Abstract Solar energy is widely regarded as a major renewable energy source, which in future energy systems will be able to contribute to the security of energy supply and the reduction of CO 2 emissions. This study combined an evaluation of solar energy resources in Taiwan with land use analysis, which allows the potentials and restrictions of solar energy exploitation resulting from local land use conditions to be considered. The findings unveiled in this study indicate that photovoltaic electricity generation and solar water heating have the potential of producing 36.1 and 10.2 TWh of electricity and thermal energy annually in Taiwan, accounting for 16.3% and 127.5% of the total domestic consumption of electricity and energy for household water heating in 2009, respectively. However, the exploited solar photovoltaic power generation in 2009 accounted for only 0.02% of total potential in Taiwan, while the exploited solar water heating accounted for 11.6% of total potential. Market price and investment incentive are the dominant factors that affect market acceptance of solar energy installation in Taiwan. The administrative barriers to the purchase and transmission of electricity generated from renewable energy sources have to be removed before the potential contribution of solar energy can be realized.