European solar market 2024-2025: balancing growth, challenges and opportunities

Markus Hoehner and Rajan Kalsotra, CEO and Senior Consultant at EUPD Research, discuss the growth trajectory, challenges, and opportunities within the EU solar PV market, with a focus on policy support, pricing trends, module shipments, and future projections.

The photovoltaic (PV) market in the European Union (EU) has seen exceptional growth, driven by the urgent need to transition to renewable energy and enhance energy security. Solar energy has become a cornerstone of the EU's strategy to meet its climate goals and reduce dependence on fossil fuel imports. These efforts have been bolstered by policy measures, including financial incentives and updated renewable energy targets set by EU member states, positioning solar PV deployment as a key priority across the continent.

In 2024, the EU established a new growth benchmark for PV installations, fueled by increasing energy demand and rising investments in renewable infrastructure. Ambitious climate targets and supportive frameworks, such as national energy plans and EU-led initiatives, have accelerated solar adoption. However, this growth also brings challenges, including shifting trade dynamics and pricing pressures, which will influence the market through 2025.

As the EU solar market evolves, trends in module shipments, inventory levels, and pricing will play a pivotal role in shaping its future trajectory. These factors highlight the delicate balance between promoting market expansion and addressing operational challenges, making 2024-2025 a critical period for the sector's development.

Growth Trends in the EU Solar Market

The EU PV market experienced steady, albeit modest, growth in 2024, with an estimated 64 to 65 GW of new PV capacity installed. This marks a 5% increase compared to the 61.9 GW installed in 2023, according to EUPD Research calculations. This growth comes after the significant surge in 2023, which saw installations rise by 50% year-on-year due to the energy crisis triggered by the Russia-Ukraine conflict.

The cooling energy prices and a return to relative stability in energy markets in 2024 lessened the urgency for rapid expansion, which had previously been driven by high energy prices. While policy support and frameworks remained robust, they were insufficient to replicate the exceptional growth witnessed in 2023. Major markets such as France, Germany, and Italy saw continued expansion of PV capacity, while countries like the Netherlands, Spain, and Poland saw declines compared to their 2023 installation levels.

Despite the resilience of the market, 2024 faced several bottlenecks. Key challenges included grid capacity constraints, permitting delays, and fluctuating consumer demand caused by falling energy prices and high inflation. Disruptions in the procurement of PV components also hindered the rooftop solar sector, leading to inventory management issues for installers. According to EUPD Research’s PV InstallerMonitor© 2023/2024, 22% of surveyed German installers reported significant shipment delays. To mitigate these issues, installers across Europe increased their stock of PV modules, with an average of 23% of modules purchased for inventory. While this approach helped address supply chain uncertainties, it also exposed companies to risks like inventory devaluation, which could have financial implications.

Outlook for 2025: Anticipating Growth

Looking ahead to 2025, EUPD Research forecasts a return to double-digit growth, with PV installations expected to rise by around 10% compared to 2024. Policy adjustments, investments in grid infrastructure, and streamlined permitting processes are anticipated to address existing challenges and create a more stable growth trajectory for the EU PV market.

Source: EUPD Research, Global Energy Transition Matrix

PV Module Shipments from China to the EU

Between January and October 2024, EU countries imported approximately 83 GW of PV modules from China, with total imports expected to reach 100 GW by the end of the year. These figures align closely with the 2023 levels, reflecting the EU's continued reliance on Chinese-made modules. Chinese manufacturers have maintained their dominance in the EU market, leveraging economies of scale and cost advantages.

While an oversupply was noted in late 2023 and early 2024, the market dynamics have since shifted. Inventory levels have normalized as demand caught up with the influx of imports, with a stable pace of installations expected around 65 GW in 2024.

However, this excess capacity beyond installed volumes should not be considered an oversupply. Typically, a safe inventory buffer of 25-30% of the annual installed capacity is maintained to mitigate supply chain disruptions. As a result, the inventory levels this year are considered healthy. The oversupply in 2023 was primarily driven by the backlog of demand from 2022, further compounded by post-COVID disruptions. This stabilization has provided some relief to distributors and warehouse operators, though price competition remains intense.

Several factors could influence the flow of Chinese PV modules to the EU in the coming years. Changes in U.S. trade policies following the 2024 elections could redirect Chinese exports, altering global supply chains. Additionally, rising raw material costs and Chinese government policies aimed at stabilizing domestic markets might constrain production or exports, potentially leading to a more balanced global supply-demand dynamic.

Moreover, China’s robust domestic demand for solar modules has helped balance export volumes. In 2023, China installed an impressive 234 GW of PV capacity and is expected to install around 257 GW in 2024. This strong domestic market alleviates some pressure on global supply chains.

Price Trends: Falling Costs and Market Impact

Chinese manufacturers have driven module prices to record lows in 2024 through aggressive pricing strategies. While these price reductions have benefitted project developers and end-users by lowering installation costs, they have placed significant pressure on suppliers, raising concerns about the long-term sustainability of the industry. According to procurement data from EUPD's Price and Inventory Tracker, the average price of high-efficiency crystalline modules in Q4 2024 dropped to approximately €0.20/W, marking a 31.8% decrease from €0.30/W in Q4 2023. Standard crystalline modules also saw a notable price reduction, falling from €0.25/W in Q4 2023 to €0.22/W in Q4 2024, a 13.7% decline.

This rapid decline in prices has reshaped global market dynamics, intensifying competition and creating financial difficulties across the supply chain. In Germany, the market share of standard modules decreased from 79% to 26%, while the share of high-efficiency modules surged from 17% to 74%.

European manufacturers have been particularly hard-hit by these pricing trends. Unable to compete with the low-cost modules produced by Chinese manufacturers, many European firms have shut down their operations. For example, Solarwatt closed its 300 MW module production facility in August 2024, and Meyer Burger Technology ceased solar module manufacturing in Germany. Even some Chinese manufacturers have faced financial strain, with smaller firms declaring bankruptcy as they struggle to survive the price war.

Leading Chinese manufacturers like JinkoSolar and Longi Green Technology have reported significant declines in revenue and profits. For example, JinkoSolar posted a 23% year-on-year revenue drop and a 37.1% decrease in profits. Similarly, other major manufacturers such as Tongwei, Trina Solar, and JA Solar have posted losses.

This price war has driven module prices so low that many manufacturers are now selling below production costs, worsening financial losses. To address these unsustainable market conditions, Chinese regulators and industry associations, such as the China Photovoltaic Industry Association (CPIA), have proposed setting a floor price for modules. This would establish a minimum price threshold, aiming to prevent further undercutting and restore stability to the sector.

In December 2024, over 30 leading solar companies in China signed up for a program of self-discipline led by CPIA. Modeled after OPEC’s oil management system, the program assigns production quotas to participating firms based on market share, capacity, and demand forecasts, seeking to stabilize the sector amid overcapacity and slowing global demand.

Module prices are expected to rise slightly in 2025 due to changes in Chinese production and export policies. The Chinese government reduced the export tax rebate on solar products from 13% to 9% in November 2024 to stabilize domestic markets and address oversupply issues. Additionally, rising raw material costs, particularly for polysilicon, are likely to contribute to upward price pressures.

For European markets, the slight price increase could provide opportunities for local manufacturers to regain competitiveness, especially as political and industry momentum builds for local production. Some manufacturers, like Carbon, have already announced plans to establish PV manufacturing facilities in Europe. Carbon, for instance, intends to open a gigafactory in France by 2026, with an annual production capacity of 5 GW for cells and 3.5 GW for modules.

Conclusion: Strategic Considerations for Stakeholders

The EU solar PV market in 2024-2025 is at a pivotal juncture, influenced by policy-driven growth, ongoing pricing pressures, and shifting global supply dynamics. While growth is expected to continue, its trajectory will depend largely on how effectively challenges such as grid bottlenecks, permitting delays, and supply chain uncertainties are addressed. The market outlook can be framed in three possible scenarios.

In an optimistic scenario, coordinated policy efforts to modernize grid infrastructure and streamline permitting processes could lead to significant growth, with PV installations rising by 10% in 2025. Stabilized module prices would foster profitability and investor confidence, potentially giving European manufacturers a competitive edge.

In a more moderate scenario, steady but unremarkable growth could result from continued reliance on imports. While module prices remain under pressure, lower installation costs would benefit consumers and developers. However, a more constrained development scenario could emerge if factors like raw material shortages or restrictive trade policies worsen, leading to stagnation in installations and rising costs.

To navigate this critical period, stakeholders must adopt strategic approaches. Suppliers and manufacturers, particularly in Europe, need to counter oversupply and pricing pressures by improving operational efficiency, forming partnerships, and focusing on high-efficiency technologies and sustainability certifications.

Source: pv-magazine.de