Solar Energy 101 | Understanding the Solar Energy UCITS ETF
Solar Energy 101
Learn more about our solar energy ETF.
Solar energy is derived from the
sun’s radiant light and heat. It is an essential source of renewable energy.
The sun bathes earth with enough energy in one hour to satisfy the world’s
energy needs for an entire year.
Solar Energy Source: The Sun
While every location on earth
receives some sunlight over a year, the amount of solar radiation that reaches
any one spot on the earth’s surface varies. Solar technologies capture this
radiation and turn it into useful forms of energy.
Harnessing Solar Power Through Technology 
There are two main types of solar
Photovoltaics (PVs), which is
used in solar panels. When the sun shines onto a solar panel, energy from the
sunlight is absorbed by the PV cells in the panel. This energy creates
electrical charges that move in response to an internal electrical field in the
cell, causing electricity to flow.
Concentrated Solar-Thermal Power
(CSP), which uses mirrors to reflect and concentrate sunlight onto receivers
(such as solar modules, as seen in the chart below) that collect solar energy
and convert it to heat. This heat can then be used to produce electricity or
stored for later use following the process shown below. CSP is used primarily
in large power plants.
Solar Energy Generation Process
Source: EQM Indexes; This illustration shows how heat
from the sun is captured by gadgets known as solar modules, which then stores
energy into a charger controller, a battery bank and an AC service panel. The
stored energy is used to power utility grids and to supply energy for critical
needs during blackouts and other power outages.
Solar energy technology doesn’t
end with electricity generation by PV or CSP systems. These solar energy
systems must be integrated into homes, businesses and existing electrical grids
with varying mixtures of traditional and other renewable energy sources.
Why Go Solar?
Solar energy can help reduce the
cost of electricity, contribute to a resilient electrical grid, create jobs and
spur economic growth, generate back-up power for night-time and outages when
paired with storage, as well as operate at similar efficiency for small- to
Solar energy systems come in all
shapes and sizes. Residential systems are found on rooftops, such as those
across the United States. Businesses are also opting to install solar panels.
Furthermore, utilities are
building large solar power plants to provide energy to all customers connected
to the grid.
The Solar Energy Revolution: A Brief History 
Solar energy was used by humans
as early as 7th century B.C., as they used sunlight to light fires with
magnifying glass materials. In the 3rd century B.C., the Greeks and Romans were
said to harness solar power with “burning mirrors” to light torches for
religious ceremonies. Chinese civilization documented the use of mirrors for
the same purpose later in 20 A.D.
In the late 1700s and 1800s,
researchers and scientists used sunlight to power ovens for long voyages. They
also used sunlight to produce solar-powered steamboats.
The technology to develop solar
energy as we know today dates back to the 1860s. American inventor Charles
Fritts, driven by expectations that coal would soon become scarce, installed
the world’s first rooftop PV solar array. He used 1%-efficient selenium cells,
a photoelectric device used to generate or control an electric current, on a
New York City roof in 1884.
The development of solar
technologies stagnated in the early 20th century in the face of the increasing
availability, economy and utility of coal and petroleum.
However, the 1973 oil embargo and
the 1979 energy crisis caused a reorganization of energy policies around the
world, bringing renewed attention to developing solar technologies.
Deployment strategies focused on
incentive programs, such as the U.S. Federal Photovoltaic Utilization Program
in the 1970s and Japan’s Sunshine Program in the 1980s.
Other efforts included the
formation of research facilities in the United States, Japan and Germany.
Between 1970 and 1983, installations of PV systems grew rapidly, but falling
oil prices in the early 1980s moderated the growth of PVs from 1984 to 1996.
In the mid-1990s, development of
both residential and commercial rooftop solar, as well as utility- scale
photovoltaic power stations began to accelerate due to supply issues with oil
and natural gas, global warming concerns and the improving economic position of
PV relative to other energy technologies. In the early 2000s, the adoption of
feed-in tariffs—a policy mechanism, that gives renewables priority on the grid
and defines a fixed price for the generated electricity—led to a high level of
investment security and to a soaring number of PV deployments in Europe.
Moreover, in 2012, Tokelau (a New
Zealand territory) became the first country to be powered entirely by PV cells,
with a 1MegaWatt system using batteries for night-time power.
EQM Indexes, partner of our solar energy ETF.
For several years, worldwide growth
of solar PV was driven by European deployment, but has since shifted to Asia,
especially China and Japan, and to a growing number of countries and regions
all over the world, including Australia, Canada, Chile, India, Israel, Mexico,
South Africa, South Korea, Thailand and the United States.
From 2000 to 2013, worldwide PV
growth has averaged 40% annually and total installed capacity reached 303
gigawatt (GW) at the end of 2016, with China having the most cumulative
installations (78 GW) and Honduras having the highest theoretical percentage of
annual electricity usage which could be generated by solar PV (12.5%). The
largest manufacturers are located in China.
Concentrated solar power (CSP)
also started to grow rapidly, increasing its capacity nearly tenfold from 2004
to 2013, albeit from a lower level and involving fewer countries than solar PV.
As of the end of 2013, worldwide cumulative CSP-capacity reached 3,425
In the United States, solar
energy has experienced an average annual growth rate of 42% over the last
decade. Thanks to strong federal policies like the Solar Investment Tax Credit,
rapidly declining costs, and increasing demand across the private and public
sectors for clean electricity, there are now more than 97 GWs of solar capacity
installed nationwide, enough to power nearly 18 million homes.
Sources: Solar Energy Industries Association and Wood
Mackenzie Power & Renewables 2020; This illustration shows the cumulative
solar installations in the United States (measured in Megawatts of direct
current) from 2006 to 2020 for residential, non-residential, utility and
Learn more about our solar energy ETF here.