Choosing to follow the sun, the United States strongly turned to the solar industry in 2019. According to a new report from Wood Mackenzie/SEIA U.S. Solar Market Insight, the solar market installed 13.3 gigawatts (GW) of solar capacity in 2019, representing a 23% increase over 2018. In fact, approximately 40% of all new electric generating capacity in the U.S. came from solar in 2019 -- the largest annual percentage in the industry's history.

When expanding the time horizon even further, the solar industry's growth becomes even more glaring. Whereas cumulative photovoltaic (PV) operating capacity was 1 GW at the end of 2009, it now stands at over 76 GW. Industry experts expect growth will extend into 2020, but the global efforts to contain the spread of the novel coronavirus may curtail the robust growth that analysts have predicted.

An electrician works on solar panels.

Image source: Getty Images.

Bring it on home

With the nonresidential PV market reporting a year-over-year decline in 2019, the residential market picked up the slack and contributed to the solar industry's record-breaking year. Besides growth in Texas, Nevada, and Florida, it was in sunny California where growth in the residential market was most noteworthy. In fact, it became the first state, in the fourth quarter of 2019, to install more than 300 megawatts (MW) of capacity in one quarter. While the mandated power outages stemming from the California wildfires represented one significant factor in that growth, new home construction also figured in prominently.

Unsurprisingly, the recent Q4 2019 earnings reports of some of the nation's leading residential solar providers are consistent with the Wood Mackenzie/SEIA U.S. Solar Market Insight report. Sunrun (RUN -6.89%), for example, recently reported that it added 52,000 customers to its base in 2019, representing 22% growth over 2018; moreover, the company reported a 24.7% year-over-year increase in its cumulative leased megawatts deployed. Meanwhile, Vivint Solar (VSLR), which has been providing residential solar solutions since 2011, reported that it ended 2019 with cumulative installed capacity of 1,294 MW, representing a year-over-year increase of 22%.

Keeping it in the community provides a silver lining

Despite the significant gains recognized in the residential PV market last year, the nonresidential market failed to grow in 2019. In fact, the 2 GW of nonresidential installations in 2019 represented a 7% decline from the approximately 2.14 GW of installations booked in 2018. According to Wood Mackenzie and SEIA, the shrinking nonresidential installations can be attributed to "a handful of state-specific regulatory cliffs and policy reforms in 2019." For example, in California, "installations declined year-over-year stemming from the transition to new time-of-use rates and the resulting damage to the favorability of project economics." Furthermore, interconnection delays in Massachusetts contributed to the state reporting its lowest annual nonresidential PV installed capacity total since 2013.

One bright spot in the nonresidential segment, however, was the growth of community solar, which allows community members to source their electricity from a solar installation that is accessible to the community. Gaining traction in a variety of states, community solar accounted for more than 500 MW of installations in 2019 for the third consecutive year.

A little black spot on the sun

Clearly, 2019 was a strong year for the solar industry, and according to experts, 2020 is poised to represent another year of considerable growth. In fact, Wood Mackenzie forecasts 20 GW of PV installations in 2020, representing 47% growth over the 13.3 GW added in 2019, due to "increased confidence in near-term projects being completed in 2020 and the spillover of several 2019 projects into 2020."

While this forecast may come to the delight of those keen on seeing renewable energy continue to assume a more prominent position in our energy landscape, it's imperative to note that the forecast doesn't account for the effects of the novel coronavirus on the industry. The changes brought to our daily lives as politicians implement increasingly stringent restrictions to prevent the spread of the novel coronavirus will likely pose significant challenges to the industry. This may, for example, manifest as complications in the supply chain. Recently, Canadian Solar (CSIQ -0.94%), a leading manufacturer of PV modules, issued a press release in which the company stated that its manufacturing capacity suffered setbacks at the end of January through the first 10 days of February due to the virus. 

The sunny conclusion for investors

For investors who have been bullish on solar, the industry's growth in 2019 and presumed continued growth in 2020 come as welcome news. However, the devastation wrought by the coronavirus may, likewise, dampen their auspicious outlooks. For investors with a long-term investing horizon, though, the possibility that the solar industry doesn't achieve its forecast of 47% year-over-year growth in 2020 is fairly inconsequential. The overarching trend is that the residential market has warmed up to the prospect of solar solutions for their homes. And although the prospect of delays in the installations of these systems may be unfavorable, it won't translate to homeowners eschewing the option altogether. The spread of the coronavirus will pose some challenges for the industry, but the long-term trend in growth remains intact.