The European Solar Divide: Where PV Investors Can Still Find Returns in 2026
EU solar capacity additions remained nearly unchanged in 2025—but the market did not. For the first time, solar farms accounted for more than half of the new capacity, France displaced Italy from third place, and revenues per kilowatt-hour varied widely. What this means for country selection.
The short answer
The “European Solar Schism” refers to the fragmentation of the European solar market into segments and countries that are diverging economically. For PV investors, it is not a question of volume, but of distribution. At 65.1 gigawatts, EU capacity additions in 2025 were only 0.7 percent below the previous year—but the market has undergone a reshuffling: Solar farms now account for more than half of new capacity for the first time, the share of residential rooftop systems fell from 28 to 14 percent, and five of the ten largest markets installed less capacity than in 2024. France has displaced Italy from third place. For investors with 100,000 euros or more in equity, this means that returns are determined by the selection of projects within the market. In March 2026, Italy achieved the highest revenue among the three major EU markets tracked by Modo Energy, at 124.72 euros per megawatt-hour, while Spain recorded 13.51 euros.
1. The European Solar Market in 2025: Barely Smaller, but With a New Landscape
EU capacity additions fell from 65.6 to 65.1 gigawatts in 2025—a 0.7 percent decline and the first drop since 2016. The figure alone does not justify an investment decision. What is significant is what has shifted behind the scenes: segments, the ranking of countries, and revenue structures have all changed simultaneously.
By the end of 2025, the EU reached a cumulative solar capacity of 406 gigawatts, thereby achieving the 2025 interim target of the EU Solar Strategy—which the Commission estimates at 320 gigawatts of AC capacity and SolarPower Europe at 400 gigawatts of DC capacity. The 2030 target, however, is slipping out of reach: In the most likely scenario, SolarPower Europe expects 718 gigawatts, compared to the target of 750. The decline is expected to continue in 2026 and 2027; according to this forecast, the annual market will not return to the 2025 level until 2030.
Here, too, it’s worth taking a closer look at the unit. EU documents often cite a target of around 600 gigawatts for 2030, while industry publications mention 750 gigawatts. These are actually the same target value: The European Commission calculates in terms of alternating current (AC) capacity, while the industry uses direct current (DC) capacity, with a conversion factor of 1 to 1.25. Comparing the two figures side by side without specifying the unit creates a contradiction that does not actually exist.
Three Shifts That Are Reshaping the Market
First, the segments. In 2025, solar farms accounted for more than 50 percent of new installations for the first time. The share of residential rooftop systems fell from 28 to 14 percent between 2023 and 2025. This is not an economic downturn, but rather a shift in demand from rooftop to open-space installations and from individual properties to projects. So solar energy continues to grow in Europe—just in different areas.
Second, the ranking of countries. Germany and Spain remain the two largest markets. By 2025, France had overtaken Italy for third place, driven by commercial and utility-scale projects, while Italy’s rooftop segment shrank significantly after subsidy programs expired. Romania and Bulgaria entered the top 10 for the first time, while the Netherlands fell to eighth place.
Third, the trend within the leading group. Five of the ten largest markets had lower installation volumes in 2025 than in 2024: Italy, Poland, Greece, the Netherlands, and Portugal. Growth and decline thus coexist within the same metric.
The Role Solar Power Now Plays in the European Electricity System
In 2025, solar power accounted for about 13 percent of Europe’s electricity (SolarPower Europe). In June 2025, photovoltaics was the EU’s largest single source of electricity for the first time in a full month. This is no longer an isolated occurrence: In May 2026, the share stood at 23 percent, and in June and July 2026, it was 25 percent in each month—making solar the dominant energy source in the European electricity mix for three months.
Fraunhofer ISE estimates the EU’s photovoltaic generation in 2025 at 275 terawatt-hours and contrasts this with 243 terawatt-hours from lignite and hard coal. Ember arrives at a figure of 369 terawatt-hours for the same region; the difference is likely due to the fact that Ember extrapolates gross generation, including generation behind the meter. Both sets of figures are internally consistent; however, they should not be compared side by side. In terms of generation volume, solar energy on the continent is no longer a supplementary source but, in certain summer months, the largest source by volume—it does not serve as a baseload source because it is unavailable at night. The key question for investors is no longer whether solar delivers, but at what price the electricity it generates will be compensated.
Who Benefits from This Market—and Who Doesn't
The following sections are tailored to commercial investors with at least 100,000 euros in equity and to businesses that consume their own energy—not to private households. This is not a mere formality: the very segment that has driven the energy transition in recent years is now declining across Europe. Anyone investing today in rooftop photovoltaic systems or ground-mounted installations is entering a market whose pricing dynamics have fundamentally changed since the energy crisis.
Sources for this section (as of August 2026): SolarPower Europe, EU Solar Market Outlook 2025–2030 (December 11, 2025); Ember; Fraunhofer ISE.
2. Germany: 128 gigawatts-peak — and a revenue model in transition
In August 2026, Germany surpassed the 128-gigawatt-peak mark for installed photovoltaic capacity (direct current), thereby meeting the statutory expansion target for 2026. More than six million systems are feeding power into the grid. However, anyone investing capital in this sector should understand that the revenue model for the next generation of systems differs fundamentally from that of the past ten years.
According to Fraunhofer ISE, net capacity additions reached 16.2 gigawatts of direct current capacity in 2025, which corresponds to 14.3 gigawatts of alternating current capacity. Photovoltaics generated approximately 87 terawatt-hours—21 percent more than in the previous year—of which about 71 terawatt-hours were fed into the grid and 16.9 terawatt-hours were consumed on-site; the figures are rounded and therefore do not add up exactly. According to an analysis by BSW-Solar based on Fraunhofer data, solar power surpassed lignite for the first time in domestic electricity generation. This comparison cannot be made using Destatis’s grid feed-in data because Destatis does not report lignite and hard coal separately.
Why a percentage without a reference value means nothing
Several figures are circulating regarding the share of photovoltaics in electricity generation. They do not contradict each other; they measure different things. Destatis reports a share of 16.0 percent of grid feed-in for 2025—this figure only counts electricity fed into the general public grid. In terms of total German net electricity generation, BSW-Solar cites a figure of around 19 percent based on Fraunhofer data (BSW-Solar, June 23, 2026). This figure includes self-consumption and self-generation by industry and commerce.
Anyone who compares these two figures is comparing two different populations. For revenue calculations, this distinction is not merely academic: self-consumption is not compensated, but rather avoids procurement costs—these are two entirely different revenue mechanisms.
The first half of 2026 marked a turnaround in the trend
The first quarter of 2026 looked like it would see a decline. However, the first half of the year showed an increase: approximately 7.4 gigawatts-peak of new capacity installed, compared with 6.8 gigawatts-peak in the same period last year—a nine percent increase. This growth, however, comes from a single segment.
From January through May 2026, ground-mounted capacity increased by 36 percent to 3.4 gigawatts-peak. Commercial rooftop capacity above 30 kilowatts-peak declined by 30 percent, while the residential segment (up to 30 kilowatts-peak) fell by 12 percent. During the same period, large-scale battery storage systems fed 1.5 gigawatt-hours into the grid, compared with 0.3 gigawatt-hours in the previous year.
In other words: Capacity is growing, but it’s growing in large units. Small PV systems on the roofs of homes and small businesses are no longer driving this expansion—this is the same trend that’s visible across Europe, only in a market that can afford it.
The Shift to Direct Marketing
The European Commission’s approval of the EEG 2023 under state aid law expires at the end of 2026. On July 29, 2026, the Federal Cabinet approved the government’s draft bill for the further expansion of renewable energy in the electricity sector, as well as the grid connection package. The plan calls for the elimination of the fixed feed-in tariff for new installations, a requirement for direct marketing, Contracts for Difference, and a cap on the feed-in capacity of small and medium-sized rooftop systems at 50 percent.
None of this is legally binding yet. The drafts are currently before the Bundesrat in their first reading as Bundesrat documents 470/26 and 471/26; the next plenary session is scheduled for September 25, 2026. As of the date of this article, they have not been introduced in the Bundestag. Details on the current remuneration system are covered in our overview of EEG remuneration for 2026.
Under the grandfathering provision in the government’s draft bill, anyone who commissions a plant in 2026 will retain the last generation of the 20-year unilateral market premium. That is the real time pressure in the German market—not module prices.
Sources for this section (as of August 2026): BSW-Solar (August 20, 2026); Fraunhofer ISE, 2025 Annual Report; Destatis, Press Release No. 073 (March 6, 2026); Federal Government and BMWE (July 29, 2026); Bundesrat.
3. Italy: highest recorded revenue per kilowatt-hour, but no longer in the top 3
Among the three major EU markets tracked by Modo Energy, Italy generates the highest revenue per kilowatt-hour fed into the grid. The capture price in March 2026 was 124.72 euros per megawatt-hour, compared to 59 euros in Germany and 13.51 euros in Spain (Modo Energy, April 16, 2026). At the same time, Italy lost its third-place ranking in EU capacity additions to France in 2025.
The two go hand in hand. The explanation is that gas-fired power plants in Italy often set the market price and thus establish a price floor; we do not provide a reliable estimate of the proportion of price-setting gas hours for 2026. It is therefore partly cyclical and not a structural sure thing: if solar penetration in Italy continues to rise or if the gas price falls, it will erode.
According to Terna’s registry data, as of July 31, 2026, 87.70 gigawatts of renewable capacity were installed in Italy, of which 47.30 gigawatts were solar capacity. Photovoltaic generation in July 2026 was 20.6 percent higher than in the same month of the previous year.
The bottleneck isn't with the projects
As of March 31, 2026, Terna’s Econnextion connection portal had received 3,670 connection requests for photovoltaic systems totaling 144 gigawatts—compared to 47.30 gigawatts of actual installed solar capacity (Terna, as of July 31, 2026). Both figures pertain exclusively to photovoltaic systems, and the reference dates are four months apart. Based on this, approximately three times the current installed capacity is awaiting grid connection.
Only a small portion of these are ready for construction: 210 projects totaling 9.34 gigawatts had reached “ready-to-build” status, while 1,139 projects totaling 46.49 gigawatts had received a grid connection commitment. The total number of inquiries has been declining slightly since August 2025. For investors, this is the key metric: in Italy, a project without a secured grid connection is not a project, but merely an option.
Added to this is competition from the consumption side. As of the same reference date, data centers had submitted 480 connection requests totaling 82.63 gigawatts, including 273 requests totaling 40.9 gigawatts in Lombardy alone. This means that data centers account for approximately 86 percent of connection requests on the consumption side.
The "Decreto Bollette" and Its Loophole
The Decreto Bollette—Decree-Law 21/2026, converted into Law 49/2026 of April 10, 2026—has two main effects. First, it reduces the ASOS system component borne by non-residential, non-energy-intensive consumption points: The text of the law specifies the earmarked amount from the IRAP surcharge for energy companies at 431.5 million euros for 2026; the parliamentary services’ explanatory notes cite 469.6 million euros from the technical justification for the same paragraph. Anyone who cites only one of these two figures is not incorrect, but their citation is incomplete. Second, it expands the protection for long-term supply contracts—the GSE acts as the guarantor of last resort, and if its funds are insufficient, SACE may provide it with a subordinated counter-guarantee with a coverage ratio of no more than 70 percent, limited to 250 million euros per year.
Article 9, paragraph 3, does not specify a fixed amount in euros: The relief on gas transmission and distribution fees is legally limited to the revenues that GSE and Snam remit from the sale of gas stored in 2022, and applies from April 1 through December 31, 2026. The frequently cited figure of approximately 409 million euros is a government estimate based on the technical justification: 290 million euros for GSE plus 319 million for Snam, minus up to 200 million for the liquidity service under Article 10. According to ARERA, the actual amount will not be determined until the end of September 2026. The beneficiaries are end customers directly connected to the transmission network, gas-intensive distribution network customers, and other end customers with annual consumption exceeding 80,000 standard cubic meters.
The regulatory authority ARERA had already declined to apply the relevant provision of the decree-law in its Resolution 98/2026 of March 30, 2026, on the grounds that it constituted potentially non-notified aid; the Conversion Act of April 10, 2026, adopted this provision unchanged. The suspension remained in effect unchanged in August 2026; thus, the measure is currently on hold, and an amount will not be determined until the end of September 2026 anyway. We outline what the individual measures specifically mean for Italian PV investors in our analysis of the Decreto Bollette.
Our Pillar article on PV Investment in Italy 2026 covers incentive terms, auction results, and return scenarios for the Italian market.
Sources for this section (as of August 2026): Terna, Econnextion, and the press release on electricity consumption in July 2026; Modo Energy (April 16, 2026); Law 49/2026; ARERA, Resolution 98/2026.
4. Spain: Rapid Expansion, Low Revenue per Kilowatt-Hour
In 2025, Spain added approximately 8,821 megawatts of grid-connected photovoltaic capacity; according to a survey by the industry association UNEF, this is in addition to 1,139 megawatts of self-consumption capacity. Among the three major EU markets tracked by Modo Energy, Spain also recorded the lowest revenue in March 2026, at 13.51 euros per megawatt-hour. The capture rate had fallen to 9.4 percent in February 2026, down from 72.3 percent twelve months earlier.
When considering cumulative capacity, it is important to note the distinction. As of December 31, 2025, Red Eléctrica reports over 49,500 megawatts including self-consumption facilities and over 41,500 megawatts excluding them. Both figures are correct, but they are not interchangeable.
What the Capture Rate Means in Practice
The capture rate indicates what percentage of the average spot price a solar power plant actually achieves. If it falls, revenue decreases even though the plant is not producing any less. In the spring of 2025, the Spanish seasonal average capture price was 16.8 euros per megawatt-hour. For the month of March 2026, Modo Energy reports 13.51 euros. The seasonal average and the monthly figure are not the same—the trend is clear, but the difference between the two figures is not.
Market data provider Kpler expects average capture rates of around 50 percent in Spain and 42 percent in Portugal from August through December 2026 (as of July 10, 2026). Modo Energy anticipates that long-term capture prices for plants with single-axis tracking systems will stabilize at 25 to 30 euros per megawatt-hour (as of July 20, 2026). Both are model forecasts by market analysts.
Price pressure is also evident in the hours with zero prices. In 2025, Red Eléctrica recorded 798 hours in Spain with prices of zero or below; in the previous year, there were 784 such hours. Montel recorded 397 hours for the first quarter of 2026 in Spain alone; Portugal is reported separately. Here, too, the methodological caveat applies: Since October 2025, the day-ahead market has traded on a quarter-hourly basis, so older hourly values are not directly comparable. There is thus a significant gap between the kilowatt-hours generated and those compensated.
The entry-level price has plummeted
Ready-to-build projects in Spain cost an average of 120,500 euros per megawatt-peak in the first quarter of 2024. In the first quarter of 2026, the price was 38,000 euros, and in the second quarter, 32,600 euros per megawatt-peak—a decline of about 68 percent over two years; the price also fell again between the first and second quarters of 2026. Completed transactions ranged from 10,000 to 56,000 euros per megawatt-peak. These figures come from the nTeaser transaction platform.
Projects that include storage are valued significantly higher than solar-only systems with challenging grid connections. However, Spain’s storage capacity is still small: Of the 3,427 megawatts of installed storage capacity at the end of 2025, 3,331 megawatts came from pumped-storage facilities and only 96 megawatts from batteries. The national energy and climate target calls for 22.5 gigawatts of total storage capacity by 2030.
Self-consumption: The industrial segment holds steady
The Spanish self-consumption market is shrinking for the third consecutive year—but not everywhere. According to a survey by the industry association UNEF, a total of 1,139 megawatts of self-consumption capacity was installed in 2025, 3.7 percent less than the previous year, bringing the cumulative total to 9.3 gigawatts. These association figures cannot be reconciled with Red Eléctrica’s data: The grid operator arrives at a different total based on meter data from distribution system operators. Anyone using a specific figure must cite the corresponding survey. A breakdown reveals a different picture: The industrial sector saw a slight increase of 679 megawatts, while residential complexes declined by 17 percent and the commercial sector by 15 percent.
For commercial investors, this is the key figure. Profitability depends on the difference between the electricity purchases avoided and the revenue from surplus electricity. In the second half of 2025, non-residential customers in Spain paid between 11.91 and 16.18 cents per kilowatt-hour, excluding value-added tax, depending on their consumption bracket. The industry association APPA Renovables estimates a payback period of five to six years for a 180-kilowatt industrial plant, excluding tax deductions.
There is no regulated rate of compensation for feeding surplus electricity into the grid. The simplified compensation under Royal Decree 244/2019 applies only to generation capacity of up to 100 kilowatts and can reduce the electricity bill to zero at most. Larger systems sell their electricity at a freely negotiated price.
New Framework Conditions Effective March 2026
Two things have changed since the spring. Decree-Law 7/2026, in effect since March 22, 2026, has expanded the permitted distance for community self-consumption from 2,000 to 5,000 meters and introduced priority zones for renewable energy. Furthermore, on May 29, 2026, the European Commission approved the Spanish capacity market under state aid law; as of the date of this article, the national implementing regulations had not yet been issued.
The RENOINN 2 grant program was expanded twice after the deadline had passed. The final decision dated July 28, 2026, lists 524 grants totaling approximately 433 million euros, which will generate an investment volume of 1,186 million euros—1,225.66 megawatts of photovoltaic capacity and 2,320.72 megawatt-hours of storage, to be completed by June 30, 2030.
Sources for this section (as of August 2026): Red Eléctrica; Modo Energy (July 20, 2026); Kpler (July 10, 2026); Montel; UNEF (January 29, 2026); APPA Renovables (February 17, 2026); Eurostat nrg_pc_205; IDAE; BOE.
5. Austria: What Happens If Subsidy Policy Changes?
Austria demonstrates how quickly a functioning market can collapse when the framework conditions become unstable. Following a record expansion of 2,476 megawatts in 2023, new installations fell to 1,634 megawatts in 2025—a 22 percent decline from the previous year. Cumulatively, by the end of 2025, there were approximately 9.8 gigawatts across 533,500 installations. Their generation, totaling 9.8 terawatt-hours, covered 15 percent of Austria’s electricity consumption.
Whether that is a lot or a little depends on the benchmark—and the two commonly used benchmarks are far apart. The statutory target set by the Renewable Energy Expansion Act is 1,100 megawatts per year; according to that measure, the target was exceeded in 2025. The grid infrastructure plan assumes about 2,000 megawatts per year; according to that, there is a shortfall of about 18 percent. Both figures are correct; they answer different questions.
The trigger was tax-related, not technical
In March 2025, the new coalition prematurely eliminated the zero sales tax rate for photovoltaic systems up to 35 kilowatts-peak: The National Council approved the elimination on March 7; it was announced on March 18, 2025; and the standard tax rate has been in effect again since April 1, 2025. Normally, the exemption would not have expired until December 31, 2025. The subsequent slump was concentrated precisely in this segment. The investment subsidy under the Renewable Energy Expansion Act will be offered in 2026 through three funding rounds—from April 23 to May 11, from June 16 to 30, and from October 8 to 22—with rates ranging from 120 to 150 euros per kilowatt-peak, 150 euros per kilowatt-hour for storage, and a bonus of up to 20 percent for European components.
Contrary to widespread reports, the Electricity Industry Act has now been enacted and will take effect at the end of 2025. The associated regulations—including those regarding grid fee exemptions for storage systems that support the grid—are still pending. Starting in June 2026, new photovoltaic systems must be controllable by grid operators.
Storage is becoming the second source of demand
In the first quarter of 2026, the sixteen major Austrian distribution network operators received 8,600 grid connection applications for energy storage systems—compared with 15,396 applications for photovoltaic systems. At the end of 2025, 79,160 energy storage systems were registered. According to the same survey, new photovoltaic capacity additions in the first quarter of 2026 totaled 243 megawatts, compared to 367 megawatts in the same quarter of the previous year. The quarterly series covers sixteen distribution network operators, while the annual series mentioned above covers sixty; the two series are not directly comparable.
This shift could be justified on political grounds. On August 13, 2026, State Secretary Elisabeth Zehetner suggested that subsidies for photovoltaic systems might be eliminated entirely in the future and that storage systems would be subsidized instead.
The industrial sector has recovered to some extent
According to the commercial register, inverter manufacturer Fronius posted a loss of 115 million euros in fiscal year 2024 and cut approximately 1,000 jobs in two phases. In 2025, the company returned to profitability with 1.1 billion euros in revenue and currently employs 6,500 people, 4,300 of whom are based in Austria. The wholesaler suntastic.solar, which most recently reported revenue of 125 million euros, underwent restructuring proceedings beginning in June 2024.
The lesson for investors has nothing to do with technology. No market volume can protect against regulatory instability—and ex post interventions hit models without contractual safeguards harder than those with long-term purchase agreements.
Sources for this section (as of August 2026): E-Control; PV&B Austria; Federal Law Gazette I No. 7/2025; ORF Upper Austria (April 30, 2026).
6. What all four markets have in common: the grid connection
Across all four markets, the bottleneck is not solar power generation, but rather grid integration. A study by Ember estimates that grid bottlenecks are blocking planned renewable energy projects in the EU totaling about 120 gigawatts. This capacity has been planned, approved, or is in the application stage—and is waiting for grid connection.
In Germany, the redispatch volume from photovoltaic generation rose to 2,704 gigawatt-hours in 2025—94 percent more than in the previous year. Across all renewable energy generators, the redispatch volume totaled 9,379 gigawatt-hours. The curtailment of renewable generation in 2025 accounted for approximately 3.5 percent of total renewable energy generation. Noteworthy is the shift in the cause of these bottlenecks: 35 percent of bottlenecks occurred in the distribution grid in 2025, up from 26 percent the previous year. Compensation paid to operators of renewable energy plants fell to 433 million euros, while the total costs of redispatch rose to 3,071 million euros.
For the calculation, this has two implications. Curtailed kilowatt-hours directly reduce revenue. A claim for compensation exists under Section 13a(2) of the Energy Industry Act, but it does not apply in every case—when prices are negative, compensation under Section 51 of the Renewable Energy Sources Act does not apply anyway. Anyone calculating open-space projects without storage should explicitly report the curtailment amount rather than hiding it in the performance ratio.
The second common factor is negative prices. In Germany, exchange prices were negative for 573 hours in 2025; in the first half of 2026, SMARD recorded 1,178 negative quarter-hours, which corresponds to approximately 295 hour-equivalents. However, comparisons with previous years are limited because the day-ahead market has been trading on a quarter-hourly basis since October 2025. The lowest price in 2025 was minus 250.32 euros per megawatt-hour on May 11 between 1:00 and 2:00 p.m.—that is, during the midday peak.
When compared across Europe, this pattern is evident in all grids—and the highest value in 2025 was not achieved by a single country, but by a bidding zone: SE2 in northern Sweden, with approximately 679 hours (Montel). Next are the Netherlands with 584 hours and Germany with 576 hours; Spain stands at around 555, Belgium at 519, and France at 513 (pv magazine, analysis of ENTSO-E day-ahead data). This series counts only negative prices; the 798 Spanish hours from the previous chapter include hours with a price of exactly zero and represent an annual figure. The series is a ten-month analysis covering January through October 2025; the SE2 figure, however, comes from Montel and is an annual figure for the bidding zone. Therefore, the two cannot be directly converted into one another—the ranking is the key point, not the absolute value. In Germany, the Netherlands, and Belgium, no additional negative hours were recorded in November and December 2025; in France, there were two quarter-hours, each at minus one cent per megawatt-hour (energy-charts based on SMARD data, accessed August 20, 2026).
The Federal Network Agency reports 573 hours for Germany. The three-hour difference is not a contradiction, but rather a consequence of the day-ahead market’s transition to quarter-hour intervals effective October 1, 2025: Depending on whether one sums the quarter-hour intervals using time-weighted averaging or counts an hour as such even when its average value is negative, the result shifts. When comparing markets, one must stick to a single time series—and specify the bidding zone.
Sources for this section (as of August 2026): Ember, Crossed Wires (April 2026); SMARD (March 30, 2026, and August 3, 2026); Federal Network Agency (January 5, 2026); pv magazine (October 31, 2025); Montel (December 30, 2025).
7. Three Investment Theses for 2026
In 2026, the return on European solar projects will depend less on solar irradiance than on three factors: location, segment, and timing. All three can be quantified using verified market data, and all three are currently shifting faster than the duration of a project. The following propositions relate the verified market data to investment prospects.
Thesis 1: Italy — Buy high-quality revenue, check the network connection
Italy combines the highest of the three capture prices tracked by Modo Energy with an auction-based hedging mechanism. The bottleneck lies not in the market but in the queue: there are 144 gigawatts of connection requests compared to 47.30 gigawatts of installed capacity, and only 9.34 gigawatts are ready for construction.
Practical implication: The value of an Italian project is determined by its approval and grid connection status, not by the choice of modules. A project with a confirmed grid connection falls into a different asset class than one without. And the capture advantage is partly driven by gas prices; therefore, it should be factored into the long-term assumption at a discount.
Thesis 2: Spain — Focus on Margins Rather Than the Hunt for Megawatts
In Spain, the feed-in tariff has fallen to a historic low, but so has the market price for electricity fed into the grid. Taken together, these factors shift the logic: It is not exports that determine the return on investment, but rather the avoided electricity purchases.
The industrial segment for self-consumption was the only one that did not shrink in 2025. With purchase prices ranging from 11.91 to 16.18 cents per kilowatt-hour and a payback period of five to six years for a 180-kilowatt industrial system, designing for maximum self-consumption makes financial sense—provided the load profile supports it. Those who base their calculations on surplus revenue must factor in a capture rate, which fell to 9.4 percent in February 2026 and which Kpler expects to average around 50 percent from August through December 2026 (as of July 10, 2026).
Thesis 3: Germany — 2026 could be the last year of the legally guaranteed market premium
According to the government’s draft bill, anyone who commissions a facility in Germany in 2026 will be covered by grandfathering provisions and retain the 20-year unilateral market premium. Starting in 2027, direct marketing would be the norm. As long as the draft has not gone through the parliamentary process, both scenarios are planning assumptions, not established legal provisions.
In addition, the combination with storage systems generates several revenue streams simultaneously: market premiums, balancing energy, and trading on price differentials on the revenue side; and the grid fee exemption under Section 118(6) of the Energy Industry Act on the cost side. The Federal Network Agency may deviate from this exemption—expressly including with regard to its temporal scope—and has called into question the full exemption in the ongoing determination proceedings. The marketing side is thus the real lever, not the plant technology.
The current price range: The open-area auction held on July 1, 2026, resulted in a volume-weighted average of 4.79 cents per kilowatt-hour, with 261 successful bids and a coverage rate of 148.5 percent. In the second segment for building-based systems, the June 1, 2026, deadline was fully subscribed for the second consecutive time at 80.4 percent; 108 bids totaling 208,572 kilowatts were awarded at an average of 9.72 cents per kilowatt-hour.
Sources for this section (as of August 2026): Federal Network Agency; Terna; Modo Energy; Eurostat; APPA Renovables.
8. Five Risks Every Investor Should Know About
The following five risks are present in all four markets under consideration, but differ significantly in terms of severity and the extent to which they can be mitigated. They are not arguments against investing in photovoltaics, but rather the areas where a thorough due diligence process should begin—and the factors that cause projects to differ in their valuation.
Risk 1: Regulatory Requirements — Faster Than the Project Timeline
Austria’s early elimination of the VAT exemption, the phase-out of Italy’s feed-in tariff, and Germany’s planned shift to direct marketing: two measures that have already been implemented and a government bill—all three within a year and a half. In this context, “security” specifically means: long-term purchase agreements, auction-based remuneration instead of freely negotiated market premiums, and funding commitments made before the investment decision rather than after.
At the EU level, the Net-Zero Industry Act is moving in the same direction. Implementing Regulation (EU) 2025/1176 has been in effect since December 30, 2025, and requires Member States to apply non-price criteria—which account for 15 to 30 percent of the evaluation—to at least 30 percent of the volume put out to tender annually or at least six gigawatts per year. The fact that the Commission issued implementation guidelines on July 22, 2026, suggests that national implementation has been inconsistent.
Risk 2: Grid Connection and Power Curtailment
The greatest systemic risk is described in Section 6. When evaluating a specific project, national statistics are less important than the connection point: grid level, commitment status, regional congestion, and whether or not compensation is provided for curtailment.
Risk 3: Supply Chain and Manufacturing Base
According to estimates by the International Energy Agency, China’s share across all stages of production exceeds 80 percent, and is close to 95 percent for polysilicon, ingots, and wafers. Fraunhofer ISE estimates that Asian manufacturers will account for approximately 96 percent of the solar modules and components installed worldwide in 2025. Chinese manufacturers account for the vast majority of this total.
The European counter-movement has been small so far. According to a survey by Fraunhofer ISE, European manufacturing capacity is less than 10 gigawatts-peak per year: Nearly all module manufacturers produce less than one gigawatt-peak; cell capacity is less than five gigawatts-peak; active ingot and wafer production no longer exists; and only a single manufacturer produces polysilicon. The goal of the Net-Zero Industry Act is 30 gigawatts by 2030.
For investors, this dependency is not just an abstract industry issue. It determines how reliable guarantees are, how stably prices can be calculated, and to what extent European policymakers can intervene in procurement.
Accordingly, consolidation among European solar manufacturers continues: Meyer Burger ceased module production in Freiberg and was delisted from the Swiss Stock Exchange as of January 14, 2026; three of its subsidiaries completed their U.S. bankruptcy proceedings on June 29, 2026. In August 2024, Solarwatt ceased module production at its Dresden plant, which had an annual capacity of 300 megawatts; the site remained operational with laboratories and development facilities, and modules have since been sourced from contract manufacturers in Asia. The Bitburg-based manufacturer Soluxtec—which, according to ISE figures, was Germany’s largest module production site with a capacity of 1,200 megawatts—filed for bankruptcy on April 29, 2026; 70 employees were affected.
For the solar industry in Europe, this marks a turning point for two reasons: the ongoing decline in prices for imported solar modules and the lack of scale in domestic production. A European solar manufacturer is competing against economies of scale that it cannot achieve on its own. Subsidies have done little to change this situation so far.
For investors, the practical implication is not module availability, but rather the reliability of the warranty: A 25-year performance warranty is only as reliable as the entity providing it.
Risk 4: Module prices are no longer a driver of returns
Module prices in 2026 followed a two-phase pattern: an increase from January through April, halted as of July 2026, with a recent slight downward trend for TOPCon modules. The frequently cited cause—the elimination of the Chinese export tax rebate effective April 1, 2026—is not a valid explanation, according to market observers: The elimination had already been factored into prices, and polysilicon prices moved in the opposite direction. The drivers were production cuts in China. Our article on PV price trends in 2026 covers these developments in detail.
The module price is now a secondary factor in determining the return on a commercial project. Revenue and the cost of capital have a much greater impact on the internal rate of return.
Risk 5: Revenue Risk — and How Storage Can Change That
The annual market price for solar power in Germany in 2025 was 4.508 cents per kilowatt-hour. Systems without storage and without contractual protection are fully exposed to price fluctuations.
The European energy storage market is growing rapidly. In the EU-27, 27.1 gigawatt-hours of new capacity were installed in 2025, a 45 percent increase over the previous year; cumulative capacity now stands at 77.3 gigawatt-hours, and for the first time, large-scale storage accounted for 55 percent of the new capacity. For Europe—including the United Kingdom, Switzerland, Ukraine, and Turkey—SolarPower Europe reports 36 gigawatt-hours of new capacity and a total installed capacity of over 100 gigawatt-hours; over 50 gigawatt-hours are expected for 2026.
There are two caveats to consider. First, increasing storage capacity squeezes the trading margins from which the business is financed. Second, figures in gigawatts and gigawatt-hours are not the same and should not be compared directly. Our guide to battery storage investments covers the fundamentals and revenue models.
Sources for this section (as of August 2026): International Energy Agency; Fraunhofer ISE (July 15, 2026); SolarPower Europe (January 28 and June 23, 2026); European Commission (July 22, 2026); netztransparenz.de.
Conclusion: In a schism, the winner is whoever knows the benchmark
The European solar schism runs along two lines. One divides segments: solar energy is growing in solar farms, declining on residential rooftops, and falling somewhere in between for commercial rooftop systems. The other divides markets: revenue quality and installation growth are diverging—among the three markets surveyed, Italy generates the highest revenue per kilowatt-hour but is losing market share, while Spain is expanding rapidly and generates the lowest.
Here are three key points for investors:
- Market conditions outweigh solar power. Spain's solar power is economically less competitive than Italy's lowest gas price as long as the capture price there stands at 13.51 euros per megawatt-hour in March 2026 and in Italy at 124.72 euros.
- Grid connection capacity is the scarce resource—not capital, and not technology. In Italy, approximately three times the current installed capacity is awaiting connection; across the EU, approximately 120 gigawatts of planned projects are blocked by grid bottlenecks.
- Time windows close at different rates. In Germany, the legally guaranteed feed-in tariff for new installations will end in 2026, provided the government’s draft bill passes the legislative process. In Spain, the entry-level price for projects has fallen to one-third of its original level within two years and has continued to decline recently.
If you'd like to know what a structured PV investment with secured financing and long-term profit sharing looks like, you'll find the basics on our page about photovoltaic investments.
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Which market and segment are a good fit for your investment profile depends on your specific financial figures. Logic Energy designs, builds, and operates photovoltaic systems for investors with at least 100,000 euros in equity. The contractual partner for direct PV investments is mediplan Helm e.K., which is subject to personal liability of its owners.
Frequently Asked Questions About the European Solar Market
What does the capture rate mean in photovoltaics?
The capture rate indicates what percentage of the average spot price a solar power plant actually achieves. It falls when many plants feed electricity into the grid at the same time and drive down the price. In Spain, it fell to 9.4 percent in February 2026, down from 72.3 percent twelve months earlier (Modo Energy).
Will the European solar market have shrunk by 2025?
Only slightly: from 65.6 to 65.1 gigawatts, a decrease of 0.7 percent and the first decline since 2016. More telling is the shift within this figure—solar farms now account for more than half of the new capacity for the first time, while residential rooftop systems account for only 14 percent.
Why does Italy generate higher revenues than Spain?
The explanation is that gas-fired power plants in Italy often set the market price and thus establish a price floor; we do not provide a share value for this. In March 2026, the capture price was 124.72 euros per megawatt-hour, compared with 13.51 euros in Spain (Modo Energy). This advantage is partly driven by gas prices and may erode.
What changes will take effect in Germany starting in 2027?
According to the government draft dated July 29, 2026, the fixed feed-in tariff for new installations will be eliminated; the draft proposes a requirement for direct marketing and Contracts for Difference. This is not yet legally binding: The drafts are in their first reading in the Bundesrat and have not yet been introduced in the Bundestag.
How severe is the grid connection bottleneck in Italy?
As of March 31, 2026, Terna had received 3,670 connection requests for photovoltaic systems totaling 144 gigawatts; 47.30 gigawatts had been installed as of the end of July 2026. A total of 210 projects, representing 9.34 gigawatts, were ready for construction. A project without a connection commitment is therefore primarily an option.
Is self-consumption still worth it in Spain?
For industrial facilities, yes: The industrial segment was the only one to grow slightly in 2025. With purchase prices ranging from 11.91 to 16.18 cents per kilowatt-hour, the APPA association estimates a payback period of five to six years for a 180-kilowatt system. There is no regulated rate of compensation for surplus electricity; the simplified offsetting up to 100 kilowatts merely reduces the electricity bill.
What is the minimum amount required for a direct PV investment?
Logic Energy works with investors who contribute at least 100,000 euros in equity. The investor purchases plant components and receives a long-term share of the profits; operation, maintenance, and marketing remain the responsibility of the operator. Terms range from 20 to 40 years.
References
- SolarPower Europe — EU Solar Market Outlook 2025–2030, Press Release dated December 11, 2025
- SolarPower Europe — EU Battery Storage Market Review 2025, Press Release dated January 28, 2026
- SolarPower Europe — European Battery Market Outlook 2026–2030, Press Release dated June 23, 2026
- Federal Statistical Office — Press Release No. 073 dated March 6, 2026, Electricity Generation in 2025
- Fraunhofer ISE — Public Electricity Generation in 2025: Wind and Solar Lead the Way for the First Time
- Fraunhofer ISE — Photovoltaics Report, version dated July 14, 2026
- Fraunhofer ISE — Press Release: 2025 Annual Figures, January 26, 2026
- BSW-Solar — 128-gigawatt milestone, analysis of the market master data registry as of August 20, 2026
- BSW-Solar — 2026 Mid-Year Report dated July 14, 2026, and Storage Report dated June 23, 2026
- Federal Network Agency / SMARD — Data on the Electricity Market in 2025, Press Release dated January 5, 2026
- SMARD — Total Redispatch Volume for the Full Year 2025, Technical Article dated March 30, 2026
- SMARD — Q2 2026 Quarterly Report, Technical Article dated August 3, 2026
- Federal Network Agency — Solar Power Plant Tenders, Segment 1, Bid Deadline: July 1, 2026
- Federal Network Agency — Solar Power Plant Tenders, Segment 2; Bid Deadlines: February 1, 2026, and June 1, 2026
- netztransparenz.de — Market Value Overview, Annual Solar Market Value 2025
- Federal Government — Cabinet Decision on the EEG Amendment and Grid Package of July 29, 2026
- Federal Ministry for Economic Affairs and Energy — Press Release dated July 29, 2026
- Federal Council — Printed Papers 470/26 and 471/26
- European Commission — State Aid Decision SA.102084 on the EEG 2023, dated December 21, 2022
- European Commission — Guidelines on Non-Price Criteria Under the Net-Zero Industry Act of July 22, 2026
- Terna — Press Release on Electricity Consumption in July 2026
- Terna — Econnextion Portals, as of March 31, 2026, and May 31, 2026
- Law No. 49/2026 of April 10, 2026, converting Decree-Law 21/2026 (Decreto Bollette)
- ARERA — Resolution 98/2026/R/com dated March 30, 2026
- Modo Energy — European solar capture rates, March 2026 (April 16, 2026) and February 2026 (March 26, 2026)
- Modo Energy — Spain Solar Forecast Update, July 2026
- Red Eléctrica — 2025 Renewable Energy Summary Report and System Reports
- Montel — Summary of the European Electricity Market, Q1 2026
- Montel — Sweden Tops the List of Europe's Most Negative Power Price Hours in 2025, December 30, 2025
- pv magazine — Electricity Market Analysis: Germany Leads the Way in October with Negative Electricity Prices on the Exchange, Oct. 31, 2025
- Kpler — Europe's solar capture rates hit record lows as market divergence widens, July 10, 2026
- Federal Law Gazette of Austria — Budget Consolidation Measures Act 2025, BGBl. I No. 7/2025
- UNEF — 2025 Self-Consumption Report, dated January 29, 2026
- APPA Renovables — 2025 Annual Report on Self-Consumption, dated February 17, 2026
- Eurostat — Electricity Prices for Non-Residential Customers, nrg_pc_205, Second Half of 2025
- MITECO — National Energy and Climate Plan 2023–2030, as of September 24, 2024
- IDAE — RENOINN 2 Program, Final Resolution dated July 28, 2026
- Official State Gazette — Royal Legislative Decree 7/2026 of March 20, 2026, and Royal Decree 244/2019
- E-Control — Grid Connection Survey, Report for Fiscal Year 2025, and Quarterly Report for Q1 2026
- PV&B Austria — Photovoltaics 2025 Fact Sheet: By the Numbers and Press Release dated August 14, 2026
- ORF Upper Austria — Report on Fronius's Annual Results, April 30, 2026
- Ember — Crossed Wires, Grid Capacity in the EU, April 2026
- Ember — European Electricity Review 2026 and Monthly Dataset
- International Energy Agency — Global Solar PV Supply Chains
- nTeaser, published by ION Analytics — Price Trends for Spanish Ready-to-Build Projects, June 2026
Important Note: This article is intended solely for general informational purposes and does not constitute investment, tax, or legal advice. Information regarding returns, income, proceeds, lease payments, and costs consists of sample calculations or market observations as of the date indicated and does not constitute a guarantee of future results; the actual values that can be achieved depend on location, system design, contract terms, and market developments. The legal situation described reflects the status as of the date indicated. Where reference is made to drafts, these do not constitute applicable law; changes may occur during the further legislative process. For your individual situation, please consult a licensed tax advisor, attorney, or investment advisor. All information is provided without warranty. As of August 20, 2026.
Market data from Modo Energy, Montel, nTeaser, and ION Analytics are surveys and model calculations provided by private market providers; they are not official statistics. Each set of data is labeled with the provider and the reference date. The grid fee exemption under Section 118(6) of the Energy Industry Act is subject to any differing provisions issued by the Federal Network Agency and does not constitute a guaranteed basis for calculation over the entire term.
