The U.S. solar market is set to nearly triple over the next five years, thanks to the Biden administration's Inflation Reduction Act, according to a recent report from the Solar Energy Industries Associations and Wood Mackenzie.
The report estimates the U.S. market will grow by 40% more than previous forecasts through 2027 as the White House invests in clear energy initiatives and issues a decade of consumer tax credits to incentivize Americans to make their homes more energy efficient.
"The Inflation Reduction Act has given the solar industry the most long-term certainty it has ever had," said Michelle Davis, principal analyst at Wood Mackenzie, in a statement. "Ten years of investment tax credits stands in stark contrast to the one-,two-, or five-year extensions that the industry has experienced in the last decade. It's not an overstatement to say that the IRA will lead to a new era from the U.S. solar industry."
The report projects total solar installations across all market segments will grow from the 129 gigawatts (GW) currently installed to 336 GW over the next five years. And much of that growth will be coming from the residential sector, which set its fifth quarterly record at 1.36 GW installed in the second quarter, according to the report.
This growth is expected to boost clean energy exchange-traded funds (ETF) like iShares Global Clean Energy ETF (NASDAQ: ICLN) and Invesco Solar ETF (NYSE: TAN).
ICLN offers investors a broad bet on the clean energy industry--including biofuels, ethanol, geothermal, hydroelectric, solar, wind, semiconductor equipment, renewable electricity, and other electrical utilities and equipment--while TAN offers a pure play of the solar energy sub-industry. ICLN and TAN are both up for their respective year-to-dates at 4% and 8%.
The solar industry projections also come amid more frequent energy grid outages that is causing more Americans to rethink how they power their homes. Recently, California has recommended for residents to reduce their energy usage due to a record heat wave driving the state's power demand to new highs. Other extreme weather events, like what occured last year in Texas, may also lead to more consumers switching to solar power.