Solar Energy Monthly Report | April

11 April 2022

Solar Energy ETF

Solar PV capacity must reach 5.2TW by 2030 (annual installs must quadruple) to meet 1.5°C Paris climate goal, says International Renewable Energy Agency. The 2022 edition of IRENA’s flagship report states solar PV is not installing fast enough to reach a capacity necessary to limit global warming to 1.5°C by 2050, suggesting installs must nearly quadruple from the ~126GW it says was installed in 2020 to 444GW each year until 2050. Global investments in renewables will amount to US$25.9 trillion by 2050, with an annual investment of US$1 trillion per year until the end of this decade with more than a third (US$338 billion) in solar PV alone, more than treble investments in the technology pre-COVID-19. Asia will be the region with the highest investment needed with US$10.9 trillion, followed by North America (US$4.7 trillion) and Europe (US$3.6 trillion). According to IRENA, Solar PV and wind alone will be supplying 42% of total electricity generation by 2030, it currently sits at 10% today. [1]

Wind and solar generated over a tenth of global electricity for the first time in 2021. All clean power is now 38% of supply, and fifty countries have now crossed the 10% wind and solar landmark, with seven new countries in 2021 alone, according to an annual Global Electricity report by Ember, a global thinktank. [2]

Solar accounted for 46% of all new electricity-generating capacity added in the US in 2021, the third year in a row that solar made up the largest share of new capacity. In 2021, the U.S. installed 23.6 gigawatts (GWdc) of solar PV capacity to reach 121.4 GWdc of total installed capacity. This is enough enough to power 23.3 million American homes. However, 2021 was a year of increasing costs for the solar industry. Year-over-year price increases for utility-scale solar reached 18% for fixed-tilt projects and 14.2% for single-axis tracking projects in Q4. Despite these challenges, forecasts remain strong, including the potential impacts of potential federal clean energy policies under consideration, which would increase solar deployment projections by 66% over the next decade. [3]

Renewable energy production increased significantly in the U.S. in 2021. According to a report from Inside Climate News, energy from renewables increased by 5.5% year over year, surpassing nuclear energy production, which declined by 1.5% year over year. However, coal energy production eclipsed renewable energy production once again after a strong comeback, growing by 16.2% year over year after facing a decline of more than 51.4% since 2010. The increased use of coal is attributed, however, to the fact that cuts in coal use in 2020 were so deep that some recovery was not a surprise, and according to the report, coal’s decline is expected to continue as renewables steadily rise — the report notes that energy companies plan to close coal-fired power plants by 2028, eliminating 70 gigawatts of coal-generated power. For renewable energy, the future looks much brighter. In 2021, renewable energy generated 826,387 gigawatt-hours of energy. [4]

Florida Solar bill under scrutiny: Similar to a California vote on a controversial proposal that would dramatically change the state’s net energy metering (NEM) rules, which was was postponed from its scheduled date of February 10, a proposed bill making its way through the Florida Legislature threatens to undermine the growth of rooftop solar in that state. The utility-backed measure would change rules for net metering, which would reduce the compensation solar owners receive for sending excess electricity back to the grid, as Elizabeth Djinis reports for Canary Media. Solar industry leaders say the bill is bad for consumers at a time when the industry was just beginning to gain momentum in the state. [5]

Macro Outlook

Energy independence from Russia could spur a shift to renewables. Oil and gas prices have spiked in the aftermath of Russia’s invasion of Ukraine. As the conflict in Ukraine rages, European leaders are pushing for a faster switch to renewables as part of a strategy to end dependence on Russian gas. [6] Their ambitious plans now call for fast-tracking deployment of solar and tripling clean energy capacity by 2030. The effects of the conflict have implications for greenhouse gas emissions and energy policy. [7] The long-term effects could touch on everything from nuclear power to renewable energy, as industry leaders expect wind and solar to remain more insulated from price shocks and sanctions targeting Russia than fossil fuels. [8]

Experts also say that electricity has to take over from natural gas in sectors where just months ago gas seemed a secure long-term bet, which would significantly enhance prospects for solar power. The European Commission believes it can replace 24 billion cubic metres (bcm) of Russian gas with zero-emissions renewable energy sources this year. Furthermore, The International Energy Agency (IEA) issued a 10-point plan in March to reduce Russian gas imports by 63bcm, approximately half of what Europe imported last year, through a mixture of diversification and economy. The organisation says these measures could be enacted in the next year, without building new infrastructure. Following the IEA’s statement, the European Commission announced an even more ambitious plan, the REPowerEU plan, to reduce reliance on Russian gas by two-thirds before Christmas, and abolish all Russian fossil fuels – including coal and oil – by 2030. [9]

Europe consumes about 495bcm of gas a year, and the EC estimates Russia supplied 155bcm last year. The IEA plan would reduce Russian gas use by 33bcm by asking Europeans to turn down their thermostats by 1 degree Celsius (33.8 Fahrenheit) and increasing electricity generation from nuclear power and biofuels. It would replace another 30bcm of Russian gas with Liquefied Natural Gas (LNG) shipped from the United States, Caribbean and east Mediterranean. The total savings of Russian gas amount to 63bcm. The European Commission’s plan would reduce gas use by slightly more than 40bcm, by speeding up installation of solar panels and household economy. It would find an additional 10bcm of gas from non-Russian pipelines (from Norway, North Africa and Azerbaijan) and 50bcm from LNG. The total savings of Russian gas in this regard amount to 100bcm. [10]

Solar Energy ETF Performance Table (As of 31.03.2022)

 

1M

3M

6M

YTD

12M

SI

Solar Energy UCITS ETF

6.55%

-6.33%

-9.03%

-6.14%

NA

-4.01%

EQM Global Solar Energy Index

6.62%

-6.14%

-8.82%

-6.14%

-18.24%

-3.08%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/03/2022Performance 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. 

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