Solar ETF Monthly Report | November

23 November 2023

Solar ETF Key Takeaways | November

Renewable Energy Stocks Slump on Higher Interest Rates  Despite a surge in solar installations, shares of solar companies have faced headwinds as rising interest rates have impacted demand for solar energy. Enphase, Sunrun, and SunPower, are at risk of facing some of its biggest financial challenges in years thanks to volatile costs and high interest rates. Also in play have been cuts to California’s compensation rate for solar incentive programs for homeowners, and the cuts could be extended to multifamily homes.  Earnings have been mixed, with inverter companies like Enphase and Solar Edge missing expectations, while panel manufacturers like First Solar topped estimates and increased guidance on order backlogs.

Chinese Manufacturers Flooding Europe with Cheap Solar Modules and Equipment – Chinese manufacturers have also flooded the European market with inexpensive solar modules and equipment, creating problems for distributors. In addition, solar installations typically pick up in late summer and September in Europe, but that hasn’t happened this year, causing the inventory of panels and equipment to pile up.

Solar Stocks at 3-Year Lows – Solar stocks are at 3-year lows due to the effects of the combination of ongoing inventory, end market demand, and margin issues that are likely to serve as headwinds for the stocks for the foreseeable future given what appears to be a significant deterioration in visibility.

Despite Headwinds, Solar Installations Set to Break Global/US Records in 2023 – The solar industry is having yet another record-setting growth year, globally and in the U.S. A perfect storm of policy, incentives and still-plummeting costs has made solar the clear choice for new generation capacity worldwide. Research firm BloombergNEF expects global solar installations to rise by 56 percent in 2023, according to a September report. While solar deployments in the U.S., South America and the EU are growing fast, China continues to lead the way — it’s expected to account for 50 percent of new global solar PV projects by 2024.

Global PV Must Grow to 5,400 GW by 2030 to Curb Global Warming – The International Renewable Energy Agency said in a recent report that the scale of the energy transition needs ‘urgent’ acceleration to meet Paris Agreement climate emergency targets. Solar PV deployment, in particular, must ramp up and increase fourfold by the end of the decade. Global installed renewable energy power generation capacity needs to expand three-fold to 11,174 GW by the end of the decade to meet the 1.5 C Paris Agreement climate warming ceiling, the International Renewable Energy Agency (IRENA) reports.

Sources available upon request. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance, and when you invest in ETFs your capital is at risk.

Macro Outlook

Despite negative headlines for solar stocks, the industry is having a record-setting growth year thanks to a perfect storm of policy, incentives and plummeting costs. Solar has become the clear choice for new global generation capacity. 

 Bloomberg NEF expects global solar installations to rise by 56% in 2023, despite higher interest rates and excess inventory destocking. China is leading the way, accounting for 50% of new solar projects.   Beyond new projects, its installed capacity is expected to cross the 500-gigawatt mark by the end of 2023 and is expected to double to 1 terawatt by the end of 2026, according to recent data from Rystad. Although lagging China, the US solar industry is expected to add a record 32 GW of new capacity this year, an increase of 52% over last year. 

Certainly, one of the factors driving these trends is the price of solar modules, which hit an all-time low of 16.5 cents per watt in August and these prices are heading even lower. While the U.S. does not see the full benefit of these low prices due to tariffs on China panels, the rest of the world does.  

 

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For illustrative purposes only. Graph displays expected data.

 

Solar ETF Performance
 
As of 31.10.2023

 

1M

3M

6M

YTD

12M

2Y

SI

Solar Energy UCITS ETF

-13.84%

-33.69%

-33.40%

-33.61%

-32.56%

-53.92%

-42.68%

EQM Global Solar Energy Index

-13.82%

-33.65%

-33.30%

-33.32%

-32.13%

-53.29%

-41.43%

 

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/10/2023

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. When you invest in ETFs and ETCs, your capital is at risk.

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