Solar Energy Monthly Report | June

13 June 2022

Solar Energy ETF: Key Takeaways

Major positive announcements for solar: On June 6 the Biden administration announced two major positive initiatives in support of the solar sector. First, President Biden confirmed plans to waive tariffs on solar imports from Southeast Asia for two years. [1] This alleviates concerns that tariffs would continue to add to the overall cost of solar panels and components since many solar components are produced in Southeast Asia. Secondly, President Biden has also authorized the US Department of Energy (DOE) to use the ‘Defense Production Act’ (DPA) – Cold War-era legislation designed to incentivize the domestic manufacture of strategically important goods – to accelerate the production of five clean energy technologies, including PV modules and module components. [2] The statement noted that while the US’ domestic solar manufacturing output is expected to treble to 22.5GW by 2024, expansion need to occur more swiftly. President Biden’s Build Back Better Act, which includes the proposed Solar Energy Manufacturing for America Act, itself a suite of tax credit incentives for domestic solar manufacturing, remains blocked. The White House has also moved to stimulate demand for domestically-made PV panels by “putting the full power of federal procurement to work”, introducing master supply agreements for PV systems made in the US and adding so-called ‘Super Preferences’ for domestic content for federal procurement contracts. [3]

China expected to double solar installations in 2022. According to China’s National Energy Administration (NEA), China expects to install up to 108GW of solar this year, nearly double the capacity it installed last year. [4] In 2021, China installed 54.88GW of solar, a new record for the country, but a total that perhaps underwhelmed compared to initial forecasts after material price hikes caused numerous projects to be delayed into 2022. However, many of these previously delayed projects are expected to be completed this year.  China’s NEA forecasts that around 121GW of solar projects are currently under or awaiting construction, 108GW of which will be connected to the grid this year. That would constitute a 96% leap in installations year-on-year and be markedly higher than the up-to-99GW forecasted by the China Photovoltaic Industry Association earlier this year. [5]

US hits a record 20% of electricity from wind and solar in April. The US achieved a new record in April 2022 – for the first time, the US generated 20% of its electricity from wind and solar power, according to new data released today from global energy think tank Ember. [6]

 

Macro Outlook

Solar energy equities got an important boost on June 6 after President Joe Biden took actions aimed at boosting the industry and supporting domestic manufacturing in the sector. [7] The positive news for much of the sector comes after Biden invoked emergency authorities to impose a two-year freeze on new tariffs for solar panels imported from four Southeast Asia countries. In 2020, 89% of the solar modules used in the United States were imported, with Southeast Asian countries accounting for the bulk of the shipments. The move is a victory for domestic solar installers, who said the tariffs would put at risk the Biden administration’s goal of significantly cutting carbon emissions by the end of the decade by reducing the flow of products into the United States. [8] But it goes against the wishes of some American solar manufacturers and their defenders, who have been pushing the administration to erect tougher barriers on cheap imports to help revive the domestic industry.

Biden’s announcement is expected to revive solar projects stalled by a US Commerce Department into solar panel dumping. The tariffs had received increased criticism in recent months as the war in Europe has driven up energy prices around the world. The tariffs were originally put in place by the Trump administration, with Biden announcing a four-year extension in February. [9]

President Biden also utilized powers under the ‘Defense Production Act’ to support solar panels and other domestic clean-energy manufacturing. 

These announcements will likely benefit utility-scale solar, which is most prices sensitive to changes in materials cost and requires the highest number of panels per installation. The residential solar industry should also benefit from the removal of “punitive tariff risks”. [10]

 

Solar Energy ETF Performance Table (As of 31.05.2022)

 

1M

3M

6M

YTD

12M

SI

Solar Energy UCITS ETF

9.16%

1.56%

-19.15%

-10.71%

NA

-8.50%

EQM Global Solar Energy Index

9.26%

1.79%

-18.95%

-10.39%

-9.06%

-7.48%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2022

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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