Global Solar Power Market: Trends and Prospects of Solar

he solar power market is experiencing explosive growth. Market size for solar photovoltaic and concentrated solar thermal technologies increased from $37 billion at the beginning of the 2010s to almost $200 billion today, and this market growth shows no signs of slowing down.

Solar energy market: key figures

Solar keeps trending upwards as the fastest growing renewable energy market, accounting for more than half of the 302 GW of global renewable capacity installed in 2021. The solar power market has long been led by photovoltaics: today there are enough PV modules installed around the world to generate one terawatt (TW) of electricity, which marks another significant milestone in the history of solar.

Global trends in the solar power market

The rise of the solar energy market is mainly attributable to substantial governmental support and rebates encouraging the adoption of solar, introduced worldwide in a bid to reduce pollution and tackle climate change. Solar energy is derived from sunlight – an infinite and clean renewable energy source, making it a perfect alternative to fossil fuels.

Apart from governmental market policies, the growth of the solar power market is also driven by rising environmental awareness, as more and more residential consumers choose to cut their carbon footprint and contribute to global net-zero efforts. According to Rystad Energy market research, domestic installations have soared 64% in just five years and currently account for 30% of the world’s total solar capacity.

This global push towards renewable energy also motivates international businesses to embrace solar power as part of their sustainable market strategies since the commitment to sustainability dramatically improves a company’s public image and market positioning. The positive environmental impact of the corporate solar takeup can hardly be overestimated: only in the US commercial PV installations offset 2.4 million metric tons of carbon emissions annually. Many large corporations, including Walmart, Apple, and Ikea, have set up solar capacities so far.

The sun's power output, about 3.8 x 10^26 watts, is the ultimate source of energy, driving climate, weather, and supporting life on Earth through solar radiation.

The solar power market is supported by continuous price decline. According to the National Renewable Energy Laboratory (NREL), the price of residential solar generation has fallen from $7.5/W in 2010 to around $2.7/W in 2021, while the cost of utility-scale solar has dropped from $5.7/W a decade ago to $0.9/W in the early 2020s. This market trend was combined with a spike in prices for conventional energy sources, which was a double win for the PV market. Supply disruptions caused by the Russian war in Ukraine and increased demand amid Chinese market recovery from lockdowns drive prices for both oil and gas up, setting the stage for the further transition to solar PV and speeding the development of the solar power market.

Solar power meters measure solar radiation levels, helping optimize solar panel efficiency and determine the feasibility of solar energy installations.

Biggest regional PV energy markets

Now let's take a closer look at the largest regional markets. The major players in the global PV market are Asia-Pacific, the Americas, and Europe. Asian market led by China, Japan, and India far eclipses its main competitors in terms of the total cumulative installed capacity and holds a market share of around 57%. North and South American markets together account for 22% of the global solar market, and Europe ranks third with a 19% market share.

Below we'll look at the top five countries currently dominating the global solar market.  

China

China’s solar energy market dates back to the 1960s, but solar power wasn’t widely spread until the turn of the millennium. The country currently dominates the global solar market with a cumulative installed solar capacity of over 340 GW. And with its current strong pipeline of solar projects, it is expected to add between 83 and 99 GW of new capacities annually in the coming years.

China implements comprehensive initiatives and policies to stimulate the development of the solar market. In 2021, the government set out its five-year strategy for the renewables market, aiming to eventually replace fossil fuels with solar, wind, and hydrogen power. In order to shift from being the world's largest CO2 emitter, China pledged to reach the emissions peak by 2030 and move to carbon neutrality by 2060. Along with taking action on climate change and decarbonization, China hopes to bolster its energy security and reduce its reliance on imported oil, natural gas, and coal. To meet these goals, the country decided to bring 555 GW of new solar and wind projects to the market by 2030.

According to IEA market research, China has invested over $50 billion in new solar PV supply capacity over the past decade, which is ten times more than all the European markets combined. The country also leads the global solar power market in PV panel manufacturing: its share in all solar PV production stages is over 80%, making it the main player in the market of solar related products. And while China's foray into the solar market is boosting the global transition to solar power, its domination of supply chains can potentially cause some trade imbalances, experts fear.

A 5000 W solar power inverter efficiently converts DC electricity generated by solar panels into usable AC power for home or business consumption.

United States

The United States is the second-largest solar power market with a cumulative capacity of over 125GW. Solar power keeps taking over the US and has even become cost-competitive with traditional power markets in several states. This is hardly surprising, given the fact that most American regions have good-to-excellent solar resources and hence a great potential for becoming thriving PV markets.

US solar market growth averages 42% annually, and the number of installed solar systems has increased 30-fold over a decade – it currently exceeds 3 million systems, enough to power 22 million homes. Solar has been the most significant source of the country’s new electric generating capacity for the last several years, accounting for almost half of all capacity added to the US grid. Today nearly 4% of the US electricity consumption is met by solar, and its market share is projected to exceed 20% by 2030.

Effective federal policies are a primary factor behind the US PV market. The most important is the federal investment tax credit (ITC), also known as the federal solar tax credit. Introduced in 2005, it was originally expected to last only until 2007. The policy initially allowed Americans to deduct 30% of the cost of installing a solar system, but only up to $2,000 in total. This limitation held back the development of the PV market, as fossil fuel production still enjoyed much more significant tax benefits. Later a $2,000 cap was removed, and the ITC expiration date was several times extended.

Today homeowners can claim a 30% tax credit on the total cost of PV systems installed between 2022 and 2032. In addition, some US states offer their tax credits and up-front rebates for installing solar, which, together with a federal solar tax credit, make the transition to renewables even more beneficial.

Japan

Japan ranks among the global solar power market leaders, even though its high population density severely limits the possibilities for installing large-scale PV arrays. The country’s cumulative installed solar capacity amounts to 78,651 MW, making it the world's third largest solar energy market.

Japan’s energy policy has evolved considerably since the Fukushima disaster in 2011, so today, the country reduces the share of nuclear in its energy mix and is betting on the solar power market. Under its latest Strategic Energy Plan, Japan aims to achieve 36-38% renewable energy by 2030, with 14-16% coming from solar power, followed by hydro and wind. According to market analysts, Japan is projected to hit 111GW of installed solar capacity by 2025 and 154GW by 2030. In the accelerated case, however, this number can climb to 115GW by 2025 and 180GW by 2030.

The country’s government introduced a set of initiatives and policies to boost the local solar power market. In 2012, Japan introduced a Feed-in-Tariff Act (FIT), under which the government sets the price per kilowatt-hour of solar electricity. FiTs for residential solar installations today stand at $0,147 per kWh and for utility-scale solar at $0.087. Along with FIT, Japan recently launched a Feed-in-Premium (FIP) market mechanism, allowing renewable energy generators to sell electricity in the spot market at a premium to wholesale prices. These measures primarily aim to make solar more cost-effective than nuclear power: Japan estimates solar will become cheaper than nuclear by 2030.

Germany

Although Germany is far from being sun-rich, it firmly holds its position in the world solar power market and leads the solar energy market in Europe. The country’s total installed solar capacity has almost reached 60 GW, which makes up around 11% of its net electricity generation. But Germany doesn’t plan to stop there, with the new government setting an ambitious vision to further develop the local PV market and bring its capacity to 200 GW by 2030.

In Germany, the solar power market is incentivized through feed-in tariffs, allowing solar owners to receive payments for the electricity they feed to the national grid. The government has recently introduced two separate feed-in tariff schemes: now the owners of rooftop solar systems can either accept a smaller feed-in-tariff and use some of their solar power themselves or receive an extra compensation on top of the regular feed-in tariff if they send 100% of their solar electricity to the grid. This measure is designed to fully utilize solar PV and motivate householders and companies to scale their PV systems according to their consumption.

In addition to this, several German regions implemented the mandatory installation of solar systems for newly built homes and non-residential buildings, and similar legislations are expected to be adopted in the rest of the country in the coming years.

India

India is the fifth-largest solar power market with a total installed capacity of 57,7 GW, with over 6,000 MW coming from rooftop installations.

India has an ambitious plan of bringing its renewable capacity to 450 GW by 2030, including 280 GW of solar, and reach net-zero emissions by 2070. The country has made impressive progress in developing its solar market over the last few years but still has a long way to go to achieve its targets.

To stimulate the growth of the domestic solar power market India has to ramp down its current reliance on imports, as 80-85% of the country’s PV modules currently come from abroad, mainly from China. To solve this problem, the Indian government has imposed a 40% import duty on solar modules and a 25% duty on solar cells. This measure aims to give an advantage to local solar manufacturers and support the domestic solar power market. India’s solar policies also include a production-linked incentive (PLI) market scheme helping foreign enterprises to establish manufacturing facilities locally and offering them incentives on incremental sales from solar products manufactured in India.

Market outlook for solar power

According to IEA, even though rising commodity prices can somewhat hamper the growth of the global solar power market, utility-scale solar will remain the cheapest way of adding new electricity capacity, especially given the soaring natural gas prices. Annual capacity additions are expected to steadily grow, with nearly 1 100 GW of solar power coming into operation in the next five years. Overall, almost 60% of all global renewable power capacity additions are expected to come from the solar power market, with utility-scale installations providing more than 60% of all solar power additions.

Growth drivers for global PV

The continued growth in fossil fuel prices is likely to further support the global solar power market and bolster its competitiveness. For large businesses, fixed-price solar contracts will provide a hedge against rising spot market prices for conventional energy.

Supporting government initiatives is another key factor that is going to continue propelling the solar energy market. As environmental concerns mount over and the impacts of climate change become ever more alarming, a growing number of countries are likely to stimulate a shift to renewables. In addition, governments worldwide seek to enhance energy security and decrease the reliance on fossil fuel imports. In the future, getting into the solar market will remain a perfect way of addressing both issues.

Consistent research and technological advancement also play a vital role in driving the solar market growth. Solar efficiency keeps developing, with the most advanced PV cells already approaching a 50% conversion rate. Apart from traditional crystalline photovoltaics, such technologies as PERC and thin-film PV hold great promise for accelerating global solar uptake.

Main challenges for the PV market

Today’s solar power market sees a price increase due to rising commodity and shipping prices. This makes manufacturing and transporting solar modules more expensive and slightly slows down the PV market development.

Another concern is potential imbalances in global solar supply chains due to China’s dominance in solar module manufacturing. Its market share of the entire solar production cycle currently exceeds 80% and can reach 95% in some manufacturing stages by 2025.

And finally, despite being a clean and renewable energy source, the solar market still faces some environmental challenges. Utility-scale solar projects are associated with unsustainable land use, habitat destruction, and soil erosion. Apart from this, the disposal and recycling of solar modules need to be given more attention: PV waste almost universally falls under the general waste category, even though it requires a more complicated recycling process and specialized equipment.