EU Solar Outlook 2025: Solar Leads Power Mix but Faces First Market Slowdown, Says Mid-Year Report

For the first time in history, solar energy became the European Union’s largest source of electricity, supplying 22.1% of the bloc’s total power mix in June 2025, according to SolarPower Europe’s EU Market Outlook – Mid-Year Analysis. This historic feat demonstrates the rapid advancement of solar in the EU’s energy transition. However, the report also raises serious concerns about market stagnation and future targets, particularly for 2030.

Solar Surpasses Coal, But Market Momentum Slows

The EU is on track to meet its 2025 REPowerEU solar target of 320 GWAC (400 GWDC). But the pace is slowing. After double-digit growth in 2022 (+47%) and 2023 (+51%), the market slowed to 3.3% in 2024 and is now forecast to contract by -1.4% in 2025 under the Medium Scenario—the first drop in nearly a decade.

While utility-scale solar remains resilient, largely due to auctions and corporate PPAs, the rooftop solar segment—especially residential—has collapsed in several markets due to falling electricity prices, policy uncertainty, and abrupt withdrawal of incentive schemes.

Rooftop Collapse Drives Market Decline

Residential installations, which accounted for 30% of capacity additions from 2020–2023, are projected to fall to just 15% in 2025. This includes steep declines in key markets such as the Netherlands, Germany, Austria, Italy, and Hungary, with contractions over 60% in some cases.

The rooftop solar decline is forecast to pull overall additions in that segment down by 11% to 32.4 GW in 2025, down from 36.3 GW in 2024. In contrast, utility-scale installations are expected to contribute half of all new capacity, with strong growth continuing in Germany, Spain, and Italy.

Auctions and PPAs: Key Drivers Amid Market Hesitation

Solar auctions have regained momentum after reforms and recorded over 20 GW awarded in 2024, with Germany leading and innovation tenders seeing prices as low as 0.05 EUR/kWh. Meanwhile, corporate PPAs, although having surpassed 20 GW in total volume, saw a 41% drop in Q2 2025 due to weak buyer demand and falling electricity prices.

The EU’s solar expansion is increasingly reliant on auction-based public funding and private PPAs, but both are facing structural limitations. Market volatility and reduced capture rates—especially in countries like Germany where solar reached a 30% monthly share—are pushing down project revenues and causing hesitation among developers and corporate buyers alike.

Flexibility and Storage Now Critical to Future Success

As solar generation increases, price cannibalisation is reducing its market value. Capture rates—the price solar producers receive compared to market average—have dropped to as low as 31% in Germany, prompting calls for urgent investment in battery storage and grid flexibility.

SolarPower Europe expects the EU battery fleet to grow over 50% in 2025, reaching 75 GWh, with utility-scale storage leading the surge. However, residential storage installations are declining in line with rooftop systems. Regulatory and permitting barriers are also slowing progress in the commercial and industrial (C&I) segment.

2030 Target at Risk

To meet the 750 GWDC (600 GWAC) target for 2030, the EU must install an average of 69.6 GW per year—a pace that now seems difficult given current market trends. At this rate, the bloc risks falling short, reaching only 723 GWDC by the decade’s end.

SolarPower Europe emphasizes that solar cannot succeed in isolation. A resilient energy system—supported by long-term policy certainty, dynamic pricing models, and integrated storage—is essential.

The EU solar sector stands at a pivotal crossroads. While 2025 marks a historic moment with solar leading the electricity mix, structural challenges—particularly the decline in residential installations and weakening policy frameworks—threaten long-term ambitions. Accelerated deployment of battery storage, improved regulatory frameworks for PPAs and auctions, and renewed political commitment are now urgent to keep Europe’s clean energy transition on track.