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Italy's solar market has boomed since 2007 when production subsidies were boosted but the government has since tried to cut incentives to help consumers who support the scheme through power bills.

Italy installed 9 gigawatts (GW) of new PV capacity in 2011 compared to 2.3 GW in 2010 and accounted for 33 percent of the top 10 solar PV markets in the world, the report said.

"A substantial portion of these new connections were part of a rush of installations that took place at the end of 2010," the report said, referring to an Italian law which allowed systems installed by the end of 2010 and connected by mid-2011 to benefit from subsidies.

Even when Italy cut generous solar incentives in June last year, almost 4 GW of new capacity was installed in just seven months, the report said.

This year, Italy is preparing new, gradual incentive cuts for renewable energy from June which should end a period of regulatory uncertainty but some fear investors might downsize their plans for the Italian solar market.

Germany installed 7.5 GW of new capacity last year, accounting for 27 percent of the world market, while China installed 2 GW and accounted for 7 percent.

Italy and Germany accounted for almost 60 percent of global market growth in 2011.

Globally, new PV capacity rose to 27.7 GW last year from 16.6 GW in 2010, with Europe accounting for more than 75 percent of all new capacity last year, the report said.

Total installed PV capacity world-wide reached over 67.4 GW at the end of 2011.

"PV is now, after hydro and wind power, the third most important renewable energy in terms of globally installed capacity. The growth rate of PV during 2011 reached almost 70 percent, an outstanding level among all renewable technologies," the report said.

The total energy output of the world's PV capacity over a calendar year is now equal to some 80 billion kilowatt hours, enough to cover the annual power needs of over 20 million households worldwide.

Despite this growth, the association said the PV industry was at a crossroads.

"Whilst European markets have always outpaced home production, this will presumably no longer be the case in the years to come," said Ingmar Wilhelm, president of the EPIA.

"New markets around the world will have to be opened up to drive PV development in the coming decade just as Europe accounted for it during the last decade."