The Investment Case for Solar Energy: Executive Summary
Learn more about our solar energy ETF
As the renewable energy
revolution enters an important inflection point this decade, the case for solar
energy investing is more compelling than ever amid two potential catalysts: the
commitment from many countries to promote a clean-energy future and the
significant decline in renewable energy costs. Together, these factors may lead
to increased adoption of solar and other clean energy sources.
On the policy side, governments
of more than 100 countries have pledged to achieve net-zero carbon emissions by
2050 due to climate-change mitigation and economic considerations.
Affordable and clean energy technologies will have meaningful benefits
for the world over the long term, according to the International Energy Agency
(IEA). These benefits include improved energy security among countries through
reliance on an indigenous, inexhaustible and mostly import-independent
resource, enhanced sustainability, reduced pollution, as well as lower costs of
alleviating global warming and keeping fossil fuel prices lower.
On the cost side, it is important
to note that conventional energy from fossil fuels (i.e., coal, oil and natural
gas) has dominated the global power supply because until recently, electricity
from fossil fuels, especially coal, was far cheaper than electricity from
renewables (i.e., solar, wind, rain and geothermal heat). This has dramatically
changed within the last decade. In most places across the globe, power from new
renewable energy sources is now cheaper than power from new fossil fuels.
In fact, solar energy is now the
cheapest new source of global electricity in most developed countries. With
solar less expensive today than fossil fuels, this may serve as a key driver of
rapid wide-scale adoption.
In the United States, there has
been an ongoing trend away from conventional toward renewable energy. The U.S.
Energy Information Administration (EIA) forecasts that the share of renewables
in the U.S. electricity generation mix will increase from 21% in 2020 to 42% in
2050. Wind and solar are responsible for most of that growth. The renewable
share is projected to increase as nuclear and coal-fired generation decrease
and the natural gas-fired energy generation share remains relatively constant.
According to the EIA, solar
electric generation, which includes photovoltaic (PV) and thermal technologies,
as well as both small-scale and utility-scale installations will surpass wind
energy by 2040 as the largest source of renewable energy generation in the
For investors, the pivotal shift
toward renewable energy this decade and the continued development of the
technology to support it may present an appealing investment opportunity. Now
may be a good time to invest in companies within the solar energy supply chain (the constituents of our solar energy ETF) that provide solutions and enable the transition from fossil fuels to clean
Visit our solar energy ETF fund page.