Solar Energy in Asia: Bright Prospects and Growing Challenges

The solar energy sector in Asia is rapidly expanding, driven by rising demand for sustainable energy, strong government support, and technological innovations.

This growth is particularly evident in countries like China and India, where large-scale solar projects are being implemented to meet increasing energy needs and reduce carbon emissions. Moreover, advancements in solar panel efficiency and energy storage solutions are making solar power more viable and cost-effective.

The Asia-Pacific solar power market is expected to grow at a strong compound annual growth rate (CAGR) of 25.31% between 2025 and 2034, making it one of the fastest-growing renewable energy markets globally. Regional collaborations and investments are further accelerating progress, positioning Asia as a leader in the global transition towards renewable energy. As the sector continues to evolve, it promises significant economic and environmental benefits, fostering sustainable development across the continent.

As countries aim to cut carbon emissions and secure energy independence, solar power has become a key part of national energy strategies across the region.

What is the Solar Energy Industry?

The solar energy industry encompasses all activities related to harnessing the power of the sun and converting it into usable electricity. 

It involves a broad ecosystem that includes the research and development of solar technologies, the manufacturing of photovoltaic (PV) panels and solar thermal systems, the installation and maintenance of solar farms and rooftop systems, and the integration of storage solutions such as batteries to manage energy supply.

At the core of the industry are photovoltaic (PV) systems, which use semiconductor materials like silicon to directly convert sunlight into electricity. 

Alongside PV technologies, solar thermal systems capture the sun’s heat to produce steam for electricity generation or to supply hot water for residential and industrial use. Increasingly, the industry also incorporates energy storage technologies and smart grid solutions to ensure the reliability and efficiency of solar power, even when sunlight is intermittent.

What Countries Are Leading the Solar Industry in Asia?

Several major factors are behind Asia’s booming solar energy industry, with country-specific initiatives shaping the region’s renewable energy landscape.

China remains the undisputed leader in solar development. The government’s Renewable Energy Development Plan, alongside its broader carbon neutrality pledge by 2060, has unleashed massive investments in solar infrastructure. State-owned enterprises and private firms alike are expanding solar farms at an unprecedented pace. 

Furthermore, generous subsidies for solar manufacturers, major investments in research and development, and large-scale grid upgrades have solidified China’s dominance in the global solar supply chain.

India is another major force driving solar growth. Through the National Solar Mission and subsequent policy frameworks under its broader energy transition programs, India aims to install 500 gigawatts (GW) of non-fossil fuel capacity by 2030, with a significant portion coming from solar. The government has also launched various incentive schemes such as viability gap funding for solar parks and production-linked incentives for solar manufacturing, boosting both supply and demand.

Japan is focusing on integrating solar into urban spaces and industrial sectors. Following the Fukushima disaster, Japan’s commitment to diversifying its energy mix has intensified. Policies promoting feed-in tariffs (FiTs) for renewable energy and encouraging rooftop solar installations have made Japan one of the largest solar markets in Asia, despite limited land availability.

Vietnam has emerged as a regional solar success story over the past five years. Aggressive government feed-in tariffs between 2019 and 2021 sparked a solar installation boom. Although the tariff structure has since changed, the Vietnamese government continues to prioritize renewables through its Power Development Plan 8, aiming for 50% of households to be powered by rooftop solar by 2030.

Malaysia is boosting its solar energy sector by promoting large-scale solar (LSS) auctions and strengthening net energy metering (NEM) schemes. The government is aiming to generate 31% of its energy from renewables by 2025, and solar is set to play a central role in achieving this goal.

Thailand is pushing solar development through initiatives such as the Alternative Energy Development Plan (AEDP), aiming to raise renewable energy’s share to 30% of total energy consumption by 2037. Strong emphasis is placed on hybrid projects and floating solar farms, which are ideal given the country’s abundant reservoirs.

How Will the Tariffs Impact the Solar Industry in Asia?

Despite the strong momentum behind Asia’s solar energy boom, the industry faces significant and growing hurdles that could slow future progress.

One of the most immediate and serious challenges is the imposition of new tariffs by the United States. 

In April 2025, the U.S. announced sweeping duties of up to 250% on solar panels imported from Southeast Asian nations, specifically Vietnam, Malaysia, Thailand, and Cambodia. According to The Guardian, U.S. officials claim these countries have been helping Chinese manufacturers circumvent existing tariffs by completing minimal assembly work locally while sourcing most materials from China.

This practice, referred to as “circumvention,” triggered the latest wave of trade protection measures.

The impact of these tariffs could be profound. Southeast Asia accounts for roughly 80% of U.S. solar panel imports, and many of the manufacturers operating in Vietnam, Malaysia, Thailand, and Cambodia are Chinese-owned or closely linked to Chinese supply chains. The new tariffs are likely to disrupt production plans, inflate project costs, and create significant bottlenecks in the global solar supply chain. Companies that had relied on Southeast Asian factories as a workaround for U.S.-China trade tensions must now either absorb higher costs, seek alternative manufacturing hubs, or face potential market losses.

At the recent Energy Summit referenced in the article, several Asian leaders warned that these measures could trigger broader trade disputes and slow the global transition to renewable energy. Southeast Asian governments, along with industry groups, have criticized the U.S. move as politically motivated and detrimental to climate cooperation efforts. Some hinted at exploring legal action through the World Trade Organization (WTO), while others are seeking to accelerate regional energy collaboration to reduce reliance on Western markets.

Beyond tariffs, several other challenges continue to threaten Asia’s solar trajectory:

• Supply Chain Vulnerabilities: The heavy reliance on Chinese and Southeast Asian manufacturers leaves the global solar industry exposed to geopolitical tensions, export controls, and material shortages, particularly for key inputs like polysilicon.
  
• Land Constraints: In densely populated countries like Japan, South Korea, and parts of India, securing enough land for large-scale solar projects remains difficult. This is pushing developers toward costly solutions like rooftop installations or floating solar farms.
  
• Outdated Infrastructure: Many Asian countries still lack modern grid infrastructure capable of integrating large volumes of intermittent solar energy. Without significant upgrades in grid technology, storage systems, and transmission networks, scaling up solar deployment will face technical bottlenecks.
  
• Regulatory and Policy Uncertainty: While many governments are setting ambitious renewable energy targets, frequent policy changes, unclear regulatory guidelines, and bureaucratic delays create uncertainty for investors and developers.
  
• Financing and Investment Risks: In some emerging markets, the lack of mature financing models for renewable projects, combined with currency risks and political instability, makes solar investments more challenging compared to more developed markets.

Asia’s solar energy industry stands at a pivotal crossroads. On one hand, the region’s booming demand for clean energy, robust government support, technological innovation, and falling costs are setting the stage for unprecedented growth. 

With a projected CAGR of 25.31% through 2034, Asia-Pacific is poised to be the world’s fastest-growing solar market, driving both regional and global progress toward carbon neutrality.

However, significant challenges could temper this bright outlook. The newly imposed U.S. tariffs on Southeast Asian solar panels, alongside persistent supply chain vulnerabilities, land shortages, outdated grid infrastructure, regulatory uncertainty, and financing hurdles, threaten to disrupt the momentum. As geopolitical tensions escalate and trade barriers rise, Asian countries will need to adapt quickly by strengthening intra-regional cooperation, diversifying supply chains, and investing in local innovation and infrastructure.

Ultimately, the future of solar energy in Asia will depend on how effectively the region can balance rapid expansion with resilience to external shocks. If governments and industry leaders can navigate these growing pains, Asia is well-positioned not only to lead the global renewable energy transition but also to set new standards for sustainable economic development in the decades ahead.