The global solar market has experienced significant growth in 2024, achieving 495 GWdc of installed capacity, a 14 percent increase compared to 2023.
However, this growth is expected to slow in 2025, with projected capacity reaching 493 GWdc, reflecting a slight contraction, Wood Mackenzie report said. The worldwide solar market is influenced by factors such as policy uncertainty, protectionist measures, and interconnection and transmission bottlenecks.
The changing political landscape following 2024 elections introduces uncertainties in renewable energy policies, impacting solar project development worldwide. In the US, President Donald Trump’s administration raises concerns about tariffs and tax credits. Mexico’s power sector reforms and Argentina’s changes in power market operations further complicate private solar investments. In China, the solar industry faces challenges related to policy transitions, curtailment, and revenue risks under the 14th Five-Year Plan.
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Declining financial incentives in mature markets also hinder solar growth. Reductions in capex rebates and export compensation for distributed PV in Germany, the Netherlands, and Italy create barriers for developers. Chile’s proposed subsidy reductions for electric bills affect revenue potential, while uncertainty around net metering and competitive auctions in South Africa dampens investor confidence, impacting both small and large-scale projects.
Protectionist policies and local content mandates introduce additional costs, particularly in regions lacking a mature solar manufacturing base. In India, higher costs for domestic modules and components delay projects and reduce economic feasibility. Similar challenges are seen in Australia and the US, where tariffs on imported solar components strain equipment buyers and developers, exacerbating supply constraints as domestic production remains insufficient to meet 2025 demand.
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Wood Mackenzie highlights a key trend shaping the global solar market in 2025 and beyond: the industry’s efforts to meet the surging electricity demand driven by data centre growth. Data centres, fueled by the rapid adoption of AI technologies and large language models like ChatGPT, are poised to become a major driver of energy consumption. AI software adoption is advancing at a pace comparable to the rise of mobile phones, with data centre demand potentially growing by 10-20 percent in several US regions over the next five years.
This shift marks a new era where renewables will not only replace existing fossil fuel generation but also address substantial demand growth. Solar development will be driven by innovative solutions to meet these challenges, including paired solar assets combining storage, wind, and natural gas to provide firm, zero-emission capacity. Sophisticated data centre offtakers will spearhead a wave of innovation, prioritizing access to reliable power despite higher costs.
As data centre developers compete with traditional offtakers for solar assets, Power Purchase Agreement (PPA) prices are expected to rise. Solar developers capable of delivering large-scale, multi-GW projects will thrive in this competitive and scalable environment, potentially spurring market consolidation and increased transaction activity in 2025.
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The global solar market is set for a significant transformation in 2025, shifting from record-low solar panel prices over the past two years to higher prices driven by rationalized production. Prices are expected to rise to approximately US$0.15/W FOB China, levels not seen since 2021. Despite overcapacity in module component manufacturing, leading manufacturers, including GCL, Tongwei, Trina, Longi, Jinko, JA, and Canadian Solar, have pledged to limit production and maintain minimum pricing, creating a seller’s market.
China will remain the dominant solar manufacturing hub, housing 75 percent (1.2 TW) of global operational capacity for major module components. However, new manufacturing hubs will emerge due to government initiatives and regional demand. India’s cell capacity will grow under the Approved List of Cell Manufacturers, reducing reliance on China-sourced cells. The US will expand its domestic module, cell, and wafer production as tariffs on imports from Southeast Asia drive localized manufacturing. The Middle East is also becoming a significant solar manufacturing hub, with investments from Chinese manufacturers establishing polysilicon, wafer, cell, and module facilities in Saudi Arabia, Oman, the UAE, and Egypt. These capacities will meet rising local demand and supply the US market, bypassing tariffs on Southeast Asian modules.
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The global solar market in 2025 will witness transformative technological shifts, driving asset efficiency and innovation. Utility-scale solar will see TOPCon and Heterojunction (HJT) technologies dominate, replacing p-type PERC technology, with modules achieving efficiencies of over 25 percent and wattages surpassing 800 Wp. These advancements will reduce land use by 15 percent and project costs by 5-10 percent, though larger module sizes may pose transportation and installation challenges. In distributed generation, Interdigitated Back Contact (IBC) technology will lead, driven by major manufacturers shipping significant volumes.
Inverter technology will advance to 2000 Vdc architecture, enabling longer strings and reducing utility-scale solar costs. Manufacturers like GE Vernova and Sungrow are leading this transition, supported by updated safety regulations. The tracker industry will incorporate AI and machine learning, enhancing production yields by 2-6 percent and optimizing stow positioning to mitigate weather risks. Companies like Nextracker and Array Technologies are at the forefront of these smart tracking solutions.
Labour shortages and rising costs will accelerate the adoption of robotics for construction, operation, and maintenance. Automated solutions from companies like Terabase Energy and AES double labour productivity and reduce installation time by 50 percent, even in harsh conditions. Innovations in vegetation management, such as robots from Swap Robotics, promise to cut maintenance costs by 10-20 percent. These advancements will make solar projects more scalable, efficient, and resilient.
Baburajan Kizhakedath