Solar PV keeps booming across Europe. We are announcing the third consecutive record of new PV installations, and uninterrupted double-digit growth since 2016. The unsung heroes of these results are the thousands of companies building solar PV across Europe, and the hundreds of thousands of workers giving their best every day. They are nothing short of pioneers, delivering the energy transition on the ground, exploring new approaches and business models every day, to the benefit of Europe’s energy security, climate goals and economic prosperity.

Taking any of this for granted would be a grave mistake. We see several trends coming together that require urgent attention. First, the market conditions for solar have been exceptional in the last few years, but these conditions are now changing, in particular due to the normalisation of energy prices and the current inflationary environment. Second, solar PV is hitting real system boundaries, limiting further growth and integration; and thirdly, we are still confronted with heavy permitting delays despite years of legislative action on that front.

The responsibility is back in the hands of EU leaders and local decision-makers to maintain the pace of solar PV deployment and keep it on track to reach the REPowerEU and solar strategy goals for 2030. Looking at the new NECPs, Member States are clearly counting on solar PV to deliver. Solar ambition has increased from 335 GW in the 2019 NECPs to 591 GW in the 2023 NECPs. This is welcome news and a tribute to our industry’s reputation and potential. It is, however, not enough to reach the 750 GW (600 GWAC) target, which necessitates higher ambition from several Member States. Moreover, it is very important that these pledges are accompanied with concrete policy and investment plans –plans we are currently not seeing in sufficient volume or quality. The coming year will be crucial to land the last Fit For 55 policy files and engage in fast-track implementation. It also provides a window of opportunity to look ahead and develop an action programme for the next step in the energy transition (see our "Solar for Europe Manifesto" in the coming section).

While we celebrate another record year, we should also not lose the perspective that solar PV is just doing the minimum of what is needed to keep the door open to a 1.5 °C climate safe world and a Net-Zero Europe well before 2050. As EU leaders ask the solar sector to break records every year at breakneck speed, they shall also pay attention to our needs.

1. Maintain an investment-friendly environment for solar PV, especially now that market conditions are changing

Thanks to the incredible technology and production breakthroughs, solar PV has reached record-low LCOE (levelised cost of electricity) in recent years, making it the cheapest and fastest-growing energy source in the world. We must, however, not lose sight of the factors affecting the economics of solar PV.

First, inflation, reinforced by the EU monetary policy choices, is impacting the cost of capital for solar developers. Solar PV is a capital-intensive investment – more than 75% of the price of a solar electron is capital costs, determined at the investment stage, and directly impacted by rising cost of materials. And half of that capital cost is cost of money – itself impacted by recent decisions of the European Central Bank (ECB) to increase its interest rates to more than 4%. Although this does not affect the competitiveness of solar PV in the long term, it is impacting and delaying solar project financing right now. Solutions exist at the ECB level to lower the cost of capital for green investments, or simply at the national level by indexing auction design and results to inflation.

Secondly, while the sector is achieving record-low LCOE, the question shifts to the market value of solar electricity, i.e. the ability to produce electricity in ways that have value for the energy system. This summer, we have seen an unprecedented number of ‘negative’ hours, resulting in revenue uncertainty for developers, with Contracts for Difference (CfDs) stopping in such times of negative prices. It is a sign that the energy system needs to adapt – by better linking electricity demand to generation, and by making generation more flexible and storable to respond to demand. In the meantime, however, the economic framework should not give the wrong signals to investors in the transition period. CfDs should ensure revenue stability to developers even as negative price signals increase.

2. Bring grids and flexibility investments to the next level, especially at the distribution level

According to the 2023 IEA Electricity Grids report, more than 50 million km of electricity grids need to be built and around 30 million km reinforced between today and 2040, especially at the distribution level. That is more than double the annual rate in the last decades. Building grids takes several years, often more than ten years for high-voltage grid infrastructure – in part due to long and inefficient permitting processes.

Grid operators must also look beyond adding new lines and take steps to modernise and digitalise its operations. Grid-connection procedures, in some cases, still require filling out paper forms, resulting in cumbersome and non-transparent application processes, which can take up to eight years (see Box 3). Grid operators also need to speed up the rollout of smart grid technologies and Big Data analytics infrastructure.

EU storage and flexibility capacity is not growing fast enough. The European Commission Joint Research Center calculated that flexibility solutions need to grow by a factor of two before the end of the decade. SolarPower Europe has estimated that 200 GW of battery storage capacity needs to be installed by 2030, but current projections estimate less than 130 GW by that time.

We need to deal with all of the above challenges urgently. That requires an EU action plan on grids and flexibility, primarily focused on accelerating implementation, and drives forward new concepts with respect to (1) reinforcing the governance of the EU grids policy: the EU energy infrastructure policy primarily tackles cross-border energy projects. We need new governance tools, based on national indicators on the grid situation, to better monitor decentralised infrastructure, and support swift implementation and (2) investing smartly into the grid through efficient, participatory, and anticipatory planning: connecting more renewables will also need more grid investments. Where grid reinforcement is necessary, permitting of grid infrastructure can be a bottleneck. Actions to ensure a consultative and efficient grid deployment are needed.

3. Grow the pool of certified installers and skilled workforce

The solar sector employed around 648,000 people in the EU in 2022. In order to reach the EU’s 2030 solar deployment targets, this number must reach 1 million by 2025, and 1.2 million by 2027. Skilled workers are in high demand in every corner of the continent, particularly for installation works – the wait times last up to a year in certain regions. Some worries have emerged as to the qualifications of workers involved with installations, and the movement of workers to and within Europe is still too burdensome. We suggest that policy and industry tackle those challenges head on, together. 

First, we must rehabilitate technical education and jobs. Working along with governments, we must amend our education systems and launch communication campaigns for a better consideration of technical schools. Those must also be staffed with more skilled teachers, and better bridges can be built from various education streams into vocational education and training (VET). 

Second, we stand ready to work with the European Commission and any other interested stakeholder in the solar and educational sectors to develop standardised training material for solar workers, especially for installers. This would accelerate the training of workers, improve their solar-specific skills (for safer and better-quality work), and allow for the recognition of a single training standard by all parties involved, including authorities, companies, insurance and the ultimate client. This approach also facilitates career changes and upskilling into the solar sector, for example from the construction, telecom, electrical or fossil fuel industries, and from the solar sector into heat pump, EVs or other complementary applications [1]. 

Finally, Member States must ramp up their efforts to facilitate the movement of workers, for example by mutually recognising certification schemes. Ministries must consider this as a priority to smoothen the posting of workers, or to employ local and immigrant workers in international projects. We also encourage European institutions to place solar among the key sectors as part of the new Pact on Migration and Asylum, via the Talent Partnerships and Talent Pool.

4. Time to improve renewables planning and permitting; time to implement what was agreed

While several Member States have made progress on improving permitting processes, most are still lagging. Many Member States are yet to define deadlines for the permit-granting process or set up one-stop-shops and granting access to digital procedures, which have been mandatory for years under the 2018 EU renewables directive.

The same is true for the Renewable emergency regulation from last year, the so-called 'RES Booster package’ in response to the energy crisis, where more than half of the Member States still need to designate renewables as overriding public interest, define simpler rules for repowering or implement the principle of positive silence for small-scale installations. On a positive note, it is good to see that most Member States have introduced the principle of simple notification for rooftop installations.

Member States need to swiftly transpose the provisions they agreed to and provide certainty to investors, or find themselves exposed to legal challenges from project developers. It is now time to do that, to define renewable acceleration areas and to carry out comprehensive mapping of favourable areas.

Scaling up multiple uses of land is an opportunity to accelerate the achievement of the EU’s climate objectives while ensuring secure and just energy transition. Member States should therefore encourage and promote the multiple use of space, including applications like agrivoltaics, floating PV and nature-inclusive PV through harmonised policy frameworks. Member States should, in particular, encourage the development of designated agrisolar policy frameworks and accompany these policy frameworks with clear agrisolar and agrivoltaics definitions. Establishing a regulatory environment can provide security for investors and assurance for the solar and farming sector. In addition, Member States should promote agrisolar and agrivoltaics in their National Strategic Plans for Common Agriculture Policy and National Climate and Energy Plans to provide additional security and clarity for the farming sector, among others.

5. Scale-up sustainable and diversified solar PV supply chains

2023 was the year of the Green Deal Industrial Plan, bringing a new industrial policy agenda to Europe, including the goal of reshoring at least 30 GW of solar production in Europe by 2030. This is very welcome for the solar sector given that Europe does not have a strong manufacturing industry and is highly dependent on imports along the supply chain. The current low module prices, while welcome for accelerating solar deployment, are making it harder for European solar PV manufacturers to scale up and reach the 2030 goals. It makes it even more important for EU decision-makers to take swift action and land a smart and robust industrial policy for scaling-up solar PV production in Europe.

Unfortunately, the financing and legislative proposals are not living up to the needs and expectations as yet. Within the context of the European Solar Industry Alliance (ESIA), SolarPower Europe has been calling for three concrete and swiftly implementable solutions:

Adjust the State Aid rules under the Temporary Crisis and Transition Framework to also cover the running cost of factories (OpEx) and reduce complexity. The experience of the German government call of interest for 10 GW of solar manufacturing, which is still not finalised as it is lacking financing, has shown the limitations and complexity of the current State Aid rules and is not necessarily setting an attractive example for other Member States to follow;
Set up a small but growing segment of resilience auctions within the Net-Zero Industry Act. The key here is to get the segment right and phase-in resilience criteria in public auctions to reflect the scaling-up of European solar manufacturing capacity towards 30 GW in 2030;
Accompany national financing with an EU-level financial tool for solar manufacturing, like a Solar Manufacturing Bank, based on the concept of the Hydrogen Bank but adapted to the needs of the solar sector. The Bank can be linked to the Innovation Fund, like the Hydrogen Bank, but ideally would be linked to a new EU Sovereignty Fund. This was another key financing tool for the Green Deal Industrial Plan that EU leaders have yet to deliver on. It is time for EU leaders to step up and act on our proposals.

These industrial strategy solutions need to be accompanied with clear market access standards that reflect Europe’s Environmental, Social and Governance (ESG) values. We, therefore, look forward to the first ever Ecodesign rules tailored to solar PV, as well as the upcoming Forced Labour Ban Act and the Corporate Sustainability Due Diligence Directive. Together, these legislative initiatives can help global solar PV supply chains become even more sustainable, transparent and free of any links to forced labour. To speed up the effective and practical implementation of these regulations, the solar sector has recently launched the Solar Stewardship Initiative (SSI), a solar-specific value chain assurance system to enhance ESG performance and transparency across the global solar value chain. We call on EU decision-makers to recognise the SSI and other multi-stakeholder initiatives in the relevant legislation.

The above points together form a coherent and constructive policy answer to scaling up sustainable and diversified solar PV supply chains. Trade defence instruments are not part of the solution. As history has shown, investigating and implementing trade barriers on solar is the ultimate lose-lose strategy for Europe.

EU Market Outlook for Solar Power 2023-2027

12 December 2023