Solar stocks fall back from 3.5-year high as AI theme cools

The MAC Solar Index rallied to a 3.5-year high in late May but has since fallen back. Despite the recent decline, the MAC Global Solar Energy Index is still up +8% year-on-year and +79% from last year’s 6-year low.

The MAC Solar Index has more than recovered from the weakness seen after the November 2024 US election when Republicans took control of Washington. US solar stocks rallied sharply in 2025 after Republicans’ changes to US solar policy proved less severe than expected and left solar manufacturing incentives in place. Looking ahead, markets don’t expect fresh cuts in US government legislative support for solar, especially given speculation that Democrats may regain control of at least the House in the mid-term elections this November.

Solar stocks have fallen in the past several months mainly because of the sell-off in AI stocks. Solar stocks are tied to the AI theme as an enabling technology, since solar will help meet the huge increase in electricity demand driven by the massive AI data center buildout.

Bloomberg New Energy Finance (BNEF) expects US electricity demand from data centers to more than triple by 2035 due to AI demand, forcing utilities and data center operators to install new electricity generation resources.

AI stocks have recently cooled due to profit-taking and concerns that AI growth may slow because of political opposition and possible guardrails. However, AI is clearly here to stay at large scale, along with its massive electricity demands.

Solar stocks have also been undercut in recent weeks by higher interest rates, which raise the cost of capital for new solar installations. The Federal Reserve raised its federal funds rate target by 25 basis points in mid-September, and the 10-year T-note yield in September reached a 19-year high of just over 5%.

Despite the negative factors, solar stocks have solid support from continued strong demand for solar plants worldwide. Markets also generally expect improved solar-sector profitability as the Chinese government steps up efforts to cut excess manufacturing capacity and curb disorderly competition. The Chinese government has (1) put direct pressure on Chinese companies to cut production, (2) implemented market-based solar electricity pricing to better balance supply and demand, (3) eliminated solar export incentives, and (4) implemented safety and other standards to force out low-quality solar producers. Chinese solar manufacturers have already cut production across the supply chain, partially alleviating the oversupply situation (see page 3).

Solar stocks also have support from high oil prices driven by the US-Iran conflict and associated oil supply disruptions. The Middle East turmoil underscores the energy and economic insecurity that stems from relying on oil and natural gas supplies from hostile and unstable areas of the world. High oil prices and Middle East turmoil add pressure for electrification and greater reliance on domestic clean-electricity generation.

Bullish longer-term factors for solar stocks include (1) strong economic demand for solar now that solar is cheaper and faster to build than fossil fuel or nuclear power in most of the world, (2) the pairing of solar with ever-cheaper battery systems to provide a 24/7 electricity solution, (3) the global push to reduce carbon emissions as many countries have adopted net-zero emissions goals to add to their Paris Climate Agreement goals, (4) strong demand for solar by many global corporations that have adopted net-zero emissions goals, and (5) the need for many nations to improve their energy security and independence by building domestic electricity infrastructure such as solar, thus insulating themselves from the risk of importing fossil fuels from hostile countries and regions.

Solar is by far the world’s primary source of new electricity capacity

Global solar installations in 2025 rose by +11% to a new record of 655 GW(dc)*, adding to the sharp growth rates of +76% in 2023 and +33% in 2024, according to Bloomberg New Energy Finance (BNEF). Global investment in solar projects totaled $450 billion in 2025, according to the International Energy Agency (IEA).

Annual global solar installations grew at a compound annual rate of +34% during the five years from 2020 to 2025. BNEF forecasts that global solar installations will fall by -11% in 2026 but then rise by +6% in 2027 and +7% in 2028.

Even though the growth of annual solar installations is expected to come back to earth after the torrid pace seen in the past several years, the world will still be installing a huge amount of new solar capacity each year, adding to the cumulative solar capacity that the world uses to produce electricity (i.e., the total capacity of all existing solar plants).

Specifically, BNEF forecasts that global cumulative solar capacity will grow at a compound annual rate of +16% over 2025-2030. Cumulative global solar capacity in 2025 rose by +29% to 2.9 terawatts (TW) and showed compound annual growth of +30% in the 5 years through 2025, according to BNEF.

Solar accounted for 70% of total new global electricity generation installations in 2025, far exceeding the next-largest source, wind, at 20%, according to the International Renewable Energy Agency’s (IRENA) “Renewable Capacity Statistics 2025.” Solar and wind combined accounted for a record 92.5% of total electricity installations in 2025, leaving fossil fuel and nuclear power in the dust for new global electricity installations.

Utility-scale solar accounted for more than two-thirds of global solar installations in 2024, with most of the rest involving rooftop solar on homes and businesses, according to the IEA PVPS’s “Snapshot of Global PV Markets 2025” (pp. 10-11).

Regarding total electricity use, solar accounted for 7% of global electricity generation in 2024, up from 5% in 2023, according to the International Energy Agency (IEA).

The IEA expects total global electricity use to grow at a hefty 4% annually over the next four years, driven by the need for more data centers to support artificial intelligence, the need to charge more electric vehicles, and increased air conditioning use globally. The IEA says that renewables will meet 95% of the world’s new electricity demand through 2027.

Renewables are being relied upon to meet new electricity needs because of their low cost and rapid construction. Renewables are not only the most economical solution for building new electricity capacity, but they also help slow the effects of global warming.

BNEF has determined that solar and wind are now the cheapest sources of new electricity generation for at least two-thirds of the world’s population. For more details, see the LCOE section on page 15.

Even though the Trump administration pulled the US out of the Paris Climate Agreement for the second time, the rest of the world will continue to battle climate change. At the COP28 conference in Dubai in December 2023, the world reached a consensus to pursue an “orderly transition” away from fossil fuels and to triple renewable energy by 2030 and reach net-zero emissions by 2050.

Chinese solar consolidates with a focus on quality and profitability

The solar energy industry is a key sector in China. China needs low-priced solar to expand its electricity capacity and support its economic growth targets. China also needs solar energy to build new electricity generation facilities that reduce its reliance on coal, improve air quality, and meet its carbon-emission-reduction targets.

China installed 383 GW of solar in 2025, up +13% from 338 GW in 2024. That added to the sharp gains of +144% in 2023 and +30% in 2024. China’s solar installations grew at a compound annual growth rate of +49% in the five years from 2020 to 2025, according to BNEF. BNEF is forecasting a -29% drop in solar installs in China in 2026, followed by stable installs near 265 GW during 2027-2030 as the Chinese solar market returns to more sustainable growth rates after the torrid growth seen in 2023-2025.

The 382 GW of solar added in 2025 pushed China’s cumulative solar capacity up +37% to 1.4 terawatts. BNEF expects cumulative solar capacity to grow at a compound annual rate of 14% through 2030.

Solar accounted for about 60% of all new electricity capacity additions in China in 2025, far higher than wind’s 20% share, coal’s 14% share, and the low single-digit shares for natural gas, hydro, and nuclear, according to a compilation of data from various sources. China generated 11% of its total electricity from solar in 2025, up from less than 1% a decade ago.

China installed solar at a breakneck pace during 2020-2025 to meet strong electricity demand and its climate targets. However, solar installs are now expected to fall back as the grid and battery storage catch up and as Chinese solar companies cut production capacity to restore profitability.

Over the past two years, the Chinese government has tried to address the oversupply of solar manufacturing capacity, which has led to heavy losses for some Chinese solar companies. The government has met repeatedly with top Chinese solar producers to encourage them to focus on high-quality production, cut production, and stabilize the solar market.

The Chinese government has focused on capacity controls, price law enforcement, quality inspections, and M&A restructuring.

In June 2026, the Chinese government took its strongest step yet by releasing a set of efficiency and energy-consumption standards that solar manufacturers must meet across the supply chain. The new standards, which take effect on January 1, 2027, could drive as much as 30% of manufacturing capacity out of business, according to some analysts.

Also, in a bid to reduce production incentives, China’s government removed its 9% export tax rebate for solar exports as of April 1, 2026. Eliminating that export incentive should reduce Chinese solar exports and production. The removal of the export incentive should also benefit non-Chinese solar manufacturers by reducing Chinese exports and supporting global solar module and component prices.

The eight largest Chinese solar companies in August 2026 also signed an industry initiative pledging not to sell PV products below their full cost, as a further bid to restore profitability. Those eight companies account for more than 90% of China’s polysilicon production capacity. The pricing floor is based on a new cost-accounting standard developed under the guidance of China’s government regulators.

All these efforts are producing a cut in Chinese solar manufacturing. China’s polysilicon production in the first six months of 2026 fell by -10% year-on-year to 538,000 metric tons, according to the China Photovoltaic Industry Association (CPIA). Meanwhile, wafer production fell -7% year-on-year to 293 GW, solar cell production fell -22% to 261 GW, and module production fell -35% year-on-year to 201 GW.

In the bigger picture, the Chinese government has switched the solar market towards market-based pricing, which should encourage more balanced supply and demand. Chinese solar installations began to decline in the second half of 2025 after the government phased out fixed pricing and increased solar electricity generators’ exposure to market prices. Chinese solar installs have dropped further in 2026 because last year’s policy change reduced guaranteed prices for solar electricity.

Specifically, Chinese government regulators announced a new policy in February 2025, Regulation No. 136, that moved China closer to market-based pricing for solar electricity. Solar electricity from projects implemented after June 1, 2025, is sold at market prices, thus replacing the previous system of a fixed contract price based on the coal-fired electricity price. The new program means that 100% of solar electricity is now being traded in the power market, up from 50% in 2024.

Under the new policy, a “Contract for Difference” (CfD) program provides some revenue protection for solar developers of some projects commissioned after June 2025. For solar projects commissioned before June 2025, the CfD program guarantees the original pricing terms. Since mid-2025, China’s CfD auctions have covered about one-quarter of its new solar installations.

China’s new pricing policy is designed to transition its solar industry into a mature, market-driven power sector by balancing market exposure, revenue certainty, and investment quality. It ends universal fixed pricing and begins a new era of more balanced renewable energy commercialization.

Meanwhile, the Chinese government is heavily relying on solar energy to meet its climate targets. In September 2025, the Chinese government announced a new goal of reducing emissions by 7-10% from peak levels by 2035, compared to its previous goal of peaking carbon emissions by 2030. The government also announced a goal of increasing installed wind and solar capacity to 3,600 GW by 2035, which is more than six times the 2020 level. China also adopted a goal for the share of non-fossil energy (including renewables, hydro, and nuclear) to exceed 30% by 2035. The Chinese government aims to achieve carbon neutrality by 2060 as part of its Nationally Determined Contribution (NDC) under the Paris Climate Agreement.

China has been installing utility-scale and rooftop solar nationwide on a massive scale. In addition, China has been building a vast array of solar and wind projects in its desert regions. The first phase of 97 GW of solar and wind started in 2021 and ran smoothly, thus leading the government to expand the project. The Chinese government announced another 455 GW of desert solar and wind projects, with 200 GW completed by 2025 and an additional 255 GW by 2030. Those plants will mainly deliver the electricity to the nation’s more densely populated eastern regions.

US solar industry moves forward despite last year’s phase-out of buyer subsidies

Solar has become a major industry in the United States, with sales of about $69 billion in 2025, according to the Solar Energy Industries Association’s (SEIA) Solar Data Sheet. More than 10,000 solar businesses in the US employ about 280,000 people. Nearly 9% of US electricity comes from solar, enough to power 50 million households. More than 6 million solar energy systems are already installed in the US.

US annual solar installations in 2025 grew by +0.7% to 48.1 GW from 47.7 GW in 2024, slowing after the torrid growth of +58% in 2023 and +28% in 2024, according to BNEF. US solar installations are expected to remain near 49 GW in 2026-2027 and then dip to the 41 GW area in 2028-2029.

The US is expected to install an average of 44 GW of solar capacity per year over 2026-2030, meaning cumulative US solar capacity (i.e., the total capacity of all existing US solar plants) will continue to grow solidly. BNEF forecasts that US cumulative solar capacity will grow by +18% to 323 GW in 2026, adding to the 2025 growth rate of +21% to 273 GW. Wood Mackenzie expects cumulative US solar capacity to nearly triple to 769 GW by 2036.

Solar energy is trouncing its competitors in newly installed electricity capacity. Solar energy accounted for 54% of all new US electricity-generating capacity in 2025, marking the seventh consecutive year it led, according to Wood Mackenzie. Solar’s 54% market share far outpaced battery storage at 25%, wind at 13%, and natural gas at 8%. No new coal or nuclear electricity-generating plants of any significance were installed in 2025.

Solar beat natural gas by a margin of 7-to-1 for new US electricity plant installations in 2025. With Republicans in control of Washington, calls have increased for greater reliance on natural gas for electricity production. However, natural gas is limited in its ability to provide new electrical capacity by its high cost relative to solar. BNEF determined that the levelized cost of energy (LCOE) for a new combined cycle gas turbine (CCGT) plant on a global basis has risen by +15% since 2023 to $102/MWh, which is far higher than the BNEF global LCOE of $39/MWh for fixed-tilt solar PV and $57/MWh for a 24-hour combined solar-battery storage plant.

In addition, long lead times for building new natural gas plants stem from severe turbine backlogs that extend to 2029. The average lead time for getting a gas plant into service has stretched to 5 years from 3.5 years in 2023, according to BNEF. That is much longer than the average lead time of about 3 years for a utility solar project, which can be fast-tracked to 18-24 months for an ideal project. Solar is not only cheaper to build than natural gas plants but is also much quicker.

Utility solar remained the dominant install sector in 2025, accounting for 343.7 GW, or 81% of US solar installations, according to Wood Mackenzie. Residential solar accounted for 11% of US solar installations in 2025, followed by 5% for commercial solar, and 3% for community solar.

Utility-scale solar accounted for about 6.7% of total US electricity generation in 2024, according to the US Energy Information Administration. The EIA expects utility-scale solar’s share of total US electricity generation to increase to 8% in 2026 and 9% in 2027. The relatively low penetration rate seen thus far indicates ample room for solar to keep growing rapidly in the coming years, meeting new electricity demand and replacing more expensive options such as natural gas, coal, and nuclear.

US solar installations in 2025 were undercut by policy uncertainty after Republicans curbed incentives in July with their One Big Beautiful Bill Act (OBBBA). Developers also faced a solar panel shortage due to tariff chaos and other US trade barriers.

Yet US solar installations remained generally strong in 2025 because demand for new electricity generation capacity stayed high. In addition, US solar manufacturing ramped up sharply in 2025, making panels more available and less expensive as developers avoided paying tariffs on imported panels.

US solar industry moves ahead after OBBBA subsidy curbs — The US solar industry is moving forward after Republicans passed their “One Big Beautiful Bill Act” (OBBBA) in July 2025. The bill phased out solar buyer incentives but fully retained the IRA’s 45X solar manufacturing credits through 2032, the main driver of the US solar manufacturing boom over the past several years. In addition, the OBBBA left generous incentives for battery storage in place, maintaining the attractiveness of pairing solar and battery facilities to create a 24/7 electricity solution.

The OBBBA’s early phase-out of the tax credits for solar buyers will undercut solar installation growth over the next several years. However, eliminating buyer credits early does not change the fact that solar electricity without subsidies is still much cheaper to install than natural gas or nuclear electricity. Many utilities will continue to choose solar due to its low unsubsidized cost, speed of installation, and 24/7 availability when paired with storage.

As Bloomberg New Energy Finance (BNEF) puts it, “Even without tax credits, the case for renewables and batteries remains strong in the US with top-line electricity demand growing swiftly for the first time in a decade, thanks to data-center buildout and electric vehicle sales. US natural gas is cheap, but turbines to convert it to electricity are expensive and hard to procure.”

Wood Mackenzie also remains positive about solar in a post-subsidy America, saying, “There is always the potential for policy changes to impact deployment, but solar is currently the dominant form of new energy generating capacity in the US. The benefits of solar — its cost competitiveness, benefits to the environment, low water use, and continuously improving technology, to name a few — have spurred demand from utilities, independent power producers (IPPs), and corporate off-takers who see solar as the path to US energy independence.”

Regarding the specifics, Republicans in July 2025 passed their OBBBA reconciliation bill, which included legislative amendments to the solar stimulus measures originally passed in the Biden administration’s “Inflation Reduction Act” (IRA) in 2022.

The original IRA law offered two major tax incentives for solar buyers, which substantially reduced the bottom-line cost for solar developers and operators. Buyers could choose either incentive, but not both.

The first buyer incentive was the Section 48E Clean Electricity Investment Tax Credit (ITC), which the IRA law set at up to 30% of the cost of purchased solar equipment (including inverters and batteries). The original IRA provided the credit through 2032, with step-downs to 26% in 2033, 22% in 2034, and 0% in 2035.

The second buyer incentive was the Section 45Y Clean Electricity Production Tax Credit (PTC), which offered a credit of up to 1.5 cents/kWh for solar-electricity generators. The original IRA law provided the credit through 2032, with step-downs to 75% of the credit in 2033, 25% of the credit in 2034, and zero in 2035.

However, Republicans’ OBBBA law ended the buyer 48E ITC and 45Y PTC credits for solar buyers much earlier than the IRA, providing the credit only for (i) projects that began construction between July 2025 and July 2026 (with no completion date requirement), or (ii) facilities that began construction after July 2026 but place the facility in service by December 31, 2027.

While the OBBBA law sharply curbed solar and wind credits, it was very generous with the 48E and 45Y credits for battery storage, not only leaving the IRA credits in place but also extending them by a year. Specifically, the OBBBA law maintained the battery credits through 2033, with step-downs to 75% of the credit in 2034, 50% of the credit in 2035, and a zero credit in 2036.

The OBBBA law was very generous with nuclear, geothermal, and hydropower credits, leaving the IRA’s existing 48E and 45Y credits in place through 2033. However, geothermal and hydropower pose little competition to solar because of their geographic and scalability limitations.

Meanwhile, nuclear power remains held back by very high costs, for both legacy and newer nuclear technologies, even after subsidies. Nuclear power also remains highly risky, as no electric utility could operate a nuclear power plant without a taxpayer liability backstop under the US federal government’s Price-Anderson Act. The Price-Anderson Act caps the liability of a nuclear operator and ensures compensation by US taxpayers in the event of a nuclear accident or sabotage.

Nuclear waste also poses a substantial risk. Utilities currently store most of it on-site because the US government has yet to build a permanent national nuclear waste repository due to a decades-long stalemate within the federal government. That means there is currently radioactive waste at many nuclear power plants across the US that is subject to leaks or terrorist attacks. Advanced nuclear reactor developers have yet to address the nuclear waste issue, even assuming they can overcome their monumental cost problem.

Another tax credit in the original IRA law was the Section 25D Residential Clean Energy Credit, which offered a 30% tax credit for residential solar and storage systems installed from 2022 through 2032, with step-downs to 26% in 2033 and 22% in 2034.

The OBBBA law eliminated the residential solar tax credit as of December 31, 2025. However, the bill was more lenient toward third-party ownership (TPO) companies, allowing the 48E ITC credit for TPO systems through 2030 if they are safe-harbored by starting construction before July 4, 2026. TPO companies provide solar systems to homeowners via leases or power purchase agreements.

To support US domestic solar manufacturing, the original IRA law provided $30 billion to implement a Section 45X Advanced Production Credit for US solar manufacturers through 2032. The credit covered the entire solar supply chain, from polysilicon to modules, as well as inverters and batteries.

The 45X production credit was meant to encourage companies to build factories in the United States to manufacture solar modules, inverters, and batteries, thereby stimulating employment in the country and reducing the need for the United States to import this equipment.

In a big win for the US solar industry, the OBBBA law retained the 45X production credit to keep newly built US solar factories open and encourage the construction of additional factories.

The OBBBA law retained the IRA’s expiration schedule for the 45X production credit, providing the credit through 2029, with step-downs to 75% in 2030, 50% in 2031, 25% in 2032, and 0% in 2033.

In a new measure not in the original IRA law, the OBBBA law included a “Prohibited Foreign Entity” (PFE) screen that disallows the 45X production credits for factories owned or operated by a prohibited foreign entity or that receive material assistance from one. OBBBA’s PFE rules expanded the Foreign Entity of Concern (FEOC) rules contained in the IRA bill.

PFE restrictions also apply to the 48E ITC and 45Y PTC credits, which prohibit foreign entities from receiving them. In addition, facilities that began construction after December 31, 2025, cannot receive material assistance from a prohibited foreign entity. The new PFE rules also apply to battery credits.

The countries prohibited by the foreign entity of concern rules are China, Russia, Iran, North Korea, and Cuba. China is obviously the primary concern for the solar industry, as a significant portion of the world’s polysilicon, solar wafers, and solar cells originates in China or is produced by Chinese-owned companies operating outside the country.

In February 2026, the Treasury released FEOC guidance on “material assistance” that was better than expected for the industry. The new rules said that companies claiming the subsidies do not need to prove the origin of every single raw material or component in a solar module or cell, only those already listed in the existing domestic content safe-harbor tables.

However, the Treasury has yet to release final rules on prohibited foreign ownership, leaving uncertainty over the credits.

US solar manufacturing sector has grown rapidly and can now meet US domestic module demand — The IRA’s 45X production credit, implemented in 2022 and extended by OBBBA, has been highly successful in promoting the construction of many solar factories in the United States.

Wood Mackenzie says 133 new solar and storage facilities have come online due to the manufacturing incentives. New US solar manufacturing investments now total $37 billion since 2022, with $14.5 billion of those facilities operational, $13.5 billion under active construction, and $5.7 billion under development, says Wood Mackenzie.

In fact, US solar module factories could produce 65.5 GW of solar modules as of the end of 2025, up 50% year-on-year and a 9-fold increase from the pre-IRA level of 7 GW, according to Wood Mackenzie. That is more than enough capacity to meet all of 2026’s expected US solar installs of 45 GW, meaning US developers no longer need to import solar modules.

However, the US still needs to import most of the solar cells used in the modules assembled in the country. As of the end of 2025, only about 3 GW of solar cells were manufactured in the US, according to Wood Mackenzie. That cell production capacity rose to 11 GW as of mid-2026. Moreover, solar cell manufacturing in the US should soon reach 29 GW if all currently under-construction plants are completed.

Farther upstream in the supply chain, the US will soon have 33 GW of polysilicon production and 8 GW of ingot and wafer production, including existing and under-construction plants (see SEIA’s Solar and Supply Chain Dashboard). The US also has 25 GW of solar inverter manufacturing capacity in existence or under construction.

US solar industry navigates Trump tariffs — The global solar industry has been hit with aggressive tariffs from governments worldwide for more than a decade. The tariffs have increased the bottom-line costs for solar homeowners and utility developers and have caused significant problems for solar manufacturers.

Most tariffs aim to protect domestic manufacturers from overseas competition. More often than not, however, tariffs restrict the supply of imported goods and increase prices for the country’s consumers.

For more than a decade, the US government used import tariffs in a failed attempt to promote US solar manufacturing. The import tariffs primarily restricted the supply of modules available to US solar developers and increased the price of US modules relative to global prices. It wasn’t until the US government, through the Biden administration’s Inflation Reduction Act, offered a substantial manufacturing subsidy that solar companies began building solar module assembly plants in the US at significant scale. As mentioned earlier, Republicans in the OBBBA law preserved the solar manufacturing subsidies.

Over the past decade, the US government has employed three distinct solar-specific tariffs: Section 301 tariffs, anti-dumping and countervailing duty (AD/CVD) tariffs, and Section 201 tariffs (which expired in early 2026).

The Trump administration continues to use solar-specific tariffs, but radically expanded tariff use by imposing so-called “reciprocal tariffs” on imports of nearly all goods worldwide. These tariffs were in addition to the solar-specific tariffs.

President Trump imposed reciprocal tariffs in April 2025, claiming a national emergency under the International Emergency Economic Powers Act of 1977. However, the US Supreme Court ruled in February 2026 that those tariffs were invalid because the president lacks authority under the IEEPA to impose tariffs or other taxes.

After the Supreme Court struck down the reciprocal tariffs, President Trump announced similarly sized tariffs under other trade-law authority, leaving the overall tariff picture largely unchanged. In addition, US tariff deals already announced with China, Europe, India, and many other countries generally remain in place even though the US Supreme Court struck down the original authority for the tariffs.

These new blanket Trump tariffs are making it even more expensive for US solar companies to import products from overseas, including batteries, solar modules, and upstream solar components such as polysilicon, solar wafers, and solar cells. The high tariffs on imports from China are particularly damaging for US companies seeking to import batteries from China, the world’s largest battery producer.

In addition to other tariffs, President Trump levied a national security tariff in March 2025 on imports of steel, aluminum, and their derivative products under Section 232 of the Trade Expansion Act of 1962. That import tariff is currently set at 50% for both steel and aluminum imports, except for the UK, which is at 25% due to a US-UK trade deal. The steel and aluminum tariffs have increased input costs for producers of solar trackers and solar module frames.

In August 2026, the Trump administration announced a new plan to impose an across-the-board 15% Section 232 tariff on all solar products imported into the US, regardless of country of origin. The tariff applies to all solar-chain products, including polysilicon, wafers, cells, and modules. The new tariff goes into effect on December 4, 2026, giving US solar buyers a short reprieve before the tariff starts being collected.

The new program also specifies minimum import prices (MIPs) of $21 per kg for polysilicon, $100 per kg for ingots and wafers, $0.22/watt for solar cells, and $0.38/watt for imported solar modules.

The combined tariff and MIP program is designed to protect US manufacturers but is also expected to raise solar product costs for US homeowners and developers. The US has been playing Whac-a-Mole for years, as exporters use one country after another to circumvent US tariffs, leading the US to apply a common tariff to all countries.

The new tariff replaces the safeguard duties on solar cells and panels that President Trump imposed in 2018 but expired this past February. The new 232 tariff includes exceptions: (1) an overall solar tariff cap for certain countries, and (2) the Commerce Secretary can exempt companies that begin construction on new US solar manufacturing plants before the end of President Trump’s term.

Regarding other types of solar tariffs, the Obama administration imposed Section 301 tariffs on solar modules and cells imported from China in 2012 to address concerns that Chinese solar manufacturers were dumping subsidized products in the United States. In May 2024, the Biden administration doubled the Section 301 tariffs on Chinese solar modules and cells to 50% from 25%. In December 2024, the Biden administration raised the duty on solar wafers and polysilicon to 50% from 25%, bringing the entire Chinese solar supply chain under 50% tariffs.

The higher 50% Biden tariff had little impact since the US imported virtually no solar modules or cells directly from China due to the original Obama tariff. However, the Biden administration temporarily exempted solar cell and PV wafer manufacturing equipment from the tariff as of January 1, 2024, allowing companies building manufacturing facilities in the United States to import the factory machinery they need to manufacture the solar products.

In early December 2025, President Trump’s US Trade Representative (USTR) extended the Section 301 exemption for solar manufacturing equipment to November 10, 2026, a positive factor for companies looking to set up solar manufacturing plants in the US.

Some Chinese companies responded to the original 2012 Chinese tariffs by building new factories in Southeast Asia to import solar components from China and circumvent the US tariff. To address this concern, the US Department of Commerce (DOC) imposed anti-dumping and countervailing duty (AD/CVD) tariffs on four companies in August 2023, concluding that they had circumvented the Chinese tariffs. Those factories were located in Malaysia, Thailand, Vietnam, and Cambodia.

The AD/CVD investigation, which began in March 2022, sparked a flurry of order cancellations and project delays among US developers in 2022 because of uncertainty about the tariffs’ scope. However, the Biden administration announced in June 2022 that it would suspend any tariffs resulting from the investigation until June 2024, giving US solar developers time to shift their solar module purchases to alternative sources. However, that tariff suspension ended in June 2024, and the US government began collecting AD/CVD tariffs on US solar imports from those four companies.

Then, in September 2025, the US Court of International Trade ruled that the Biden administration’s 2-year tariff moratorium in 2022-24 was invalid and ordered the retroactive collection of those duties, which could total as much as $54 billion. However, an appeals court blocked the US government from collecting retroactive tariffs pending a final ruling.

In June 2024, the US Department of Commerce (DOC) launched a new, broader AD/CVD investigation into solar factories in Malaysia, Thailand, Vietnam, and Cambodia. In April 2025, the DOC announced final AD/CVD duties, with exact levels varying by company and country. Bloomberg News reported an average duty of 34% in Malaysia, 375% in Thailand, and 396% in Vietnam. Rates for some companies in Cambodia reached 3,521% for those that refused to cooperate with the DOC’s inquiry.

In July 2025, the US Department of Commerce (DOC) initiated a new AD/CVD investigation into solar cell producers in India, Indonesia, and Laos. In February 2026, the DOC announced preliminary countervailing duties (CVD) of 126% on imports from India, 86% to 143% on imports from Indonesia, and 81% on imports from Laos. In April 2026, the DOC made a preliminary anti-dumping (AD) determination of duties of 123.04% for India, 35.17% for Indonesia, and 22.46% for Laos.

In July 2026, the US Department of Commerce (DOC) started an anti-dumping and countervailing duty (AD/CVD) investigation into whether Ethiopian solar cell producers are using Chinese components to produce their cells before shipping the cells to the US, which would be a circumvention of AD/CVD orders on Chinese products.

In July 2026, the US Federal Communications Commission’s (FCC) Public Safety and Homeland Security Bureau announced that it will ban some foreign-made inverters from the US due to cybersecurity concerns. The ban does not apply to inverters that meet the US 45X credit rules, including the Foreign Entity of Concern rules. The ban only applies to new inverter models. Foreign manufacturers can apply to avert the ban through the usual FCC certification process.

Separately, President Trump announced in August 2026 a ban on importing inverters, transformers, and other power equipment from any one of the 24 countries currently on the US arms embargo and sanctions lists. The ban applies to bulk power equipment connected to the US grid that interacts with high-volume transmission lines, and does not apply to equipment connected to distributed energy sources or local distribution grids.

The restrictions on imported inverters may push US inverter prices a bit higher. However, the US has built enough homegrown inverter manufacturing capacity to meet US needs without large-scale imports. As such, the inverter restrictions are not expected to slow the pace of US solar installations significantly.

US solar importers deal with Xinjiang restrictions — US solar imports and installations have been disrupted over the past several years by the US government’s actions to block some solar imports from China’s Xinjiang region, following allegations of forced labor at some companies located in Xinjiang. However, that situation has now largely been resolved as solar companies either met the US government’s documentation requirements or acquired the necessary modules elsewhere.

The Xinjiang issue began affecting the solar industry in June 2021, when the US government imposed a “Withhold Release Order” blocking imports of polysilicon products produced by five companies based in China’s Xinjiang province. This action was taken due to allegations that the companies were associated with government-run forced labor programs involving the Uyghur Muslim minority. China’s government denied the allegations of forced labor and objected to what it claimed was US interference in its internal affairs.

The targeted companies were hamstrung in defending themselves against the forced labor allegations under China’s Anti-Foreign Sanctions Law, which makes it illegal for Chinese companies to comply with US requirements aimed at avoiding sanctions. The Chinese law makes it nearly impossible for Chinese companies to defend themselves against allegations of using forced labor without getting themselves into trouble with the Chinese government.

Beyond the initial Withhold Release Order, the US Congress passed the Uyghur Forced Labor Prevention Act (UFLPA) in December 2021, which former President Biden signed into law, and it took effect in June 2022. That law bans the importation of products made in Xinjiang unless the importer can provide convincing evidence that the products were not produced with forced labor. The UFLPA does not impose a total ban on importing goods from Xinjiang; instead, it creates a “rebuttable presumption” of a ban that can be overcome with proper documentation.

The Xinjiang restrictions were significant for the global solar industry because factories in the Xinjiang region produced about 45% of the world’s solar-grade polysilicon as of 2020, according to Bernreuter Research. Factories in Xinjiang do not assemble many solar modules, but they do produce a significant amount of polysilicon.

However, the importance of Xinjiang polysilicon has diminished as polysilicon factories outside Xinjiang have expanded sharply. As a result, Wood Mackenzie reports that Xinjiang factories’ share of the world’s polysilicon supply decreased to less than one-quarter by 2023.

The global solar industry has addressed labor issues in Xinjiang by diverting supply chains away from the region and strengthening documentation to prove its supply chains contain no forced-labor products.

The US-based Solar Energy Industries Association (SEIA) developed the ANSI/SEIA 101 Solar and Energy Storage Supply Chain Traceability Standard to address forced labor. US solar and energy storage companies can use that standard to comply with US Customs and Border Protection’s (CBP) traceability requirements and the UFLPA requirements (link). The American National Standards Institute (ANSI) approved the standard in October 2025.

Companies that comply with the ANSI/SEIA traceability standard can demonstrate that imported products do not contain any raw materials, components, or finished products that are banned under the UFLPA. The standard was created with real-world situations in mind, with input from CBP. The new standard should help reduce seizures of imported products caused by insufficient documentation.

The ANSI/SEIA 101 traceability standard for supply chains should also help companies qualify for subsidies by meeting the OBBBA’s Foreign Entity of Concern (FEOC) rules.

The Solar Stewardship Initiative has launched a similar standard for European countries, known as the “Supply Chain Traceability Standard,” sponsored by trade bodies SolarPower Europe and Solar Energy UK.

Europe has also blocked products tied to allegations of forced labor. In December 2024, European regulatory authorities implemented the “EU Regulation on Prohibiting Products Made with Forced Labor on the Union Market” (FLR). The FLR prohibits companies from selling or exporting products made in whole or in part with forced labor to or from the EU market, as defined by the International Labor Organization. The ban will take effect in December 2027, without requiring for national legislation.

Other US solar policy developments — When Donald Trump took office for his second term as President in January 2025, he made a series of announcements affecting clean energy. He announced the US’s second withdrawal from the Paris Climate Agreement, beginning a year-long process to complete the exit. He revoked the US International Climate Finance Plan, which provides aid to developing nations for reducing emissions. Mr. Trump also revoked all US federal and national emissions-reduction goals. The Trump administration has also canceled many clean energy loans, grants, and leases.

Although President Trump dropped the Biden administration’s previous US climate commitments, a future president could reinstate them. The Biden administration, in April 2021, announced a new Nationally Determined Contribution (NDC) under the Paris Climate Agreement of a reduction in US greenhouse gas emissions by 50-52% by 2030 from 2005 levels. That was nearly double the Obama administration’s previous commitment: a 26-28% cut in greenhouse gas emissions by 2025 from 2005 levels.

The Biden NDC also included the target of achieving net-zero carbon emissions in the US economy by 2050. The Biden administration also pledged to reach a 100% carbon-free electricity sector by 2035 and reach net-zero greenhouse gas emissions by 2050.

Europe continues to strengthen policy support for solar

European solar installations in 2025 fell slightly by -1% to 65.1 GW year-on-year after the +4% increase in 2024, according to industry association SolarPower Europe in its report, “EU Market Outlook for Solar Power: 2025-2030.” Europe’s flat solar growth in 2024-2025 followed a banner year in 2023, when solar installations surged by +53%.

Solar energy’s share of total electricity generation in Europe rose by 2.1 percentage points to 13.2% in 2025 from 11.1% in 2024, according to energy think tank Ember (European Electricity Review 2026). In 2025, solar electricity usage surpassed coal for the second year, with solar’s 13.2% share of total EU electricity usage easily exceeding coal’s 9.2%. For the first time, solar and wind together accounted for 30.1% of total EU electricity use, exceeding fossil fuels at 29.0% (coal 9.2%, natural gas 16.7%, and other fossil fuels 3.1%).

Weaker residential installations slowed European solar growth in 2024 and 2025, as electricity prices stabilized after the surge in 2022-2023 tied to Russia’s invasion of Ukraine and higher natural gas prices. Yet utility-scale solar continued to grow in 2025, accounting for 53% of European solar installations, up from 44% in 2024, according to SolarPower Europe.

Looking ahead, EU solar installations are expected to fall by -6% in 2026 and -4% in 2027 as rooftop installations continue to decline, according to SolarPower Europe. Utility solar is also expected to be undercut as standalone solar projects transition to solar-plus-storage to boost revenues and reduce curtailments.

SolarPower Europe expects solar installation growth to resume in 2028 and beyond as electrification accelerates and new rooftop requirements begin to take effect. The group expects rising electricity demand from data centers, electric vehicles, heat pumps, and air conditioning to drive more solar in the coming years.

The EU has aggressive climate and renewable energy goals. In September 2022, the European Parliament approved raising the target for the share of renewables in the EU’s electricity mix to 45% by 2030, up from 40% in June 2022 and the previous target of 32%. The European Commission set the new 45% target as part of the REPowerEU plan to cut the EU’s dependence on imported Russian natural gas. The actual target is 42.5%, but a 2.5% “indicative top-up” allows the EU to reach 45%.

The EU is relying on its renewable energy target to meet its pledge under the UN Paris Climate Agreement to reduce its greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, and to achieve net-zero emissions by 2050.

Europe was thrown into an energy emergency after Russia invaded Ukraine in February 2022, which forced Europe to slash its dependence on Russian oil and gas. Russia’s invasion of Ukraine brought the importance of domestic energy security to the forefront once again, much as it was in the 1970s when OPEC’s oil embargo caused long gasoline lines and a global recession. Fossil fuels often originate in hostile, inhospitable locations, making them an expensive and unreliable energy source for importers.

As a result of Russia’s attack on Ukraine, the EU formulated a plan called REPowerEU to slash its dependence on Russian fossil fuels. A key strategy of REPowerEU was to rapidly expand renewable electricity production to replace fossil fuels, such as natural gas and coal. REPowerEU aims to ensure that 750 GW of cumulative solar capacity is in place by 2030, requiring approximately 340 GW of new solar capacity to be installed between 2026 and 2030.

The REPowerEU strategy includes several key measures to accelerate solar installation, including larger government solar auctions, government support for identifying suitable land sites, streamlined permitting, and simplified solar Power Purchase Agreements (PPAs) to make them more attractive to small and medium-sized companies.

The US passage of the IRA in 2022 helped galvanize European policymakers to take more aggressive action to build a domestic solar manufacturing base. The European Commission formulated the “Green Deal Industrial Plan,” which focused on four key pillars: regulation, financing, skills, and trade.

As part of the Green Deal Industrial Plan, the EU’s “Net-Zero Industry Act (NZIA)” took effect in June 2024. The NZIA aims to utilize European-manufactured products for at least 40% of its clean energy deployment. The NZIA imposes domestic content requirements on European public auctions and tenders for renewable energy capacity, thereby supporting European manufacturers. The NZIA also seeks to promote worker training for solar manufacturing plants and ease regulatory burdens on European solar manufacturers.

In February 2025, the European Commission unveiled the Clean Industrial Deal, which aims to provide €105 billion in funding to support European clean industrial manufacturing.

The EU has manufacturing capacity of 12 GW of PV modules, 2 GW of PV cells, and 25 GW of PV-grade polysilicon, according to the EU publication “Clean Energy Technology Observatory, Photovoltaics in the EU”. The EU does not manufacture PV-grade silicon ingots or PV wafers. The EU is a much bigger player in inverters and trackers, with manufacturing capacity of 142 GW of PV inverters and 121 GW of mounting structures, representing global market shares of 23% and 34%, respectively.

Türkiye, an EU candidate, has a burgeoning solar industry. In fact, Türkiye has 13.2 GW of solar module manufacturing capacity, exceeding the 9.7 GW of combined manufacturing capacity of Italy, Germany, Spain, France, and the Netherlands, according to Sinovoltaics. Türkiye has 3.3 GW of solar cell manufacturing and 1.2 GW of wafer capacity.

Solar installations in Türkiye soared by +163% in 2023 and +96% in 2024 to a record high of 10.8 GW in 2024, but then fell back by -44% to 6.1 GW in 2025.

India becomes a major module exporter as production capacity soars

India’s government is pushing hard for solar energy to modernize its infrastructure, boost global competitiveness, expand electricity access in rural areas, and meet its climate goals.

India is pursuing national goals of 500 GW of renewable energy capacity by 2030 and net-zero emissions by 2070. India’s government has also set ambitious goals to increase its cumulative solar capacity by +49% to 186 GW by 2027 and nearly triple it to 365 GW by 2032, from its current level of 125 GW, according to its 14th National Electricity Plan (NEP14).

Solar is already the largest source of new electricity capacity in India, accounting for 68% of annual new electricity capacity additions in 2025, according to Mercom Capital Group. That means solar energy in India trounced other sources of new electricity generation in 2025, including wind, natural gas, coal, and nuclear.

In 2025, India installed the second-most solar capacity globally, surpassing the US. India installed 51.0 GW of solar in 2025, up +55% year-on-year from 33 GW in 2024, and adding to the +143% surge in 2024, according to BNEF. Over the 5 years through 2025, India’s annual solar installations grew at a compound annual rate of +64%.

BNEF forecasts that India’s solar compound annual growth rate over the 5 years through 2030 will be +6%, reaching 68 GW of annual installs by 2030.

Utility-scale solar accounted for 76% of India’s total installs in 2025, followed by 21% for rooftop and 3% for off-grid and distributed systems, according to data from India’s Ministry of New and Renewable Energy (MNRE).

In recent years, India’s government has pushed hard for a homegrown solar industry, combining tariffs on imported solar products with a large subsidy program to build solar factories in India.

As a result, India’s domestic solar manufacturing capacity has exploded in recent years. India’s solar panel manufacturing capacity reached 210 GW as of December 2025, while cell manufacturing reached 27 GW, according to Mercom India. India is currently in a manufacturing glut, with factory module production capacity utilization running below 50% according to some accounts.

Now that India’s module producers can easily meet domestic demand, they are focused on exporting their production. However, that has become harder since their main buyer, the US, now imposes prohibitive tariffs on Indian solar products.

To build a domestic solar manufacturing industry, India’s government provided a substantial $3 billion in funding for its solar PV manufacturing “Production Linked Incentive” (PLI) scheme, which offers subsidies to companies that establish large solar manufacturing plants in India.

India’s government has also used tariffs to block imports of Chinese solar modules and encourage Indian solar installers to buy Indian modules. Effective April 1, 2022, India’s government imposed a 40% basic customs duty on certain imported solar modules and a 25% duty on imported solar cells.

As another trade protection mechanism, India maintains an “Approved List of Models and Manufacturers” (ALMM) of solar modules approved for installation in India for government projects and programs. That list was originally designed as a minimum quality requirement. However, it is actually a domestic content requirement, as no non-Indian solar manufacturers are listed.

The ALMM currently applies to both solar modules and cells. The ALMM restriction will also apply to solar ingots and wafers beginning in June 1, 2028.

Solar in Japan and Asia/Pacific shows growth

Solar installations in Japan rose +6% year-on-year in 2025 to 6.0 GW, adding to 2024’s +6% rise, according to BNEF. BNEF expects annual increases averaging about +2% during 2027-2030. Solar power accounted for a record 10% of Japan’s electricity generation in 2025, above the global average of 9%, according to Ember.

Japan’s annual solar installation growth has slowed in recent years as subsidies have been reduced and the government works to move solar to a fully unsubsidized market. The Japanese government plans to phase out fixed feed-in tariffs (FIT) and feed-in premiums (FIP) for large solar systems with a capacity of over 10 kW beginning in fiscal year 2027, while keeping incentives in place for both residential and commercial-industrial projects.

The Japanese government is pursuing aggressive solar targets to help meet its emissions goals. In July 2021, the Japanese government almost doubled its solar target to a cumulative capacity of 108 GW by 2030. Japan’s Nationally Determined Contribution (NDC) calls for a 60% cut in emissions by 2035 and a 73% cut by 2040 from 2013 levels. Japan aims to achieve net-zero carbon emissions by 2050.

Solar in Japan is also expected to receive support in the coming years from Japanese corporations seeking to sign solar power purchase agreements to meet their corporate renewable energy goals. Corporate demand is expected to be a key driver of subsidy-free solar development in Japan in the coming years.

Elsewhere in the Asia-Pacific region, Taiwan is expected to see strong solar installations in the coming years as the government promotes solar energy to meet its climate goals. Solar installations in Taiwan fell -36% to 1.2 GW in 2025, but BNEF expects growth of +9% in 2026 and +15% in 2027.

Taiwan has strong solar demand from corporations seeking to meet their renewable energy goals. Additionally, demand for solar power is growing in Taiwan to replace the impending closure of coal plants, in line with the government’s goal of achieving net-zero emissions by 2050.

Taiwan’s government aims to obtain 50% of its total electricity from renewable sources by 2035. The government has announced an aggressive cumulative solar capacity target of 31 GW by 2030, more than double its current capacity of 15 GW.

Meanwhile, solar installations in South Korea rose by +7% to 3.4 GW in 2025. Corporate demand for solar power is expected to remain solid after South Korea’s government revised its electricity laws in 2021, allowing clean energy developers to sell electricity directly to corporations through power purchase agreements.

South Korea’s 11th Basic Plan for Electricity Supply and Demand, approved in February 2025, set cumulative solar capacity targets of 55.7 GW by 2030 and 77.2 GW by 2038, which will require aggressive annual installations, given its 2025 capacity of only 34 GW.

The South Korean government’s current goal is to derive 20% of total electricity generation capacity from renewable sources by 2030. In 2025, the South Korean government raised its Nationally Determined Contribution (NDC) under the Paris Climate Agreement to a 53-61% reduction in emissions by 2030 from 2018 levels.

In Australia, solar installations fell by -3.4% in 2025 to 4.9 GW, adding to a -16% decline in 2024, according to BNEF. Australia’s government has pledged to reduce emissions by 43% from 2005 levels by 2030 and to reach net-zero emissions by 2050. The government is also targeting 82% renewable generation by 2030, up from the current level of 27%.

In the Southeast Asian bloc, BNEF expects 9 GW of solar to be installed in 2026 and a cumulative 133 GW from 2026 to 2030, making the region a major source of new solar demand. BNEF says that solar demand will stem mainly from forecasts that electricity demand in that region will soar by +42% from 2026 to 2035, making it the second-fastest-growing region after India at +49%. Southeast Asia includes Vietnam, Malaysia, the Philippines, Thailand, Indonesia, and Singapore.

Latin America becomes major solar player, with Brazilian dominance

Latin America has emerged as a significant player in the solar industry, driven mainly by rapid growth in Brazil.

Annual solar installations in the 15 largest Latin American countries in 2025 fell by -19% to 21.8 GW, breaking the string of nine consecutive yearly rises, according to BNEF. Latin American solar installations rose by +30% on a compound annual basis over the five years through 2025.

Solar installs in Latin America are heavily concentrated in Brazil, which accounted for 70% of the region’s solar installations in 2025. Brazil ranked fifth globally in annual solar installations in 2025, behind only China, India, US, and Germany.

Brazil’s solar installations in 2025 fell by -22% to 15.2 GW, but showed a compound annual growth rate of +29% over the five years through 2025.

Colombia was the second-largest solar player in Latin America in 2025, with a 6.9% market share, followed by Chile (5.8%), Argentina (5.5%), and Mexico (5.0%).

Solar in Africa is set to rapidly expand, led by South Africa

While solar energy currently has a small footprint in Africa, solar installations are set to expand rapidly in the coming years. There are approximately 600 million people in rural Africa who lack access to electricity. Also, electricity systems in urban areas require significant expansion and improvement.

Africa faces a significant energy investment deficit since it accounts for about 20% of the world’s population yet receives only 3% of global energy investment, according to the Global Solar Council (GSC).

Africa installed 4.5 GW of solar in 2025, according to the “Africa Market Outlook for Solar PV, 2026-2029,” published by the Global Solar Council (GSC). South Africa accounted for the lion’s share (32%) of Africa’s installations, with 1.6 GW of installations,

The other largest solar players in Africa are Nigeria with a 17% share (803 MW), Egypt with a 10% share (500 MW), and Algeria with an 8% share (400 MW).

It should be noted that the solar installation figures for Africa are likely understated, as many rooftop and smaller projects slip under the radar of research firms attempting to count installations.

Africa faces multiple obstacles to installing solar energy, including inadequate grid infrastructure, limited scalability, loan-shedding issues, a cost of capital three times higher than in developed countries, currency risks, and weak purchasing power for small-scale solutions, among others, according to GSC.

Despite these obstacles, GSC forecasts that African solar installations will grow at a compound annual rate of +21% over the four years through 2029. Specifically, GSC expects annual installations to more than double to 9.6 GW in 2029 from 4.5 GW in 2025. Most of that growth is expected to come from utility-scale solar.

Africa has strong political will to rely on solar energy to strengthen the electrical systems and infrastructure needed for economic development and improved quality of life. GSC notes that African leaders set a target of 300 GW of renewable generation capacity by 2030 as part of the Nairobi Declaration issued in 2023. African leaders expect solar energy to account for a large proportion of the new electricity installations in the near future.