Global solar market expected to contract 8% in 2026 as policy uncertainty weighs on growth

Global solar installations are expected to decline by approximately 8% in 2026, marking one of the industry’s first significant annual contractions in years, according to forecasts cited by Renewables Now and industry analysts. The projected slowdown comes after several years of record-breaking deployment and reflects growing policy uncertainty in key markets, particularly the United States.

SolarPower Europe, one of the industry’s leading trade associations, has previously forecast continued long-term growth for solar power worldwide. However, market conditions entering 2026 have become increasingly complex as governments revise incentive programs, supply chains adjust to new trade measures, and developers face tighter financing conditions.

Industry observers point to the United States as a major factor behind the weaker outlook. Changes to federal clean energy incentives and uncertainty surrounding future tax credit eligibility have prompted developers to reassess project pipelines. While many projects rushed to begin construction before policy deadlines, analysts expect a temporary slowdown in new development activity during 2026.

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Despite the projected decline, the broader outlook for solar remains positive. SolarPower Europe’s latest market outlook anticipates that annual global solar installations will remain at historically high levels, with cumulative installed capacity continuing to grow rapidly throughout the decade. The organization previously projected global installations to reach approximately 655 GW in 2025, followed by continued expansion toward nearly 1 terawatt of annual installations by the end of the decade under its medium-growth scenario. (SolarPower Europe)

China is expected to remain the world’s largest solar market, while India, the Middle East, Southeast Asia, and parts of Latin America continue to emerge as important growth regions. Demand for solar power remains supported by falling technology costs, growing electricity consumption, energy security concerns, and corporate decarbonization goals.

Analysts note that the expected 2026 contraction should be viewed in context. Global solar deployment has expanded at an unprecedented pace over the past several years, making some degree of market normalization likely after successive record-breaking installation years. Many industry forecasts still expect solar to remain the fastest-growing source of new electricity generation worldwide over the long term.

At the same time, industry leaders are increasingly emphasizing the need for complementary investments in battery storage, transmission infrastructure, and grid modernization to support continued solar growth. As renewable penetration rises, grid flexibility and energy storage are becoming critical factors in maintaining reliability and maximizing the value of solar generation.

While 2026 may bring a temporary slowdown, analysts generally view the forecast as a pause rather than a reversal of the global energy transition. Continued electrification, growing power demand from data centers and industry, and ongoing efforts to reduce emissions are expected to support strong solar deployment over the longer term.

Sources: Renewables Now; SolarPower Europe Global Market Outlook 2025–2029; Reuters; Ember.