Regulatory changes significantly affect residential solar projects. Policy shifts, such as the addition or removal of compensation mechanisms like net-energy metering or feed-in tariffs, can cause dramatic year-over-year increases or decreases in the installation of residential solar projects in markets worldwide, note Senior Partner Scott Perl and colleagues.
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A series of line graphs show the impact of major regulatory shifts on annual residential solar additions in 6 large markets: Brazil, Germany, California, Poland, the US, and Vietnam. Each line chart shows additions indexed to 100 (representing the peak year). The x-axis for each chart shows time, with “2 years before” an event, “event,” and “2 years after” the event marked. The y-axis shows the index of annual residential solar additions.
In Brazil, the index rose from ~30 to 100 at the event and then remained at 100 for 1 year afterward. This change was due to net-energy-metering (NEM) changes that reduced surplus electricity value by 45% in 2023, an effect offset by reduced capital costs.
In Germany, the index rose from ~30 to just under 100 at the event and then declined to ~75 after 2 years. This was due to feed-in-tariff (FiT) for solar decreasing under the Energy Services Act in 2010–11.
In California, the index rose from ~65 to 100 at the event, followed by a decrease to below 60 after 2 years. This was due to a NEM 3.0 policy that reduced payment rates for surplus energy connected to the grid by 80% from 2023.
In Poland, the index rose from ~55 to 100 at the event, then declined to just above 60 after 1 year. This is because NEM was phased out at the end of 2022.
In the US, the index rose from ~20 to 100 at the event before dropping to ~20 after 2 years. This resulted from an investment tax credit decreasing to 10% from 30% at the end of 2016.
In Vietnam, the index rose from near zero to 100 at the event. This was followed by a sharp drop to ~20 after 2 years, due to the expiration of the Solar FiT in mid-2019.
Note: This image description was completed with the assistance of Writer, a gen AI tool.
Source: McKinsey solar-distributed generation and behind-the-meter battery energy storage system forecasting model; Wood Mackenzie.
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To read the article, see “Residential solar: Down, not out,” February 3, 2025.