Solar Energy Monthly Report | May

Solar Energy ETF: Key Takings

2021 was the biggest year ever for solar.According to the latest from analysts at Wood Mackenzie (WoodMac) and the Solar Energy Industries Association (SEIA), the US solar industry installed 23.6 gigawatts (GW, or million kilowatts) in 2021.[1] That’s 19 percent more than in 2020, which itself had been a record breaker, and 77 percent more than in 2019. And that took it soaring past the 100 GW cumulative mark in 2021. Last year solar was the biggest source of new US electric generating capacity, accounting for 46 percent, according to WoodMac/SEIA. That makes the third year in a row it was number one! [2]

US solar generation was also strong in 2021 Last year also showed the fruits of the prior year’s labors. The year-end results from the US Energy Information Administration show that solar generated 25 percent more in 2021 than in 2020. In fact, solar accounted for 3.9 percent of US electricity generation, more than four times its 2015 share. [3]

Global solar buildout expected to increase five-fold by 2050 as renewables become the ‘new baseload’, according to the global consulting firm McKinsey. McKinsey’s Global Energy Perspective 2022 report also states that the energy transition will need to be “significantly” accelerated if global warming is to be limited to 1.5 degrees Celsius, with warming currently set to exceed 1.7 degrees.[4] It also found that despite net zero targets being set by 64 countries, which account for 89% of total CO2 emissions, emissions reductions remain insufficient to limit global warming to within the 1.5 degrees ambition established in the Paris Agreement.[5] Nonetheless, there is hope. McKinsey expects that by 2030, around half of the world’s power mix will originate from renewables sources, rising again to between 80 – 90% by 2050, most of which will come from solar and onshore wind. [6]

China Is Planning Record Wind and Solar Power Additions This Year. NDRC researcher forecasts 140 gigawatts of new capacity - more than rest of world combined in 2020. The forecast is the latest sign that China is racing ahead of its official target for renewable adoption as local governments, wind and solar equipment producers and state-owned utility giants continue to push ambitious plans. China is aiming for 1,200 gigawatts of wind and solar generation capacity by 2030 and had 678 gigawatts by the end of last year, according to BloombergNEF [7]

Macro Outlook

Solar exhibited many positives in 2021 and the industry’s secular growth story remains bright. Still, certain recent factors counterbalance all the enthusiasm.

Costs (unsurprisingly, given global supply-demand issues) rose in 2021 and continue to experience upward pressure, after declining for much of the past decade. Policy uncertainty also remains in the US, as California’s public utility commission considers possible changes to rooftop solar, and Florida’s legislature just passed a bill that would dramatically weaken the rooftop PV economics in the Sunshine State.[8] And, at the federal level in the US, the Trump administration’s solar import taxes remain an issue, and potential new ones are increasing trade concerns.[9] In addition, the solar industry is closely watching the US Congress, whether it will find a way forward on extending the investment tax credit (ITC) that has been so powerful for driving solar forward.

Despite the recent challenges, we believe the longer-term trend for solar continues to look positive. The trends toward greater efficiency, larger panels, larger projects, and greater economies of scale across the industry indicate that costs should resume their downtrend, which should further increase solar accessibility and help set new records for solar installations and generation. [10]

Solar Energy ETF Performance Table (As of 30.04.2022)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2022

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.

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