The solar energy industry has experienced remarkable growth, quickly becoming a key player in the renewable energy sector. However, changes are on the horizon as major markets like the United States and China adjust their policies.
Developers are now adopting a more cautious approach, focusing on battery storage and long-term contracts to handle fluctuations in prices and ensure steady profits. According to BloombergNEF, new solar capacity increased by 16% this year. While this is a noteworthy rise, it’s the slowest rate seen in several years.
This acceleration pales in comparison to the 30% average growth noted over the last decade, with forecasts suggesting a drop to about 3% annual growth by 2035. The slowdown is most pronounced in China, where new policies introduced market-driven pricing for renewables. Previously, solar and wind projects benefited from a stable income for up to 20 years tied to coal-generated electricity prices.
Lara Hayim, a solar analyst at BloombergNEF, pointed out, “The solar plants will be exposed to power prices, which introduces a lot of risks.”
After the new regulations, many developers rushed to finalize projects before the changes took effect, significantly increasing installations in May. However, numbers quickly fell in June, dipping below 20GW, as reported by the International Energy Agency.
In the US, growth is also expected to decelerate due to less favorable renewable policies. A report by the IEA downgraded the solar growth projection for the US between 2025-2030 by nearly 40% compared to 2024.
Despite this cooling in major markets, emerging countries in Asia, Sub-Saharan Africa, and the Middle East are poised for greater advancements. Saudi Arabia stands out as a leader due to lower solar panel costs from China and a government initiative to diversify its economy away from oil.
The rapid growth of renewable sources, particularly solar and wind, has led to unstable electricity prices. Excess supply during the day can reduce prices, often resulting in negative pricing, while evening demand experiences sharp spikes.
As the market matures, especially in Europe, competition has intensified. This has put pressure on solar providers to deliver stable returns, according to one European asset owner. Dario Bertagna, a senior managing director at Capital Dynamics, highlighted the challenge of obtaining necessary permits, which can take up to seven years in southern European nations.
Solar projects, like any energy initiatives, must navigate through regulatory hurdles, including environmental assessments and grid connection agreements. The most significant challenge, as highlighted by Hayim, is securing a grid connection, which can delay projects or even make them financially unviable if upgrading costs are too high.
To manage price fluctuations and grid limitations, many developers are now integrating battery storage systems into their projects. These batteries help store energy during low-price periods and supply it when demand is high. In 2024, global battery storage capacity surged by 75% compared to the previous year, largely to support large-scale renewable projects, according to the IEA.
Masdar, the largest renewable energy developer in the Middle East, is undertaking a significant project in Abu Dhabi aimed at establishing a solar plant that will rely on a 19 gigawatt-hour battery to ensure stability in its solar output. This project is expected to go live in 2027 and can meet the UAE’s power needs for an hour.
Dave Jones, co-founder of energy research group Ember, noted that technological progress and a substantial drop in battery prices—down 40% in 2024—have fueled this growth, with further declines anticipated in 2025.
Utilities are increasingly seeking long-term contracts or fixed-profit models to shield themselves against rising price volatility. Many European nations have implemented contracts-for-difference programs to secure pricing for low-carbon electricity.
However, companies purchasing renewable energy are exhibiting more caution, as noted by Bertagna. He remarked, “Market dynamics have changed, making it significantly more difficult to convince buyers to take risks.”
The regulatory landscape may become even more complicated due to the One Big Beautiful Bill Act, which restricts the use of Chinese solar and battery technologies. This has led one European battery manufacturer to consider sourcing components from other parts of Asia, as relying solely on the US may not be feasible.
Despite political changes, Jones believes the solar sector remains on a strong growth trajectory. “The solar revolution is ongoing, often independent of government policy,” he stated, questioning whether import restrictions on solar panels might hinder progress.