Slowing Down but Still Growing: The Solar Market's New Normal
Expansion of solar energy market exhibits a steadier, less rapid pace
After a series of impressive years, the solar energy sector anticipates continued growth in the future, albeit at a slower pace compared to the past record highs. This prediction stems from industry forecasts, including those of BSW Solar and Solar Power Europe. In 2023, the global addition of solar installations could surpass the 600-gigawatt threshold, approximately double the amount from the previous year.
Germany, despite its smaller size, is one of the top performers on the global stage. With an installed capacity of around 100 gigawatts in 2022, Germany ranks fourth, somewhat behind China, the USA, and India, according to analysts at BSW Solar. By 2024, the country is projected to increase its solar power capacity by a substantial 14 percent, or 17.5 gigawatts.
However, the growth rate may moderate slightly in 2023. Carsten Körnig explains that residential solar system installations might dip slightly this year. Conversely, demand for balcony solar systems remains strong and is expected to reach approximately 800,000 units by 2024.
The reduction in growth can be attributed to a confluence of factors. Firstly, a natural market normalization after an extended period of rapid expansion. Secondly, policy uncertainties and changes in major markets such as China and the US create volatility and potentially mitigate growth. In the European Union, inadequate implementation of policy frameworks at regional levels could even lead to market contraction.
Moreover, the solar manufacturing industry is dealing with an overcapacity issue that has resulted in significant module stockpiles. This excess supply and lower prices have exerted pressure on the entire PV (photovoltaic) value chain, causing concern for manufacturers and investors alike.
Policy and investment uncertainty also play a significant role. Unclear future prospects for key policy incentives like the IRA, tariffs, and renewable energy tax credits have triggered a decline in corporate finance and investment for solar projects, bringing the sector to a halt. Specifically, corporate financing for global solar companies fell by 41 percent year-on-year in Q1 of 2025, with similar drops across energy storage and smart grid sectors.
Lastly, grid limitations and increasing curtailment pose significant challenges for the sector. Large-scale curtailment of solar power, when it cannot be fully utilized or fed into the grid, results in substantial generation losses and project risk for investors. For example, solar arrays in Brazil experienced an average curtailment rate of 17.1 percent between April 2024 and March 2025, leading to postponed investments and a decline in new large-scale solar plant implementations in 2025 despite prior growth.
In summary, the slower growth pace is attributable to a mix of policy uncertainty, manufacturing overcapacity, grid challenges, and investment declines, which temporarily hinder a market otherwise primed for long-term rapid expansion. Despite these short-term obstacles, the global solar market is still expected to rebound and maintain strong double-digit growth beyond 2025, with declining costs, cross-sector electrification, and energy security priorities potentially propelling the market to reach terawatt-scale annual installations by 2030.
The Commission has also recognized the challenges faced by the solar industry, with science and climate-change experts emphasizing the need for investment certainty and policy stability to boost renewable energy financing. Environmental-science scholars have warned that climate-change mitigation efforts could be hampered if financial institutions remain hesitant to back solar projects, given the looming uncertainty surrounding energy policies in key markets. Moreover, the finance sector is encouraged to play a more active role in supporting the transition to a low-carbon economy, with sustainable energy investments potentially providing attractive returns in the long run.
