Europe’s distributed solar outlook has been upgraded by about 14 GW DC for 20262028, with residential demand growing by around 20%
Impact of rising energy prices is more moderate than in 2022, with demand response expected at roughly 1/3rd of the earlier surge
Country-level trends vary, with Italy and Germany leading growth, while the Netherlands remains flat and Ireland sees stronger C&I-driven demand
Energy price uncertainty is back in focus, and it is starting to influence solar demand in Europe again. The system is more decarbonized today than in 2022, but gas still drives electricity prices. That keeps solar closely linked to global developments. For now, early signs suggest rising procurement activity, especially in residential and C&I markets.
During the recent TaiyangNews Virtual Conference on Smarter Solar for Homes & Businesses, Juan Monge, Principal Analyst, Distributed Solar, Europe, at Wood Mackenzie, noted that disruptions in energy markets are already forcing a rethink of demand expectations. He explained that long-term solar capacity projections have not changed much, but the near-term outlook is shifting. According to him, demand is not being newly created. Instead, installations expected in the early 2030s are now likely to happen sooner. This could bring forward the market peak and lead to earlier signs of saturation.
A key driver behind this shift is the renewed sensitivity of residential PV demand to electricity prices. Monge pointed out that the segment remains highly elastic, with demand responding to changes in retail prices after a lag. Based on early installer feedback and contract activity, the residential outlook has been revised upward by around 20%, reversing earlier expectations of a decline in 2026. Markets such as Germany are already showing signs of recovery, even before the full impact of higher retail prices is reflected in consumer bills. He added that the near-term outlook for residential and C&I PV combined has been upgraded by about 14 GW DC for the 2026-2028 period.
In contrast, the C&I segment is expected to grow more steadily. Monge noted that while growth rates have been upgraded, the overall trajectory remains intact. Here, macroeconomic factors such as industrial output and GDP growth play a more prominent role. Sustained high energy prices could support solar adoption, but may also pose risks of industrial slowdown, particularly in energy-intensive economies.
The impact of rising gas prices is not felt evenly across Europe. Juan Monge pointed to Italy as the most exposed market, where electricity prices remain closely linked to natural gas prices. That makes the country particularly vulnerable to fuel price swings and likely to see a stronger push toward distributed solar.
Germany, the Netherlands, and Belgium are also expected to feel the effects, he added. In contrast, the UK and Ireland may see a more muted impact, as policy measures and market structures help soften the impact of price increases on end users. In Italy, natural gas is estimated to influence electricity pricing for nearly 89% of operating hours, highlighting just how exposed the market is to price shocks.
Looking at individual markets, Monge said the picture is quite uneven. Italy is expected to see the strongest growth, with distributed solar demand rising by around 20%. This is largely due to its high exposure to gas-driven electricity pricing, along with continued policy support. Germany is also set to grow by roughly 15%, although early signs of market maturity and economic pressure are beginning to show.
The Netherlands is likely to stay relatively flat as net metering is phased out. Ireland, on the other hand, is emerging as a growth market. Monge pointed out that demand there is being driven more by the C&I segment, supported by rising electricity needs from data centers.
Policy frameworks continue to shape regional dynamics. Monge noted that Germany benefits from incentives such as VAT waivers, while Italy offers support through mechanisms like Ecobonus. In the Netherlands, the planned 2027 phase-out of net metering is influencing installation behavior, although the policy’s retroactive nature reduces the sense of urgency. Belgium and the UK are supported by regulatory measures and evolving frameworks.
Monge also linked long-term solar growth to broader electrification trends. As fossil fuel costs increase, energy demand is gradually shifting toward electricity. This is visible across both households and commercial users, with EV adoption adding further pressure. He also pointed to improving storage economics and models such as virtual power plants (VPPs) as supporting factors. Rising petrol and gas prices are expected to further accelerate the electrification of heating and transport.
He noted that the current situation is not comparable to the 2022 energy crisis. Price increases are more moderate this time, and policymakers have more tools to contain the impact. However, tighter budgets and shifting priorities may limit the level of support. He added that wholesale electricity prices are expected to rise to roughly 1/2 of the levels seen in 2022, with the demand response reaching only about 1/3rd of the earlier surge.
The full presentation, “Identifying the Hottest Solar Rooftop Markets,” is available on the TaiyangNews YouTube channel here.