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Solar Energy Monthly Report | November

 

Solar Energy ETF Monthly Report: Key Takeaways

Data for the first eight months of the year show that U.S. utility-scale solar generation has jumped 55% year-on-year. Combined, wind and utility-scale solar generation has gone up by 76 million megawatt-hours (MWh)—a 31 percent increase—while coal and gas generation has fallen by 1.6 percent since 2019, reflecting the ongoing transition of electricity markets to renewable energy and away from fossil fuels). However, an even larger surge in renewable generation is expected soon. IEEFA estimates that by the end of 2026—just five years from now—wind and utility-scale solar will generate roughly 850 million MWh of electricity annually, equal to more than 21 percent of total 2020 demand from about 12% today. The increase in utility-solar generation in the past two years was driven by the installation of roughly 22,500 megawatts of new capacity. The Solar Energy Industries Association now expects utility-scale installations to average more than 21,000MW a year through 2026, with a peak of 25,000MW in 2023. These new solar projects could be generating an additional 283 million MWh of power a year by the end of 2026—more than triple the full-year 2020 level of 90.1 million MWh—for a total of 374 million MWh. [1]

Solar wafer, cell price hikes underscore new polysilicon pricing volatility. Recent solar wafer and cell price increases from both LONGi Solar and Tongwei, which have seen prices rise by between 5.6% – 7.7%, have underscored heightened volatility in the solar supply chain. Material, components and module prices increased October after Chinese authorities imposed restrictions on power consumption and manufacturing operations in the wake of an ongoing power and coal crisis in the country. Module prices have risen in excess of US$0.30c/W in some instances – prices not seen since 2019 – while a shortage of silicon metals triggered by the reduced output has driven polysilicon prices up more than 10% to a new annual high. Factory utilisation rates fell as a result, continuing to pressure the solar value chain in the short-term. [2]

The IEA World Energy report released in October calls for a more than three-fold investment in renewables. In the next decade, the IEA says solar investment will need to increase at least 300% to meet net-zero targets and says 70% of the additional spending required to put the world on a path to net zero is needed in emerging economies. Solar PV and wind are set to more than double their combined current share of electricity generation over the next decade in two of the IEA’s scenarios and quadruple it in another, the net zero emissions pathway, which would see around 4.96TW of solar PV deployed globally in 2030. [3] 

Solar corporate funding surges 190%, VC funding sees biggest rise of 466%. Total solar corporate funding (including venture capital funding, public market, and debt financing) in solar increased 190% in the first nine months of this year, with US$22.8 billion raised in 112 deals compared with US$7.9 billion in 72 deals in the same period last year, according to a Mercom Capital Group report. According to Raj Prabhu, the CEO of Mercom, 2021 will be “one of the best years for solar financing since 2010. As the push toward the energy transition picks up speed worldwide, solar – one of the mature renewable energy resources – is benefitting enormously. Solar project acquisitions in the first nine months of 2021 have already surpassed all of 2020.” [4]

Macro Outlook

Demand for solar power continues to grow.

Despite production problems in China causing polysilicon and module price rises and global supply chain disruptions, the growth outlook and funding for solar remains strong. BloombergNEF estimates that to be on target for net-zero by 2050, the world needs to add 455 gigawatts of solar every year through 2030. Last year was a record—and it only added 144 gigawatts. [5]

Even with the recent solar panel price hikes, solar panels are still cheaper now than they were in October 2018, and installations keep inching higher. [6] New polysilicon factories and an eventual end to China’s power crunch are expected to bring prices back down by 2023 at the latest. In addition, solar companies have continued to improve their technology and manufacturing efficiency this year, which should continue to make solar an attractive alternative to traditional fossil fuels on a cost basis, especially as coal and natural gas prices have reached new record levels. [7] 

In the U.S. alone, the solar market has surpassed 100 gigawatts (GWdc) of installed generating capacity, doubling the size of the industry over the last 3.5 years, according to a U.S. Solar Market Insight Q2 2021 report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. [8] The White House released a Build Back Better framework on October 28 that includes significant investments in climate and clean energy policy priorities. The plan, which allocates over 30% of the total price tag to climate and clean energy, will be voted on by Congress, and would put the U.S. on a path to decarbonize the electric grid and reach President Biden’s clean energy targets, which include an ambition for the country to have a carbon pollution-free power sector by 2035. [9]

 

Solar Energy ETF and Index Performance (As of 31.10.2021)

 

1M

3M

6M

YTD

12M

SI

Solar Energy UCITS ETF

17.89%

11.07%

NA

24.40%

 NA 

24.40%

EQM Global Solar Energy Index

17.97%

11.75%

15.32%

25.39%

55.71%

25.39%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/10/2021

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data. 

 

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