OPIS Insights

As 2025 draws to a close, the global solar industry finds itself at a crossroads. From Europe’s ambitious decarbonization framework to sweeping U.S. policy reversals, the past year has reshaped how solar power is made, financed, and traded. What began as another record-breaking year for clean energy deployment is ending as one defined by policy uncertainty, shifting trade routes, and strategic recalibration.

Europe: Record Growth Meets Regulatory Realignment

Europe continued to lead the global solar market in 2025, with installations soaring to a record 65.5 GW in 2024, enough to supply more than 20% of the EU’s electricity by mid-year. Yet even as the region celebrates its progress, the tone among policymakers and developers has shifted. The conversation is no longer just about deployment, it’s about direction.

At the center of this pivot lies a trio of landmark policies. The Net Zero Industry Act (NZIA) mandates that a significant share of clean technologies deployed in Europe, including solar, be domestically manufactured, aiming to reduce dependency on imports and strengthen industrial resilience. The complementary Clean Industrial Deal, launched in early 2025, mobilizes over €100 billion to decarbonize manufacturing and build out European clean-tech capacity.

Meanwhile, the Carbon Border Adjustment Mechanism (CBAM) is preparing to move from the reporting phase to full implementation in January 2026. CBAM effectively puts a price on the carbon embedded in imported goods, including steel, aluminum, and potentially solar components, creating a seismic shift in how global supply chains operate.

While these policies align with Europe’s long-term climate goals, they introduce short-term friction. Developers face higher procurement costs, and investors are navigating new compliance obligations tied to sustainability criteria and lifecycle emissions. Still, the policy consensus is clear: Europe is betting that industrial sovereignty will be the foundation of its next energy boom.

United States: Incentives Reversed and Timelines Tightened

Across the Atlantic, the U.S. solar sector is grappling with the most significant policy shift in over a decade. The “One Big Beautiful Bill,” signed into law by President Trump in July 2025, has effectively rewritten, and in many cases dismantled, key provisions of the Inflation Reduction Act (IRA).

The most immediate change is the accelerated sunset of the Investment Tax Credit (ITC), which has been a cornerstone of U.S. solar economics since 2006. Under new guidance, projects must now demonstrate on-site physical construction to qualify, eliminating the “5% safe harbor” rule that allowed developers to secure credits through pre-construction spending. This change has sent developers scrambling to break ground before mid-2026 to lock in a four-year runway. Otherwise, the credit goes to zero for any project not in service by the end of 2027.

Adding further complexity are the expanded Foreign Entity of Concern (FEOC) restrictions, which limit the use of components or financing linked to certain foreign suppliers, primarily Chinese firms. This has reshaped procurement strategies, financing models, and project valuations across the industry.

Developers now face a dual challenge: securing compliant materials amid rising costs, and convincing lenders that projects will remain eligible under evolving federal guidance. Analysts warn of a short-term construction surge followed by a slowdown as projects struggle to close financing in the absence of long-term certainty.

Despite these headwinds, the policy reset may accelerate a broader restructuring of the U.S. solar supply chain. Domestic module assembly and cell manufacturing are expected to grow modestly through 2026, supported by private investment and state-level incentives. But whether that momentum can offset the loss of federal tax credits remains an open question.

Asia and Global Trade: Supply Chains Under Pressure

While Europe and the U.S. rewrite their policy frameworks, solar manufacturing hubs across Asia are adapting to a rapidly shifting trade landscape. New U.S. tariffs on imports from Vietnam, Malaysia, Cambodia, and Thailand, countries that collectively supplied more than 80% of U.S. solar panels in 2024, pushed manufacturers to relocate operations to Indonesia and Laos.

These shifts underscore a new global reality: the solar supply chain is becoming more fragmented and politically charged. What once operated as a seamless global network is now being restructured around trade alliances, tariff exemptions, and domestic-content rules. For developers, this translates into longer lead times, higher costs, and growing uncertainty about where and how their projects will source materials.

The Takeaway: Trade, Not Technology, Will Define Solar’s Next Chapter

For years, the solar industry’s narrative has revolved around cost declines and technological innovation. In 2025, that story changed. The defining forces shaping solar’s future are no longer purely economic, they’re political.

From Europe’s push for industrial sovereignty to America’s reversal of clean-energy incentives, global markets are diverging in both policy and philosophy. The coming year will test whether solar can sustain its momentum amid fragmented regulation, higher costs, and complex trade barriers.

As we look to 2026, one truth stands out: trade, not technology, may be the decisive factor in solar’s next chapter.