[Insight] Solar PV installations in Europe and the United States are expected to decline by 10% over the next decade, with mixed costs across the solar value chain

[McKinsey & DNV]

An analysis by global consulting firm McKinsey indicates that the escalating global confrontation between the United States, the European Union, and China could reduce solar PV installations by 9% in the United States and 7% in the European Union. If trade tensions worsen, battery storage system installations in Europe could decline by as much as 10%.

The report's high-impact scenario assumes the United States imposes a 60% tariff on all Chinese imports, a 20% tariff on imports from other countries, and a 47.7% tariff on Chinese solar panels and cells by the European Union. This scenario does not account for other factors, particularly the significant cuts in renewable energy subsidies announced by the United States in earlier July, 2025. The article goes on to state: "Our projections suggest that, at least in the EU, the imposition of tariffs is unlikely to significantly alter the pace of the energy transition. Tariffs add uncertainty to the clean energy sector. Broadly speaking, our scenario analysis suggests that the longer and higher the tariffs, the slower and more expensive the adoption of clean energy technologies is likely to be."

However, McKinsey states that under any tariff scenario, solar PV installations in the US and EU "could more than triple" due to a significant drop in solar PV technology prices between 2022 and 2023. In the mildest tariff scenario, assuming conditions "similar to late 2024," EU PV installations could reach 750 GW by 2035. Under the same global scenario, McKinsey forecasts 553 GW of solar capacity in the US.

McKinsey projects that battery energy storage system (BESS) installations in the EU will grow more than fivefold over the next decade, largely due to the technology's diverse global supply chain.

A 2024 report by consulting firm DNV warned that geopolitical shocks could become a headwind to the global energy transition. Although renewable energy's share of electricity generation continues to reach new highs and grows faster than any other energy technology, financial shocks could still undermine this momentum. The global transition to renewable energy has recently suffered a setback. Following Trump's election, anti-renewable energy sentiment entered the White House, and his administration's actions against the industry run counter to the trend in most developed countries. The report also notes that trade tensions will place greater pressure on supply chains as macroeconomic trends shift from globalization and liberalism to a greater emphasis on protectionism and nationalism.

In fact, with the inevitable arrival of the era of "deglobalization," countries are beginning to encourage the establishment and improvement of their domestic industrial systems, including the solar PV industry, in various ways, with some countries calling this a "return to manufacturing." REBIO GROUP's solar value chain services are helping industry investors in South Africa, the Middle East, and Central Europe quickly implement localized industrial chain layouts, as well as subsequent raw material supply chains, personnel training, and product certification.

[IRENA & Lazard]

A recent report from the International Renewable Energy Agency (IRENA) reveals that the global levelized cost of electricity (LCOE) for solar photovoltaic (PV) will rise slightly by 0.6% to $0.043/kWh in 2024, marking a rare increase in recent years. PV power has the second-lowest LCOE of all technologies, second only to onshore wind power, which costs $0.034/kWh. Despite the low average LCOE for global solar PV in 2024, it saw a slight increase of 0.6% compared to the previous year.

According to the report, LCOE performance showed significant regional divergence. China, leveraging ample manufacturing capacity, has reduced LCOE to $0.033/kWh, while India, relying on large-scale projects, has reduced LCOE to $0.038/kWh. IRENA predicts that China's PV LCOE will continue to decline due to ample domestic manufacturing capacity and suppressed costs. In the United States, the LCOE jumped from $0.059/kWh to $0.07/kWh due to permitting delays, grid connection bottlenecks, and rising balance-of-system costs. The European Union faces similar structural challenges.

In both the United States and the European Union, the levelized cost of electricity (LCOE) for solar photovoltaic power generation increased in 2024, as shown in the figure above. This is due to permitting delays, grid connection bottlenecks, and rising balance-of-system costs, which limit further cost reductions. A recent report by Lazard, a US financial analysis firm, indicates that by 2025, the LCOE for large-scale ground-mounted photovoltaic solar power generation in the United States will be between $38 and $78 per megawatt-hour. By 2024, renewable energy will remain the most cost-competitive option for new power generation, with nearly all (91%) newly commissioned large-scale ground-mounted projects generating electricity at a lower cost than the cheapest new fossil fuel-based power generation project. "Cost competitiveness remains a hallmark of renewable energy. In 2024, 91% of all newly commissioned large-scale ground-mounted renewable energy projects will generate electricity at a lower cost than the cheapest new fossil fuel-based power generation project," said Francesco La Camera, Director-General of IRENA.

The report notes that battery energy storage system costs continue to plummet, reaching $192/kWh for large-scale ground-mounted power plants in 2024, a 93% decrease from 2010.

"Emerging technologies such as battery energy storage systems continue to see rapid cost reductions, driven by increased manufacturing scale, improved materials, and production efficiencies," said La Camera, regarding energy storage costs. The report highlights that hybrid systems combining PV/wind power with storage have become mainstream, while also improving grid reliability and capacity factors.

China is using "solar PV + energy storage" to reduce the risk of curtailment in provinces with high power penetration. The United States is accelerating the deployment of "solar PV + battery energy storage systems" to enable peak-hour power dispatch. The weighted average LCOE of its 17 hybrid projects (4.5GW of solar PV + 7.7GWh of energy storage) is $0.079/kWh, on par with the cost of a combined-cycle gas turbine (midpoint cost of $0.077/kWh) and significantly lower than coal's $0.119/kWh.

The International Renewable Energy Agency (IRENA) stated that while data estimates for the levelized cost of electricity (LCOE) of hybrid systems are scarce, available data suggests that in key markets, the cost of combining renewable energy with battery energy storage systems (BESS) is increasingly approaching that of fossil fuel generation.

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