Solar energy: what it is and how it works

The Sun is the most abundant and accessible source of energy on the planet: in one hour, the Earth receives more energy from solar radiation than all of humanity consumes in a year. Yet, for centuries, this extraordinary resource remained largely untapped. Today, thanks to technological advances and the gradual reduction in installation costs, solar energy has become one of the world’s most widespread renewable energy sources and one of the pillars of the energy transition.

Understanding what solar energy is, how it works in its various forms, and what its advantages and disadvantages are helps us interpret the role this technology is already playing – and will increasingly play – in the energy system of the future.

Solar energy: definition and types

The term solar energy refers to the range of technologies capable of capturing and converting the electromagnetic radiation emitted by the Sun into usable forms of energy – mainly electricity and heat. Unlike fossil fuels, which store energy accumulated millions of years ago, solar energy is renewable by definition: the Sun continuously replenishes the resource without depleting it. The two main technology families are solar photovoltaic and solar thermal, which differ substantially in their operating principles and applications.

Solar photovoltaic

The solar photovoltaic converts sunlight directly into electricity through the photoelectric effect: when photons strike a semiconductor material – typically silicon – they release electrons which, once set in motion, generate direct current. This current is then converted into alternating current by an inverter, making it usable by household systems or suitable for feeding into the power grid.

The basic unit is the photovoltaic cell; several cells assembled together form a module, and multiple connected modules make up a system. System sizes can vary enormously, from small panels installed on residential rooftops to utility-scale plants extending over several square kilometres. The world’s largest solar park, Bhadla Solar Park in India, covers almost 60 km² and has an installed capacity of more than 2,700 MW, enough to power millions of homes.

The efficiency of commercial photovoltaic panels – that is, the percentage of solar radiation actually converted into electricity – was around 6% in the first modules produced in the 1960s and has exceeded 23% in the latest generation of commercial modules, while research cells have already surpassed 29%. At the same time, the installed cost per watt has fallen by 90% over the past decade, making photovoltaics the cheapest source of electricity ever available in much of the world, according to IRENA 2023 data.

Solar thermal

The solar thermal, or solar thermal energy, follows a different logic: instead of producing electricity, it captures heat from solar radiation to warm a fluid – typically water or an antifreeze mixture – which is then used directly for space heating, domestic hot water production or, in concentrating systems, to generate steam and produce electricity on a large scale.

Residential solar thermal panels for residential use are extremely widespread: in Europe, millions of homes use them to meet a significant share of their hot-water demand, with bill savings of up to 60-70% compared with a conventional gas system. At industrial scale, concentrated solar power plants (CSP – Concentrated Solar Power) use mirrors or lenses to focus radiation onto a single point, reaching extremely high temperatures. The Noor Ouarzazate solar complex in Morocco, one of the largest in the world with 580 MW of capacity, uses this technology and includes a thermal storage system that allows it to generate electricity even at night, overcoming one of the most frequently cited limitations of renewable energy sources.

Advantages of solar energy

The advantages of solar energy are numerous and span several dimensions: environmental, economic and strategic. Together, they explain why this technology has grown so rapidly and why it is now at the heart of the energy policies of dozens of countries.

From an environmental perspective, the main advantage is the near-total absence of CO₂ emissions during operation. Unlike coal and natural gas, which release carbon accumulated over millions of years into the atmosphere, a solar panel generates electricity without burning anything. The emissions associated with module production and end-of-life disposal do exist, but they are more than offset over the system’s useful life – generally 25-30 years – with an “energy payback” typically achieved within 1-3 years, depending on the technology and geographical location.

From an economic perspective, the sharp decline in costs now makes solar photovoltaic competitive – and in many contexts already cheaper – than fossil fuels, even without subsidies. For households, installing a domestic system can significantly reduce electricity bills and, when combined with a storage system, achieve substantial levels of energy self-sufficiency. For businesses, solar power can stabilise energy costs over multi-year horizons, providing protection against volatility in fossil fuel prices.

From a strategic perspective, harnessing solar energy reduces dependence on gas and oil imports, increasing countries’ energy independence. This has become even more important since the 2022 energy crisis, which highlighted the vulnerability of European systems to fluctuations in international markets and geopolitical tensions. Finally, the distributed nature of solar power – which can be generated locally, even in remote areas not connected to the grid – makes it a key technology for providing access to energy for communities that are still excluded from traditional energy systems.

Disadvantages and limitations of solar energy

An honest assessment of solar energy must also consider its disadvantages and the challenges that still limit its deployment. Understanding them is useful both for those considering installing a system and for those studying the energy policies of the future.

Among the disadvantages of solar energy most often discussed in public debate, intermittency is certainly the most frequently cited. It is a real limitation, but one that is evolving rapidly: the combination of solar power, storage and smart grids is already demonstrating in many parts of the world – California, South Australia and Spain – that systems with high shares of renewables can be stable and reliable. South Australia, for example, met 100% of its electricity demand with renewables during certain hours in 2023, thanks to a combination of solar, wind and large-scale storage.

Land use is another tangible challenge, particularly in a country such as Italy, where pressure on agricultural land is high. The most promising response is agrivoltaics: photovoltaic systems installed above crops, sharing the same land. Studies conducted in Italy, Germany and Japan have shown that some crops – such as lettuce, strawberries and lavender – benefit from the partial shade provided by the panels, with agricultural yields remaining unchanged or even improving, while the panels themselves become more efficient thanks to the lower temperature of vegetated ground.

Practical applications of solar energy

Solar energy is not a monolithic technology: it can be applied in many different ways depending on scale, context and purpose. This versatility is one of its greatest strengths.

At residential level, installing photovoltaic panels on rooftops is now an accessible option for many households, particularly following the incentive policies introduced in recent years. In Italy, the 110% Superbonus significantly accelerated installations between 2020 and 2023: according to data from the GSE (Gestore dei Servizi Energetici), by the end of 2023 Italy’s installed photovoltaic capacity had exceeded 30 GW, a significant share of which was located on residential buildings. Combined with a storage system and a heat pump, a domestic solar installation can cover most of a home’s annual energy demand, reducing both bills and environmental impact.

At industrial and commercial level, solar power is increasingly integrated into companies’ energy strategies. Warehouses, logistics centres and large retail spaces are ideal structures for hosting medium-sized photovoltaic systems capable of covering a significant share of electricity consumption. Amazon, IKEA and many other multinational companies have announced targets to operate on 100% renewable energy, with solar power as a central component.

Solar-powered lamps are an apparently simple application with enormous potential, especially in developing countries. Stand-alone solar lighting – including streetlights, portable lanterns and lighting systems for schools and healthcare centres – has already reached hundreds of millions of people in sub-Saharan Africa and South Asia who do not have access to the electricity grid, transforming daily life, night-time safety and opportunities to study and work after dark.

At system level, solar power is increasingly integrated with other renewable energy sources and with smart distribution grids. The ability to generate distributed electricity – close to consumption points and without the transmission losses associated with large power plants – naturally supports renewable energy community models, in which households and small businesses share local energy production and consumption. In this context, solar power also integrates with renewable gases, such as biomethane and green hydrogen: surplus solar electricity generated during peak hours can be used to produce hydrogen, storing it as an energy carrier and feeding it back into the grid when demand requires it.

Finally, frontier applications such as space-based solar power – panels placed in geostationary orbit that capture solar radiation without atmospheric attenuation and transmit energy to Earth via microwaves – are the subject of active research programmes by the European Space Agency (ESA) and several national governments. If the technological and economic challenges can be overcome, space-based solar power could provide continuous renewable energy 24 hours a day, regardless of weather conditions and latitude.

Solar energy is no longer a technology of the future: it is already a present-day reality, with more than 1,600 GW of installed capacity worldwide at the end of 2023 and a growth trajectory that shows no sign of slowing. Its limitations are real and deserve attention, but the technological solutions needed to overcome them are maturing rapidly. For companies that manage energy infrastructure, solar power is one element of an increasingly integrated system in which different sources – sun, wind, renewable gases, storage – work together to ensure security of supply, reduce emissions and maintain service continuity.