S. residential customers are now stranded without an installer of record. With over 2 million solar homes that are approaching the 10-year life point, systems will need repairs and upgrades, as their first-generation solar inverters are near the end of their warranty life.
In addition to warranty repair, many such clients will need to upgrade to larger systems as they may also be EV owners now, which will force the addition of energy storage to retain their NEM status (e.g. in California). Solar plus battery systems have greater asset management needs due to the several additional operating modes of these systems.
Most solar companies are not well equipped to handle this transition, lacking robust asset management systems that can reliably service their clients. Furthermore, several companies lack full-time maintenance teams to service client issues efficiently, especially for battery storage clients.
