The Solar Value Chain
Fabio Ranghino 
Federica Mallone 
Federico Freddi Environmental problem
In 2024 electricity generation contributed to over 30% of total global CO₂ emissions.
Electricity is rapidly becoming the dominant energy carrier, reshaping how energy is consumed across sectors. Between 2000 and 2023, global electricity demand grew at a 3% compound annual rate, outpacing the 1.9% CAGR of total energy supply (Figure 1). This growth reflects increasing electrification across transport, buildings, and industry with electric vehicles, heat pumps, and cleaner industrial technologies gaining traction and supporting the transition toward more efficient infrastructures.
However, global electricity generation continues to be a major contributor to climate change due to its heavy reliance on fossil fuels. In 2024, the sector emitted approximately 14 gigatons of CO₂, over 30% of total global CO₂ emissions. Fossil fuels accounted for 60% of global electricity generation (down from 67% in 2014), with coal alone responsible for 35% (Figure 2). In contrast, renewable energy sources (including solar, wind, and hydro), though on the rise, contributed only 31% of total electricity production.
The dual trend of rising electricity demand and the urgent need to decarbonize fossil-based power generation presents a critical challenge. Addressing this will require rapidly scaling up reliable, low-carbon energy technologies to replace legacy, carbon-intensive generation systems, all while meeting growing electricity needs.
Environmental solutions
Over the past two decades, solar photovoltaic (PV) technology has become a cornerstone of the clean energy transition. Rising from a negligible share in the early 2000s, it contributed approximately 7% of global electricity generation by 2024.Solar PV offers a clear environmental advantage: it produces electricity without direct CO₂ emissions. In 2023 alone, it helped avoid more than 900 million tons of CO₂ emissions, equivalent to around 7% of global electricity-related emissions, with major contributions from countries such as China, India, the United States, and Germany.
Second, solar PV offers a significant cost advantage. Over the past decade, capital expenditures and production costs have declined sharply due to economies of scale and continuous technological advancements. For example, in Italy, utility-scale solar plant CAPEX has dropped by 30% over the last ten years. As a result, solar PV is now among the most competitive sources of new electricity generation globally. As a result, solar PV is now one of, if not the most competitive sources of new electricity globally (Figure 3).
Recent data from several European countries and the United States underscores the strong business case for solar PV across residential, commercial, and utility-scale segments. Notably, many solar investments are now economically viable even without public incentives. This is largely driven by high retail electricity prices—particularly in the residential sector—and the widespread availability of power purchase agreements (PPAs), which provide stable, predictable revenue streams and improve bankability for utility-scale installations.
Beyond its environmental and economic advantages, solar PV also offers unmatched flexibility and scalability. It can be deployed across a wide range of settings – from small residential rooftops to vast utility-scale solar farms. The technological requirements are minimal, essentially just access to sunlight, making it particularly suitable for remote or underserved areas. In addition, the global solar supply chain, largely driven by China, is mature and currently in a state of oversupply, ensuring widespread availability of equipment. This combination of scalability, simplicity and supply-chain reliability makes solar one of the most readily deployable renewable power technologies. Thanks to its powerful combination of environmental benefits, economic competitiveness, and ease of deployment, solar PV has emerged as the world’s fastest-growing electricity generation technology. Between 2020 and 2025, it accounted for roughly 70% of new global power capacity additions – significantly outpacing both fossil fuels and other renewable energy sources.
PV drives ~70% of new global power capacity additions (2020–2025), outpacing fossil fuels and other renewables.
However, the rapid expansion of solar PV brings a new set of challenges. In regions with high solar penetration, midday generation can exceed local demand, causing grid oversupply, price drops, and an increased risk of curtailment—where output is deliberately reduced to maintain grid stability. Additionally, deployment is increasingly constrained by grid congestion and growing interconnection queues. Limited grid capacity, speculative connection requests, and slow permitting processes now mean that projects can face lead times of several years from application to operation. Lastly, as millions of panels approach the end of their 25–30 year lifespan, the industry faces a growing need to scale up recycling and disposal solutions for solar equipment.
These challenges underscore the urgent need for grid modernisation, large-scale energy storage deployment, and regulatory reform to ensure that solar PV can continue to play its vital role in the global energy transition.
Investment opportunities
The PV market is valued at around $500 billion.
The solar PV market is exceptionally large – currently valued at around $500 billion – and continues to grow at a pace that consistently exceeds forecasts from leading industry analysts. By 2035, cumulative installed capacity is projected to surpass 10 terawatts, more than twelve times the level recorded in 2020. This remarkable growth reflects strong deployment momentum, though annual additions are expected to stabilise at around 700 GW per year from 2030 onward.
As the growth in new installations begins to slow and potentially plateau in the coming years, this trend – coupled with declining system costs – may result in a decrease in the total market value of new installations. At the same time, the Operations & Maintenance segment is becoming increasingly significant, benefiting from a growing and aging asset base. This shift supports a more stable, long-term growth trajectory. As a result, the overall market could remain stable at around $500 billion per year, but with a changing composition – less driven by upfront capital spending and more by ongoing services.
Geographically, China is expected to maintain its leadership, accounting for nearly half of all new installed capacity through 2035, thanks to strong policy support and dominance in manufacturing. The EU and the US will continue to expand, though likely at a slower pace than during the post-2020 energy crisis boom. Policy frameworks such as the U.S. Inflation Reduction Act and the EU’s REPowerEU plan have played a key role in accelerating recent solar PV growth. However, as the market begins to mature, growth is showing signs of moderation, creating opportunities for consolidation and strategic consolidation within the industry.
From a value chain perspective (Figure 6), equipment manufacturing remains attractive only in select segments. PV modules and inverters are highly commoditised, with over 80% of global production dominated by large-scale Chinese manufacturers, leading to intense price competition – at times bordering on dumping practices. In contrast, segments such as mounting structures, trackers, and sensors offer more protected and regionally competitive markets, particularly in Western countries. Demand is especially growing for technologies that enhance system efficiency and adaptability, such as smart trackers and advanced performance monitoring sensors.
Services across the value chain, especially permitting and maintenance, also offer appeal due to their resilience and lower cyclicality compared to hardware-linked revenue models. These segments are typically fragmented and locally driven, creating opportunities for market consolidation.
Today, the solar industry has evolved from a subsidy driven emerging industry to a global, mature sector. Clear signs of commoditization of production value chains emphasize the industry’s maturity, yet differentiated opportunities for value creation persist across select stages of the value chain and regional markets. We believe many investment opportunities exist for investors in this industry which could accommodate very different risks and return profiles.
Important information
