Solar’s long-term outlook remains strong despite near-term oversupply, pricing pressure, and policy risks, said BloombergNEF’s Youru Tan
India and emerging markets will drive growth, while solar-plus-storage becomes a standard project model
Trade barriers and localization policies are reshaping supply chains, but China retains its technology and cost edge
Global solar PV industry is likely to face a difficult near-term outlook due to continued excess capacity and policy uncertainty, according to Bloomberg New Energy Finance (BloombergNEF) Solar Analyst Youru Tan. Speaking recently at a China Photovoltaic Industry Association (CPIA) event, he added that despite near-term challenges, the long-term fundamentals for solar PV remain robust, especially since it is the lowest-cost solution to meet incremental electricity demand.
As a fuel-free technology, solar is insulated from fuel price volatility and geopolitical risks, he added, thus increasing its desirability.
Additionally, growing storage integration, and demand from emerging markets continue to underpin its growth. More than 23% of large utility-scale solar projects globally now include energy storage, according to BloombergNEF’s project database. New storage technologies are improving grid integration, flexibility, and system resilience. Solar also offers shorter development and delivery timelines which is required in regions like Lebanon, Ukraine and Iraq that require disruption-resistant power supply.
Solar growth expands beyond traditional markets
Among strong markets to watch out for is India that remains a major growth engine. Supported by strong policy backing and rising power demand, India is expected to add about 35 GW AC of solar capacity in 2025 and 37 GW AC in 2026, equivalent to around 47 GW of module demand, forecast Tan. High growth is expected through 2035, though policy uncertainty could create volatility.
Beyond India, Southeast Asian countries including Indonesia and Vietnam, are expanding solar as part of energy transition and security plans. Solar installations across the Middle East, North Africa, and Sub-Saharan Africa are expected to reach 27 GW in 2025 and 30 GW in 2026, as per BloombergNEF’s estimates. In the absence of grid connection statistics, the growing volume of Chinese module exports to these regions can be seen as a sign of their interest in solar, he added.
Upstream cost pressures not passed downstream
Solar modules now account for about 30% of total system costs globally, and less than 25% in China, pointed out Tan. Further cost reductions in terms of project investment will increasingly depend on lowering balance-of-system (BOS) costs, as module price declines now have limited impact on the levelized cost of electricity (LCOE).
Prices also depend on the supply and demand situation. Currently, the global PV manufacturing capacity already exceeds projected demand. Tan believes that even with slower capacity additions, existing supply can meet expected installations of about 655 GW in 2026, and even 684 GW by 2035 pointing to continued overcapacity and margin pressure.
“In terms of pricing, upstream segments (polysilicon, wafers, and cells) experienced sharp declines in the first half of 2025 followed by a rebound in the second half, while module prices remained notably stable, with average international prices consistently below USD 0.09/W,” stated Tan while pointing out that polysilicon prices rose by nearly 30% at the end of 2025 compared to the beginning of the year.
Polysilicon inventories were estimated at 500,000 tones across the value chain by the end of 2025, enough to support over 200 GW of module production. Weak end-market demand will also weigh on prices going forward. Industry self-discipline may have reduced polysilicon output, by 24% in 2025, yet overall supply will still exceed demand “keeping prices close to cost levels”.
“This highlights strong resistance from downstream developers to price increases, preventing upstream cost pressures from being passed through.”
Rising silver prices will also play a part as it pushes up module manufacturing costs but upstream price volatility and broader commodity inflation will ensure module prices to remain largely stable. Silver saw the biggest jump in the weight of solar material costs in 2025, according to Tan.
In the US and parts of Europe, tariffs and supply-chain restrictions have pushed module prices well above global averages, slowing deployment and increasing project costs, though such cases are still seen as exceptions rather than the norm.
In the US, average module prices are around $0.27/w and $0.28/W, roughly twice the international average. Yet, the US still remains the most lucrative market thanks to the growing demand for solar here mainly due to AI-driven data center growth.
Global manufacturing diversifies, but China retains cost edge
Another trend Tan highlighted is the reshaping of manufacturing and trade flows due to tariffs and local-content rules.
Overseas module capacity has grown rapidly, especially in India and the US, but upstream production outside China remains limited due to much higher capital costs and technical barriers.
Building a fully integrated PV manufacturing chain in Europe or the US costs more than 4X as much as in China. BloombergNEF estimates show stark cost differentials as modules exported from China cost around $0.08/W–$0.09/W; modules produced in Southeast Asia using Chinese polysilicon cost about $0.10/W; rebuilding a full value chain in Southeast Asia with non-Chinese polysilicon would push costs to around $0.20/W; while fully integrated manufacturing in the US (pre-subsidy) reaches as high as $0.47/W.
Overall, BloombergNEF pegs 2026 solar PV installations to reach a combined 649 GW, representing a 0.9% contraction from 655 GW it expects for 2025. S&P Global Energy analysts project a larger YoY decline of 10% (see Global Solar PV Installations Set For 1st Annual Decline In 2026).