Influencing factors on European solar CAPEX in 2026
by RES | Jun 17, 2026 | Reading time: 5 min
By Ksenia Dray, Global Solar Supply Chain Leader
The European solar market has entered a new phase. While 2023 and 2024 were characterized by unprecedented module oversupply and rapid cost reductions, the key challenge in 2026 is no longer simply deploying more solar capacity. Instead, developers, investors and utilities are increasingly focused on project profitability, grid integration and supply chain resilience.
The European Union installed more than 65 GW of solar capacity in 2025, maintaining record deployment levels despite signs of market contraction and increasing pressure on project economics. Utility-scale projects continue to dominate new installations, while residential growth has slowed significantly.
Solar-plus-storage becomes the new standard
Perhaps the most significant change is the rapid emergence of hybrid renewable projects.
Across Europe, increasing numbers of utility-scale solar projects are being developed alongside battery energy storage systems (BESS). This shift is being driven by growing levels of solar penetration, increasing curtailment risk, and record numbers of negative pricing hours in key markets such as Germany, Spain and the France.
Where developers previously optimized projects primarily around CAPEX, investors are now focused on revenue stability and capture price optimization. Batteries allow projects to shift energy production into higher-value periods, reduce merchant exposure and improve grid flexibility.
As a result, solar-plus-storage configurations are becoming a preferred option in auctions, corporate PPAs and merchant projects. Several European governments are increasingly designing procurement mechanisms that favor flexible generation assets rather than standalone renewable projects.
For developers, this trend is changing project design assumptions from the earliest stages. Land requirements, grid connection strategies, metering configurations and EPC scopes increasingly need to consider future battery integration even where storage is not installed on day one.
Module prices raising and volatility risks are returning
Following the extreme oversupply cycle of 2023–2025, module prices remain below historic averages, but the market has clearly moved beyond the continuous price declines that characterized 2024 and early 2025.
Module prices increased in Q4 2025 and continued to face upward pressure in H1 2026. This was driven by a combination of Chinese supply-side rationalization, production discipline, consolidation in the polysilicon sector, and the removal of China’s photovoltaic export tax rebate. China fully abolished VAT export rebates for PV products from 1 April 2026, after previously reducing the rebate from 13% to 9% in late 2024.
This policy shift has changed the economics of Chinese exports. The tax change contributed to module price increases of 20% to 30% in parts of the supply chain (pv-tech), creating a potential 2026 price shock for European buyers. At the same time, Chinese manufacturers are under increasing pressure to end destructive price competition. After several years of overcapacity and losses across the value chain, the market is entering a period of rationalization, with weaker suppliers likely to reduce output, consolidate or exit. For European developers, this means that the low pricing for modules is no longer reliable as assumption.
The industry is now facing a combination of production rationalization in China, trade policy uncertainty and geopolitical risks affecting global supply chains. While module manufacturing capacity remains significantly above demand, market participants are increasingly preparing for periods of volatility rather than continuous price declines.
Developers are therefore placing greater emphasis on procurement timing, supplier bankability, supplier diversification and contract structures that reduce exposure to sudden price movements. For projects with long development timelines, securing supply strategies early has become increasingly important, particularly where projects are exposed to auction deadlines, grid milestones or fixed-price EPC commitments.
Geopolitical tensions create new supply chain risks
The ongoing conflict involving Iran has introduced fresh uncertainty into global logistics and commodity markets.
Disruptions affecting the Strait of Hormuz and continuing instability in Red Sea shipping routes have increased transportation costs, insurance premiums and transit times for goods moving between Asia and Europe. Shipping routes remain vulnerable to geopolitical developments, creating additional uncertainty for solar equipment procurement and project schedules.
While the solar industry has become more resilient following the supply chain disruptions experienced during COVID-19, developers are increasingly incorporating contingency planning into procurement strategies. Longer lead times and greater emphasis on supplier financial strength are becoming standard risk mitigation measures.
Steel and balance-of-system costs face upward pressure
Unlike modules, many balance-of-system components remain exposed to commodity and energy market fluctuations.
Trackers, fixed-tilt structures, substations and transmission infrastructure all depend heavily on steel and energy-intensive manufacturing processes. Rising energy costs and uncertainty in global steel markets linked to Middle East tensions have created renewed upward pressure on structural costs.
As a result, overall solar CAPEX has not fallen at the same rate as module pricing. For many projects, reductions in module costs have been partially offset by higher labour, civil works and balance-of-system costs.
European manufacturing and resilience requirements gain importance
Another major development is the implementation of the EU Net-Zero Industry Act (NZIA).
From 2026 onwards, Member States are expected to apply sustainability and resilience criteria within renewable energy auctions and procurement processes. These measures are designed to reduce Europe’s dependence on a single supply source and support domestic manufacturing capacity.
Although Chinese manufacturers will continue to dominate global solar production in the near term, developers increasingly need to demonstrate supply chain transparency, sustainability credentials and resilience considerations during procurement processes.
This is likely to increase interest in European-made modules and components, particularly for projects participating in government-supported auctions or seeking to maximise ESG performance.
Labour and EPC capacity remain critical
Despite slower growth in some market segments, labour availability remains a challenge across much of Europe.
Shortages of experienced electrical, civil and commissioning personnel continue to affect project schedules and construction costs. Grid connection works, high-voltage infrastructure and battery integration are placing additional demands on specialist contractors.
As project complexity increases through hybridisation and grid-support requirements, EPC selection is becoming increasingly important. Successful projects are those that secure experienced delivery partners early and adopt realistic construction schedules.
Navigating the solar market in 2026
The European solar sector remains one of the strongest renewable energy markets globally, but project success is increasingly determined by factors beyond module pricing.
Hybridisation, grid integration, supply chain resilience and procurement strategy are now central considerations. Developers who can successfully manage geopolitical uncertainty, navigate evolving European manufacturing requirements and design projects for long-term revenue optimization will be best positioned to succeed in the next phase of market growth.
In 2026, the question is no longer simply how cheaply solar can be built. It is how intelligently solar assets can be integrated into an increasingly complex and dynamic energy system.
About:
Ksenia Dray, Global Solar Supply Chain Leader
Ksenia is a renewable energy executive with more than 15 years of international experience in utility-scale solar projects across Europe, North America, Latin America, and Australia. As Global Solar Leader at RES, she leads global solar strategy, procurement, and supply chain initiatives, with expertise spanning EPC delivery, commercial strategy, contract negotiation, and large-scale project execution.
Ksenia began her career in photovoltaic construction and has held senior leadership roles at leading international EPC companies, managing procurement and logistics for large-scale solar projects worldwide. She is also a recognized industry voice, regularly contributing expert commentary and analysis on solar market trends, project economics, European energy policy, and supply chain dynamics in publications including PV Magazine and PV Tech.
