EU boosts the role of solar power in the energy transition as China cuts export rebates

Solar power is reaching record importance in the European Union, becoming the EU’s largest source of electricity and a core pillar of the energy transition. At the same time, China is tightening its policy towards its own green technology sector by phasing out VAT rebates on photovoltaic exports – a move that could affect prices and the availability of technologies in Europe.

Solar energy continues to gain ground in the EU, cementing its role as a key driver of the energy transition. According to Eurostat data, renewable energy sources accounted for 47.5% of electricity consumption in the EU in 2024, with nearly a quarter of that coming from photovoltaics.

In June 2025, solar power became the EU’s largest source of electricity for the first time on record. In the same year, total installed photovoltaic capacity in the bloc reached around 406 gigawatts, exceeding the original targets set under the EU Solar Energy Strategy.

European Commission officials stress that the growing role of photovoltaics is fundamental to the EU’s energy transition. Kadri Simson, European Commissioner for Energy in the von der Leyen Commission between 2019 and 2024, described solar power as having become the “bright star” of this transformation, noting that the number of installations continues to rise steadily both in Europe and globally.

She also highlighted that solar energy is not only “clean and more affordable”, but also more secure. Photovoltaics have been identified as one of the key technologies under the Net-Zero Industry Act, which aims to expand the EU’s domestic manufacturing capacity for clean technologies and reduce reliance on imports.

Changes accelerate in China

From 1 April 2026, Beijing will completely abolish VAT rebates on exports of photovoltaic panels, while reducing the rebate rate for batteries from 9% to 6%. This mechanism will also be fully phased out by 1 January 2027, according to a joint statement by China’s Ministry of Finance and the State Taxation Administration.

The decision accelerates a process that has been underway for several years. The most recent adjustment came at the end of 2024, when VAT rebate rates were cut from 13% to 9%. China Photovoltaic Industry Association noted that the rebate system had effectively functioned as a form of additional discount for foreign buyers, squeezing the margins of Chinese manufacturers and reinforcing price pressure.

The association also pointed to the reputational costs of such policies. Export subsidies have increasingly been seen as distorting competition, while their main beneficiaries were not producers but overseas importers.