A (very) short primer on solar farms

Solar electric panels of glass-covered solar cells create electricity directly from sunlight. When sunlight hits the panels, semiconductors inside the solar panels are activated to produce electricity. The electricity is sent to the power grid and distributed for consumers to use.

 A solar farm is a large collection of interconnected solar panels. A community solar project is smaller than a utility-scale project where the power generated is distributed directly to end-users in the vicinity. Utility-scale projects connect to the grid either directly via a substation or by tapping a transmission line. In both types of projects, the panels are usually mounted to the ground using some sort of foundation structure.

According to Wood Mackenzie, the global solar PV industry grew 28% per annum between 2019 and 2023, including a whopping 56% growth in 2023 (representing a post-Covid bump once supply chains normalized). Going forward, growth is expected to slow in most markets as the industry matures, which is to be expected. However, it is still amazing that the solar power industry has grown so much, so fast, with solar moving from a new technology to become the core technology of many energy transaction plans, including the US’s. In fact, Wood Mackenzie expects it will be the largest category of generating capacity on the US grid by 2050.

Some of the US solar expansion is being driven by favorable tax, loan, and other programs. The Inflation Reduction Act of 2022 is considered the most ambitious clean energy legislation ever enacted in the US. The IRA provides favorable loan and other credit programs for solar projects. In addition, under the federal solar Investment Tax Credit (ITC), utility-scale solar projects that started in 2021 or 2022 are eligible for a 26% tax break, and those started in 2023 get a 22% tax break. This decreases to 10% for projects starting in 2024 or later.

While challenges to the industry’s growth exist in the form of grid connection issues, uncertainty around continued tax incentives and regulation, labor availability to construct projects, and increasing need for storage innovation, solar can be expected to be an important industry over the long-term.