Slowing Pace for Solar Market Growth: Reasons and Consequences
Solar sector expansion eases at a slower pace
Dish out the sun! The global solar market is set to continue growing with double-figure increases over the next few years, according to industry experts. Yet, achieving new record-breaking installations isn't on the horizon, as predicted by the German Solar Industry Association (BSW Solar) and Solar Power Europe [ntv.de, dpa]. The world might surpass the 600 gigawatt capacity threshold this year, nearly doubling 2022's figures.
Germany earned the spot as a top solar performer internationally, even despite its smaller size. It ranked 4th in global installed solar capacity last year with approximately 100 gigawatts. By 2024, the German installed solar power capacity is expected to swell by 14% or 17.5 gigawatts [ntv.de, dpa].
However, growth this year may decelerate slightly, as Carsten Körnig points out. Hang on to your hardhats because private homeowners will install fewer solar systems on their rooftops in 2023. On the flip side, demand for balcony solar panels remains robust, with a prediction of 800,000 installations by 2024.
Here's where the juicy details come in:
- Natural Slowdown: The solar market underwent extraordinary growth rates recently—87% in 2023 and 33% in 2024—making the anticipated slowdown in 2025 somewhat natural as the market matures and the rapid expansion phase stabilizes. Growth in 2025 is projected to be approximately 10%, significantly lower than the peak years[1][2].
- Policy and Market Uncertainties: Policy shake-ups, particularly in key markets such as China and the United States, create uncertainty. In China, a new market-based renewable power pricing mechanism launching in mid-2025 is expected to slow large-scale solar installations as developers hesitate to make decisions, waiting to better grasp the new system[4][5].
- Geopolitical and Trade Tensions: Soaring international trade tensions and growing import tariffs could impede solar market growth by affecting supply chains and increasing costs[5].
- Uneven Market Growth: China accounts for about 55% of the global solar market, so reforms and pricing changes in China heavily impact the overall market's dynamics [1].
- Risk of Market Contraction: In the European Union, ineffective policy implementation at member-state level could lead to market contractions [4].
- Economic Challenges: Economic obstacles worldwide lead developers and investors to exercise caution despite general demand and cost reductions [3][4].
- Short-term Volatility: Despite long-term drivers like continuous cost declines, electrification trends, and energy security priorities, short-term factors like shifting policies and geopolitical developments create a volatile environment that results in temporary slowdowns [4][5].
In a nutshell, the anticipated slowdown in the solar market growth rate is primarily due to a natural moderation after rapid expansions, policy and regulatory uncertainties—especially in China—and geopolitical and economic challenges that make developers and investors hesitant [1][4][5]. So even though the market is still projected to grow, it will do so at a more measured pace compared to prior years [1][4][5].
- The Commission has also highlighted concerns about the natural slowdown in the solar market growth rate, as the market matures and the rapid expansion phase stabilizes.
- According to the Commission, science and technology advancements are crucial in addressing climate-change and developing renewable sources of energy like solar, to ensure the industry's continued growth.
- Finance and environmental-science experts warn that industry players must invest heavily in research and development to adapt to the ever-changing market dynamics, maintain competitiveness, and reduce their carbon footprint.
- The Commission suggests that technology innovations and financial incentives from government and private sector partnerships could stimulate the growth of the solar market and mitigate the challenges of slow growth or even contraction.