Photovoltaics in the energy mix: How do you rate the status quo and outlook? What development do you expect?
Photovoltaics makes a decisive contribution to the energy supply in Germany. In 2024, their share of electricity generation was around 14.7 percent (Europe was around 9-10 percent). However, to achieve our climate goals and become independent of fossil fuels, we need to expand even more. The prerequisites were created with the adoption of the Climate Protection Act. The share of photovoltaics has thus already developed dynamically and exceeds previous forecasts - in 2025, solar energy overtakes lignite for the first time in net power generation. This requires the development of sufficient space, more powerful solar modules, maintaining acceptance in the population and promoting the repowering and recycling of solar parks.
Which technological developments do you currently consider to be the most important?
Continuous cost reduction in module production. Experts expect a further third reduction in manufacturing costs by the end of the decade. Another important factor will be improving cell efficiency. Step-by-step improvements in materials, manufacturing processes and cell architectures are constantly improving the silicon modules that currently dominate the market for commercial PV systems. Further market penetration of n-type and bi-facial modules will lead to further efficiency gains in the future. Further research in the area of thin-film technology and different material combinations (tandem cells) leads to major efficiency gains in the medium term through better use of the frequency spectrum, sunlight, longer service life and cost reductions in production. One example is the Perovskite solar cells, which can be expected to increase efficiency to over 30 percent in the medium to long term.
How do you assess the long-term profitability of photovoltaics for producers and investors?
This depends on several factors. It is obvious that falling feed-in tariffs and increasing market saturation, particularly due to the high simultaneity factor of PV (all plants generate electricity at the same time), have a negative impact on their profitability when these factors are considered in isolation. However, there are numerous developments to counteract this. The industry is characterised by a high rate of innovation and technological progress. The continuous improvement of the system components, the optimisation of technical planning for the best possible use of the space and the grid connection as well as the integration of storage solutions lead to a reduction in the generation costs for electricity and to a more likely support/increase of its market value in the medium term. With the increasing feed-in of electricity from renewable energies, the Leipzig electricity exchange has become a residual electricity exchange that generates a price for the demand-based supplementation of renewable electricity generation and no longer reflects the true price of electricity, in particular green electricity.
The transformation of the electricity market design (currently the merit order principle) will become increasingly important in the coming years. The new electricity market design, which currently only exists in rough sketches, is expected to also have a supportive effect on the price of green electricity. In summary, we expect the long-term profitability of photovoltaics to be more stable for producers and investors.
What role do PPAs play and how will this market develop?
Power Purchase Agreements (PPAs) have developed into an important pillar of growth in the PV sector in Europe alongside tenders and self-consumption. In Germany, the PPA market reached a record level in 2023 with around 3.8-3.9 GW of completed capacity - a growth of over 300 percent compared to 2022. In 2024, the volume fell to 2.1 GW, mainly due to a slump in the offshore wind segment; however, the PV PPA market remains active. In addition to Germany, Denmark, Sweden and Poland also recorded a strong increase.
The most important market in Europe is Spain. Another driver is the conditions for the production of green hydrogen in the EU. The high temporal and geographical correlation between electricity and hydrogen production required by this requires operators of electrolysers in Germany to conclude a PPA for the production of renewable hydrogen. In the coming years, we expect PPAs for hydrogen production to continue to establish themselves in the market - although the 2024/2025 market is exposed to regulatory uncertainties.
With the increasing number of wind turbines whose (EEG) subsidies are being discontinued, we expect a further increase in the number of “post-EEG PPAs” with which wind turbine operators secure their income after the end of the subsidy. In the short term, however, the market shows weakness: In the first half of 2025, PPA agreements collapsed to only around 200 MW, due to negative exchange electricity prices, uncertain promotional mechanisms and pressure on the profitability of new large-scale PV plants.
On the other hand, we see the development of short-term PPAs, which allow operators of tariff-promoted plants to increase their revenues, rather declining. Due to the fall in market prices, the award values in the tender processes were mostly higher than the PPA prices lately. Overall, we expect continued strong growth in the market, as PPAs offer many advantages, including price stability, long-term predictability of revenues, fulfilment of sustainability goals or relief of public funds or taxpayers through unnecessary tariff benefits. Due to their debt financing capability, they are an important instrument for scaling the renewable energy market more quickly and achieving the expansion targets.
