‘Europe’s solar market is being shaped by co-location, regulation and growing tension’

Montgomery is speaking at the SolarPlus Europe 2026 conference next week, where leading figures from Europe’s solar industry will gather to discuss the current and future state of the sector. You can find out more about the event here.

PV Tech: What are the defining features of Europe’s solar market in 2026?

Sarah Montgomery: Europe’s solar market in 2026 is being shaped by colocation, regulation, and growing tension between localisation ambitions and manufacturing realities.

Colocation is becoming a necessity for many solar developers. With solar revenue cannibalisation increasingly eroding returns on standalone projects, developers across European markets are diversifying into colocated Solar-BESS projects or standalone BESS altogether.

Increased pressure on supply chain localisation embedded in policy frameworks like the Industrial Accelerator Act will face the realities of China’s dominance in solar & BESS manufacturing, creating a widening gap between the demands of policy makers and the reality of the technologies being deployed.

At the same time, new and incoming regulation such as the EU Battery Regulation, EU Forced Labour Regulation, and the EU Cyber Act is putting pressure on solar and BESS developers to establish greater traceability and control in their upstream supply chains. Developers and manufacturers need to ensure they are ready for the increased regulation to ensure bankable projects. In the near term at least, achieving that transparency will mean navigating supply chains where Chinese manufacturers continue to dominate.

What are the biggest challenges facing the sector?

The most immediate challenge is navigating volatile CAPEX while maintaining stable IRR. Lithium carbonate prices have increased almost 200% in nine months, and China’s reduction of VAT rebates from 9% to 6% has pushed BESS prices up by as much as 15%, enough to kill the financial viability of some projects entirely.

Meanwhile, compressed revenues across the solar supply chain are driving manufacturers to diversify into BESS, flooding the market with new entrants. This creates more optionality for developers on the surface, but a more complex supplier landscape to navigate. As the line between established and new BESS suppliers blurs, developers face a growing challenge in identifying which suppliers have the credibility, track record, and financial resilience to be trusted long-term partners.

How can those challenges be overcome?

Progress requires building European capabilities while staying pragmatic about today’s supply chain realities.

The first shift is greater collaboration with Chinese manufacturers, whose scale and expertise are genuine assets for the energy transition. Joint ventures can accelerate deployment while developing complementary European capabilities.

Localisation targets also need to reflect where manufacturing actually sits today, backed by real financial and technical support. Ambition without delivery mechanisms that accept market realities only widen the gap between policy and deployment.

 How big a role is AI playing in your operations?

The developers we work with want to manage increasing supply chain risks and regulation requirements, but the manual workload to stay compliant is enormous and landing on teams already running at capacity against tight financing timelines and COD milestones. Which is where AI can make a significant impact.

By automating supply chain risk management, traceability and supplier engagement, the Infyos platform dramatically reduces the manual burden on developers to ensure their projects and supply chains remain bankable.

In practice, this has enabled developers up against FID timelines to achieve financier-approved supply chain due diligence in under two weeks. By removing the manual work with AI, teams have capacity for the decisions that actually require human judgment and do not have to choose between staying bankable and staying on schedule.

Does increased uncertainty and volatility offer any opportunities for the solar and energy storage industries?

Energy price volatility strengthens the case for alternatives. With renewables at cost parity with oil and gas, diversification away from fossil fuels creates clear opportunity for solar, BESS and wider renewables deployment.

Capital markets are already reflecting this: since the US and Israel attacked Iran, China’s top battery makers have gained over US$70bn in market capitalisation. CATL (up 19%), BYD (up 22%) and Sungrow (up 19%) all outperformed Chevron (up 8%), ExxonMobil (up 5%) and BP (up 15%), despite a 47% rise in oil prices over the same period.

BESS stands to benefit through near-term arbitrage as energy price spreads widen, alongside longer-term deployment tailwinds. Though conflict-driven disruptions are also causing project delays, exposing the vulnerability of global renewable supply chains.

How realistic is the notion that the fallout from the conflict in the Middle East will have an accelerating effect on European solar PV?

The impact of the Middle East conflict won’t materialise in the European solar PV industry immediately. Ongoing geopolitical instability has made the risks of Europe’s fossil fuel import dependency clear, and renewable assets are firmly at the centre of the energy independence conversation. But the practical barriers are still present. Grid connection queues are still one of the biggest constraints on solar and BESS growth across Europe. Shifting deployment pipelines will require shorter queues, more mature supply chains, and financing appetite to match.

How significant do you think the EU Industrial Accelerator Act (IAA) will be in supporting the continent’s renewables manufacturing industry?

The IAA is a meaningful step. Its focus on end-system manufacturing gives Europe a genuine foothold in the value chain, creating jobs and building industrial know-how in the process. But it leaves the upstream supply chain largely untouched, and Europe’s reliance on China for polysilicon, wafers, cells and modules remains firmly in place. Closing that gap will require manufacturing expertise, factory infrastructure, and an investment environment stable enough to absorb the significant CAPEX commitments these projects require. Northvolt is a recent and relevant reminder of how difficult that journey can be, even with substantial public and private backing.

Is it important that Europe has a robust domestic solar manufacturing industry? Is it realistic? Why?

Solar is becoming critical infrastructure for European energy security, and with China controlling around 80% of global solar module output, this level of concentration creates risk.

Full domestic independence is not a near-term reality. Structural cost disadvantages in energy and labour mean Europe cannot compete with China at scale on price. The realistic ambition is targeted capability in the most strategically critical parts of the value chain, built through structured partnerships and joint ventures that transfer knowledge over time.

The central policy challenge is managing the trade-off realistically. Domestic manufacturing carries a cost premium, and the risk of pushing localisation too hard is that it raises the cost of deployment. Building long-term industrial capability and maintaining near-term deployment momentum are both essential to energy security and policy will need to advance both without letting one come at the expense of the other.