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The solar industry logged its largest first quarter of installations on record by a significant margin in 2020, but overall dire projections on the coronavirus impact dampened any positive news for the industry.  

With new data released Thursday, analysts at Wood Mackenzie confirmed what the solar industry has feared: distributed solar has taken a significant hit due to the coronavirus, and no part of the industry was entirely insulated.

While the large-scale solar market is expected to push the overall market to 33 percent growth in 2020, the industry is believed to be working through the most difficult stretch of the year. Q1 2020 overlapped only slightly with the impacts of the coronavirus, and the industry is now in the throes of a Q2 where many states were shut down for months.

That hurdle comes after a record Q1 for the residential sector, which grew 42 percent year-over-year to 810 megawatts and nearly matched last year’s fourth quarter, which is traditionally the largest for solar installations. Looking ahead, WoodMac, who produced the report along with the Solar Energy Industries Association, expects “residential solar growth in Q2 to be severely hampered” and declines of about one-quarter in the whole of 2020. 

“Residential is the most immediately impacted, because their sales and installation cycles are much shorter than commercial and utility-scale,” said Austin Perea, a senior solar analyst at WoodMac.

This year the consultancy anticipates a 32 percent decline in installations for distributed solar compared to 2019. WoodMac cut its overall expectations for 2020 installations by 9 percent, now forecasting about 18 gigawatts of solar this year.

As the virus continues spreading, however, much remains unclear. WoodMac assumed a 5 percent contraction in U.S. GDP in 2020, before it bounces to 3 percent growth in 2021. Further waves of the virus and economic response would change the outlook.

“There’s a lot of uncertainty,” said Perea. “No one actually knows what the timeline on a vaccine looks like and how the virus will react once everyone reopens.”

Uneven impacts for the solar industry

What is certain is the uneven effect the pandemic has had on the solar industry. Solar companies have lost 72,000 jobs since the U.S. began feeling the impacts of the virus, according to the Solar Energy Industries Association, but most of the strain has thus far fallen to home solar developers and installers. Though the industry’s national installers have not yet reported Q2 figures, some companies have noted declines in demand that exceed 50 percent.

Growing geographic spread in the residential solar industry may diffuse some of the coronavirus’s impact on the residential market. States such as Florida, Texas and Colorado logged record quarters in Q1 and have begun reopening more aggressively than the still-leading market of California. A larger share of installations sited in more states means the potential for future shelter-in-place orders and second waves of the virus may only shut down a portion of the market.

In May residential installers have begun reporting an uptick in sales, but analysts caution that the second half of the year will not match pre-coronavirus levels, as the industry confronts the potential for further spread of the virus and economic conditions that will depress overall consumer spending.

“Installers say there’s a rebound in demand, that is obviously true,” said Perea. “But it’s a rebound relative to the hit that they took in April. Some installers saw a 60 percent decline in their installations.”

That decline in demand is coming for commercial solar as well, but a longer development cycle is expected to delay the most serious pain until 2022.

“On the C&I side, the impacts are going to be much longer-term,” said Perea. “The origination cycle right now is completely drying up, and folks are focusing on the execution of projects. Commercial interests are holding off on procuring.”

Shutdown orders also brought delays for commercial projects, but longer timelines mean the impacts were not as immediate as for the residential industry. Analysts expect many projects will be pushed into 2021.

Not even the relatively resilient large-scale segment of the industry completely dodged the effects of the pandemic. Numerous projects will be completed on delayed timelines, though overall installations are forecasted at 14.4 gigawatts, up from about 8.4 gigawatts last year.

That sector is the one expected to carry the overall industry to growth in 2020. Though the investment tax credit steps down after 2022, WoodMac still expects that segment to average about 13 gigawatts through 2025. That’s significant when compared to the sector’s previous record of nearly 10.8 gigawatts installed in 2016, but far from the 70 gigawatts of wind and solar combined that academics say would be required to reach a 90 percent clean grid by 2035.

Advocates at groups such as the International Energy Agency have pitched renewables as a tool for coronavirus recovery plans, but thus far that idea has gained little traction with U.S. policymakers. Scientists say the world must reach net-zero emissions by 2050 to avoid the worst impacts of climate change. The U.S. does not have federal policy in place to achieve that.