U.S. solar manufacturing booms in Q1 while uncertainty looms

The increased manufacturing capacity supports the growing solar generating capacity, with solar and storage accounting for 82% of all new generating capacity added to the grid. However, the House bill coupled with rising tariffs threaten the trajectory.

June 9, 2025 Anne Fischer

ES Foundry opened a solar cell manufacturing plant in South Carolina.

Image: ES Foundry

The 8.6 GW of new solar module manufacturing capacity added in Q1 2025 marks the third-largest quarter for new manufacturing capacity on record, according to the U.S. Solar Market Insight Q2 2025 report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.

In addition to growing module capacity, U.S. solar cell production capacity doubled in Q1 to 2 GW with the opening of the ES Foundry factory in South Carolina.

The increased manufacturing capacity supports the growing solar generating capacity, which the report finds grew 10.8 GW in Q1, with solar and storage accounting for 82% of all new generating capacity added to the grid.

While solar manufacturing and deployment continue to lead American energy independence and growth, new tariffs and potential changes to federal tax credits pose significant business uncertainty for the industry and threaten its long-term growth, according to the report’s authors.

SEIA and Wood Mackenzie’s forecast for the industry, which accounts for tariffs levied in Q2 but not potential roll backs of the federal tax credits, projects declining deployment nationwide, which could result in lost investment in local communities, energy shortfalls and increased energy bills for Americans.

“Rollbacks of the energy tax credits, on top of recently levied tariffs, would unequivocally worsen the damage to the solar industry,” the authors said.

A separate analysis by SEIA of the impacts of the potential passage of the House bill projects a devastating energy shortage for the U.S. economy. That analysis found that if lawmakers in the Senate fail to change course, 330,000 current and future Americans jobs could be lost, 331 factories could close or never come online, and $286 billion in local investments could disappear.

If Congress cuts energy tax incentives, SEIA’s analysis projects that energy production will fall 173 TWh and the United States will not be able to meet demand or compete with China in the global race to power AI.

The report noted that several factors affect various sectors of the market such as high interest rates “and other market headwinds” that will continue to drive down the residential market.

The U.S. residential solar market has been in decline for some time, initially in response to high interest rates but also due to cuts in net metering, as seen in California. Just recently the market witnessed the bankruptcies of major national installer SunPower, residential solar lender, Mosaic and a subsidiary of Sunnova Energy. The report finds that in Q1 2025, the residential solar market added 1.1 GWdc, representing a 13% year-over-year decline and 4% quarter over-quarter decrease. Compared to Q1 2024, 22 states experienced drops in installed capacity.

In contrast to the tumbling residential sector, the commercial solar market reached its record first-quarter of installation capacity in Q1 2025, adding 486 MWdc, a 4% year-over-year increase.

Community solar requires state policy, but with fewer than half the states having enacted supportive policy, the sector is in jeopardy, according to the SEIA/Wood Mac report. The Q1 report forecasts that without additional statewide programs, community solar growth will stagnate through 2030. In Q1 2025, community solar installations declined 22% year-over-year, resulting in 244 MWdc of new capacity. Some states fared worse than others. For example, in Maine and Massachusetts, installed capacity fell by 85% and 78% year-over-year, respectively.

Utility-scale solar has been on an upward trajectory but policy uncertainty is causing some large projects to be scrapped. The report find that the utility-scale sector installed 9 GWdc of projects in Q1 2025, representing a 7% decline year-over-year. The top five states with the largest installations are Texas, Florida, Ohio, Indiana, and California, making up over 65% of total installations this quarter.

Looking ahead

While there is much uncertainty around federal policy and tariffs, there is much certainty about the accelerating load growth as data centers proliferate. The SEIA/Wood Mac report authors said they consider the major drivers of increased solar to be the imminent load growth coupled with corporate sustainability goals.

In the report’s base case, the U.S. solar market is projected to add more than 250 GWdc by 2030, with the caveat being the policy and tariff risks. This base case incorporates the latest tariff announcements.

“In addition to the 25% tariffs on Canada and Mexico, we assume settlement of tariffs over the next 90 days, including a 30% tariff rate for China in 2025 and 2026, and a 10% rate for all other countries,” said the report’s authors.

The outlook does not, however, take the budget reconciliation bill into account. Overall the uncertainty caused by potential changes in tax credit policy and tariffs will cause the U.S. solar industry to contract by 2% annually through 2030 in the report’s base case. Other factors hindering growth include labor shortages and interconnection delays. However, even with the contraction, the report expects an average of 43 GWdc to be added to the grid each year through 2030.

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