California Residential Solar Market 2023: Strong Performance Leading Up to NEM 2.0 Deadline

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According to Ohm Analytics, third-party ownership is on the rise in some states due to increasing rates, while market outlooks in different regions are influenced by energy costs and incentives. Despite predictions of a slowdown in the residential solar market for 2023, the slowdown has proven to be more complicated in reality. In California, NEM 2.0 applications are exceeding expectations, while other states in the West and South are not performing as well due to interest rate effects.

Ohm Analytics has revealed that several state markets have experienced an increase in third-party ownership, with Nevada and Arizona seeing the most significant increase from 8% and 12%, respectively, in late 2022 to 12% and 19% in March 2023. Ohm Analytics had previously predicted that regional differences in electricity pricing, incentives, and installation costs would strongly influence returns on investment in addition to effects of increasing interest rates and a possible lull in California after the mid-April rollout of NEM 3.0.

To check more information of NEM 3.0 in California

Wyer, a representative from Ohm Analytics, explained that divergent regional growth is evident, with many southern Sunbelt and mountain states having slower demand due to financing and interest rate issues and some installers losing access to M1 payments. M1 refers to the first solar project milestone payments, which typically include payment to the installer when the contract is signed and another payment at various stages of permit submission and installation.

Larger companies may reallocate their resources towards solar markets with higher electricity rates or greater incentives as higher interest rates are expected to result in monthly loan payments approaching or exceeding current electricity bills. Humphrey noted that cashflow is critical to the residential solar market, particularly for the contractors that use loan products and receive an advance cash injection after signing project contracts to maintain salaries and general business expenses.

One surprising discovery is the strength of the solar market in California leading up to the end of Net Metering 2.0 on April 14, 2023. Ohm indicates that the number of people registering for solar before this date is sufficient to build large books of business, support solar installation teams for multiple months, and exceed industry expectations.

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