US Solar Installations Decline 27% in Q1 2026, Yet Solar Accounts for 60% of New Grid Capacity

WASHINGTON, D.C. – The U.S. solar industry installed 7.8 gigawatts direct current (GWdc) of new capacity in the first quarter of 2026, representing a 27% decline year-over-year and a 42% drop from the fourth quarter of 2025, according to the U.S. Solar Market Insight Q2 2026 report released jointly by the Solar Energy Industries Association and Wood Mackenzie.

Despite the sharp quarterly contraction-largely attributed to typical industry seasonality and ongoing market headwinds-solar by itself accounted for 60% of all new electricity-generating capacity added to the grid during the quarter. When combined with battery storage, the two technologies represented an extraordinary 91% of all new domestic capacity additions in the first three months of the year.

The milestone also pushed cumulative solar installations nationwide past 6 million, as solar maintained its position as the leading source of new power added to the U.S. grid.

The first quarter 2021 was driven largely by the utility scale segment bringing to market 5.9 GWdc, though this reflects a 34% decline year over year and a 45% decline quarter over quarter.

Underlying the headline numbers, a very different story is being told by contracting activity as developers executed 6.3 GWdc of utility capacity agreements in Q1, a 15% increase from last year. The increase in the total number of contracts was largely driven by Texas projects with offtakers including the data and tech sectors aggressively pursuing securing electricity needed for AI related data center load.

According to the report, project execution was very strong, with almost all projects completing on schedule or two or three months ahead of schedule. The total utility scale pipeline has grown to 216 GWdc, which supports a strong buildout through 2030; however, near term capacity additions are facing substantial constraints from permitting headwinds.

In a countertrend to the overall declines, the residential segment installed 1,179 MWdc of capacity in the first quarter, achieving a 6% increase year-over-year, though dropping 15% from the final quarter of 2025.

The growth was temporarily buoyed by an overflow of installations initiated at the end of 2025, as customer-owned projects were completed to qualify for the expiring Section 25D tax credit. California, Florida, and Illinois led residential rankings, with Florida and Illinois posting their strongest quarters since the end of 2024.

In 2026, the residential solar segment is expected to contract by 21% over the entire year due to three key developments: the second largest national installer going bankrupt, the issuing of new permits, and less availability of tax equity. However, in 2027, the residential segment should return to growth with an average annual rate of 6% between 2027 and 2031 due to prepaid products and third-party ownership transactions using safe harbor.

Another major sign of the evolving residential market was the 1st quarter of this year, which had a record-setting 45% of all residential solar installations paired with battery energy storage systems, representing a fundamental shift toward hybrid systems, as homeowners have increasing needs for backup power as well as to find ways of reducing their electric bills.

The commercial solar sub-market continues to be very active, with 523 MW installed in the 1st quarter of this year, only down by 4% from the same quarter of last year and down 25% from the prior quarter. California dominated this market with an additional 201 MW added to the total 523 MW installed during the quarter, representing 38% of the total and the installation of legacy NEM 2.0 projects prior to the April 2026 deadline for installation. Interconnection bottlenecks and permitting delays continue to act as limits to growth; however, analysts expect growth to flatline going into 2027 and accelerate thereafter. The community solar segment installed 247 MW during the 1st quarter, down 4% from the same quarter of last year and down 67% from the prior quarter, with New York being the most active state in this category.

Texas continued its dominance as the fastest-growing solar market, leading all states with 1,591 MWdc installed in the first quarter. Florida followed with 1,044 MWdc, while Ohio surged into the top three with 617 MWdc. Indiana ranked fourth, and California-historically the nation's solar leader-fell to fifth place.

In a development that underscores the bipartisan nature of renewable energy growth, states won by President Trump in the 2024 election accounted for 74% of all solar capacity installed in the first quarter. Texas, Florida, Ohio, Indiana, Michigan, Arizona, and Mississippi all ranked among the top 10 states for new solar additions.

No additional solar module manufacturing capacity was added in the first quarter of 2026, despite strong growth in recent years. Although several new cell and wafer facilities are in development, the U.S. solar manufacturing industry remains "gripped by uncertainty" around foreign entity of concern (FEOC) requirements and ongoing trade cases that have stymied new development.

Domestic module producers continued to depend heavily on imported cells, with imports from India, Indonesia, Laos, Malaysia, Thailand, and Vietnam accounting for 78% of U.S. cell imports. The industry expects full FEOC guidance in 2027, with further clarity before the July 4, 2026, safe harbor deadline deemed unlikely.

"In a world of fluctuating fuel prices, energy buyers have made it clear that they want the security, low cost, and speed of solar and storage, which commanded a massive 91% of all new capacity built in Q1," said Darren Van't Hof, interim president and CEO of SEIA. "Yet, as power demand skyrockets, political and regulatory attacks are slowing down the exact resources we rely on."

A separate SEIA analysis shows that 457 solar and storage projects, totaling 100 GW of capacity, currently have permits pending and are vulnerable to politically motivated delays or cancellations.

Michelle Davis, head of solar at Wood Mackenzie, warned that the industry expects solar additions to remain largely flat over the next five years despite record electricity demand. "We've seen a notable increase in solar procurements in utility resource planning, but current permitting bottlenecks continue to serve as near-term headwinds," Davis said.

The standout performer in 1Q has been battery storage. In addition to 40 new utility-scale battery storage projects coming online to include 2.38 GW of capacity and 6.99 GWh of energy on the grid, according to the American Clean Power Association, this was the largest 1Q recorded, with a 48% increase over the last 1Q record set in 2025. For 1Q, storage accounted for 37% of clean power capacity additions, while total U.S. battery storage installation has now reached 47.86 GW.

Texas overtook California as the top state for operational battery storage in the first quarter, adding 714 MW of new storage and further strengthening its role as the leading state not just for wind and solar, but also for storage. The storage pipeline reached 53.8 GW, up 17% from the previous quarter, outpacing both land-based wind and solar in pipeline growth.

In the first three months of 2026, the U.S. added a total of 6.4 GW of solar, battery-storage and wind utility-scale clean power capacity, continuing to increase its cumulative clean power capacity to over 370 GW, or enough to afford power to 80-million-plus U.S. homes, said Wood Mackenzie.

Wood Mackenzie anticipates the utility-scale solar segment (also complete power) will grow at an annual rate of 211 GWdc between 2026 and 2031 and the analysts foresee that after 2027, the solar market will resume its previous trend of expanding.

Sources: Solar Market Insight Q2 2026 report dated June 10, 2026, published by Solar Energy Industries Association and Wood Mackenzie; Clean Power Quarterly Market Report Q1 2026 prepared by the American Clean Power Association.