Pathways to Sustainable Energy: How Environmental Regulations and Financial Development Moderate the Impact of Solar Innovations

ABSTRACT This study aims to analyze the disaggregated effects of solar photovoltaic (PV), solar thermal (ST), and solar photovoltaic‐thermal hybrid (PV/T) technologies on solar energy capacity in the G‐7 countries, which are among the leading users of solar energy technologies, over the period 2000–2020, by employing panel data estimators (CCEMG and RCCE). In doing so, we aim to examine the effects of economic growth, environmental regulations, and financial development. Our findings indicate that solar technologies do not exhibit a statistically significant effect at either the panel or country level, regardless of whether the data are aggregated or disaggregated. However, in some countries, such as the USA, PV/T technology has increased solar capacity. In addition, across all models, the effects of economic growth on solar capacity development at the panel level were estimated to be positive. In contrast, the impacts of environmental regulation and financial development are heterogeneous. Hence, policymakers should reconsider implementing sound environmental policies, such as feed‐in tariffs, stringent emission regulations, and net renewable energy targets, to encourage the development of solar capacity.