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Investment Case for Solar Energy | Understanding the growth of the solar energy industry

Our Solar Energy ETF offers exposure to the rapidly growing solar industry.

To learn more about our solar energy ETF and the industry, please view the full whitepaper: 

The Investment Case for Solar Energy | Executive Summary

Solar Energy 101


Five Key Benefits of Solar Energy[1] 

1. Sustainable Source of Green Energy – Sunlight offers a free, abundant source of zero-carbon producing energy, unlike fossil fuels, nuclear, coal and natural gas.

1. Cost Effective – Solar energy costs continue to decline due to technological advances and economies of scale, creating cost-parity in many world regions.

3. Diverse Applications – Solar energy can be used to generate electricity (photovoltaics) or heat (solar thermal).

4. Scalable Solution – Installations can be large scale (utility) or small scale (residential and commercial buildings).

5. Battery Storage – Solar-plus-storage systems facilitate the source of electricity 24 hours a day/seven days a week to solve solar energy’s intermittency issues.


Solar Energy Growth[2]                       

Growing global demand for sustainable green energy solutions has created an investment opportunity for companies in the solar energy supply chain. Of all of technology’s utopian visions of the future, a world of clean solar power may be one of the closest to realization. Solar is the fastest-growing source of new energy capacity, which is expected to increase by over 800% through 2050, as shown in the chart below.

Solar Energy Capacity Forecast to Grow 800% from 2019 to 2050 Worldwide Electric Power Capacity Forecast Through 2050 (in Gigawatts)

Source: BloombergNEF, 2020. This illustration shows the forecast for capacity growth for all conventional and renewable energy sources worldwide, including coal, gas, oil, nuclear, hydroelectric, wind, solar, storage and others. Clockwise from top of left pie chart shows 2019 worldwide electric power capacity growth forecasts for oil at 2%, coal at 28%, gas at 23%, other at 4%, nuclear at 5%, hydro at 15%, wind at 8%, solar at 11% and storage at 4%. Clockwise from top of right pie chart shows 2050 worldwide electric power capacity growth forecasts for oil at 8%, coal at 7%, gas at 15%, other at 1%, nuclear at 2%, hydro at 7%, wind at 20%, solar at 38% and solar at 2%.


By 2040, solar is expected to be the largest source of global electrical capacity with over 35% more installed capacity than natural gas. Fossil fuels are expected to fall to just 24% of power generation by 2050 from the 62% level today.

The world is in the middle of a power revolution – and the new governmental consensus that the world needs to transition to a lower-carbon economy will likely continue to fuel the trend.

In addition, the technology behind solar continues to advance rapidly, and declining costs have made previously unviable technical solutions practical. Solar energy is the cheapest new source of electricity in most major countries, and as costs continue to decline, solar operations will undercut fossil-fuel based power generation.

Even with relatively lower oil prices over the last five years, solar has become extremely competitive on price, reaching an inflection point of affordability that is resulting in a drastic increase in solar use around the world.


Source: International Energy Agency, 2020 This illustration shows the estimated amount of renewable power capacity growth between 2020 and 2025 as measured in gigawatts (GW). One GW can power 300,000 homes. Solar PV is forecast to have the largest capacity growth of 736 GW, followed by Onshore Wind with 334 GW, Hydropower with 121 GW, Offshore Wind with 54 GW, Bioenergy with 36 GW and Other (CSP, Ocean and Geothermal) with 4 GW.


Solar Is an Inexpensive Source of Clean Energy[3] 

Solar power has cheapened at a blistering pace. Just 12 years ago, solar was the most expensive option for building a new energy development. Since then, the cost has dropped by 90%, according to data from the Levelized Cost of Energy report by Lazard. Utility-scale solar arrays are now the least costly power option to build and operate.

Source: Lazard. This illustration shows the selected historical mean of unsubsidized levelized cost of energy values, in US dollars. From the left axis, the blue line shows the cost of solar was $359/Megawatt hour (MWh) in 2009, dropping to $37/MWh in 2020; the cost of gas peaker was $275/MWh in 2009, dropping to $175 in 2020; the cost of solar thermal tower was $168/MWh in 2009, falling to $141/MWh in 2020; the cost of wind was $135/MWh in 135/MWh in 2009, falling to $40/MWh in 2020; the cost of nuclear was $123/MWh in 2009, increasing to $163/MWh in 2020; the cost of coal was $111/MWh in 2009, increasing to $112/MWh. in 2020; the cost of gas combined cycle was $83/MWh in 2009, falling to $59/MWh in 2020; and the cost of geothermal was $76/MWh in 2009, rising to $80/MWh in 2020.


As shown in the chart below, even certain unsubsidized new-build renewable energy generation technologies are approaching a levelized cost of energy (LCOE) that is competitive with the marginal cost of existing conventional generation. LCOE is a measure of a power source that allows comparison of different methods of electricity generation on a consistent basis.

Unsubsidized new-build utility-scale solar ranges from $29-$38 per MegaWatt hour (MWh). This is competitive with the marginal costs to run existing coal or nuclear power plants at $34-$48/MWh and $25-$32/MWh, respectively. Declining solar energy prices have been made possible by both research and development, as well as the economic “learning curve” concept, which means that as more of a technology is deployed, it becomes cheaper and more efficient.


Clean Energy Is Competitively Priced vs Dirty Energy

Levelized Cost of Energy Comparison: Renewable Energy vs Marginal Cost of Selected Existing Conventional Energy

Source: Lazard Asset Management, estimates as of December 2020


This illustration shows renewable energy prices are comparable to conventional energy costs, especially the prices for Onshore Wind Subsidized, Solar PV-Thin Film Utility Scale and Solar PV-Thin Film Utility Scale Subsidized.


The Falling Cost of Solar Energy: A Potential Catalyst for Increased Adoption

Source: U.S. Department of Energy. This illustration shows the drop in U.S. utility-scale solar power cost per kilowatt-hour (kWh) since 2010 and cost forecasts through 2030. The cost of solar power in 2010 was $0.277/kWh, falling to 0.046/kWh in 2020. The U.S. Department of Energy forecasts solar energy cost will further drop to $0.03/kWh in 2025 and to $0.02/kWh in 2030.


The U.S. Department of Energy has set a goal of reducing the cost of utility-scale solar power to 2 cents per kilowatt hour by 2030. This follows the 2011 SunShot Initiative, which set a goal for 2020 and reached it three years early. Figures in the chart above show the LCOE, which takes into account costs of construction and operation.


Declining Solar-Module Prices[4] 

The technological cost of solar modules, a key material used to generate solar power, has rapidly declined, as shown in the chart below. This is an important reason for lower solar energy prices.

Solar module prices typically decline as more of them are produced. For more than four decades, each doubling of global cumulative solar capacity has been associated with a 20.2% decline in solar module prices, as shown in the chart below. The price of solar modules declined from $106 in 1976 to $0.38 per watt in 2019, a decline of 99.6%.

Unlike fossil fuels, there is no raw “input” fuel cost associated with solar energy. A solar plant’s cost is determined by the cost of the technology alone.

Solar Modules: 99% Price Decline

Sources:; Lafond et al. (2017) and IRENA Database; the reported learning rate is an average over several studies reported by de La tour et al. (2013) in Energy. The rate has remained very similar since then.


This chart shows the price of solar modules declined from $106/Watt in 1976 to $0.38/Watt in 2019, a decline of 99.6%. With each doubling of global cumulative solar capacity has been associated with a 20.2% decline in solar module prices.


Solar Energy Supply Chain[5] 

There are several components involved with solar energy development, starting from the manufacturing of equipment and module production, all the way to installation and operation. The chart below shows these components and their definitions.[6] 

Source: National Renewable Energy Laboratory and This illustration shows the components of solar energy generation.


1. Polysilicon

Polycrystalline silicon, or multicrystalline silicon, also called polysilicon or poly-Si, is a high purity, polycrystalline form of silicon, used as a raw material by the solar photovoltaic and electronics industry. Polysilicon is produced from metallurgical grade silicon by a chemical purification process, which is called the Siemens process, involving the distillation of volatile silicon compounds and their decomposition into silicon at high temperatures. An emerging, alternative process of refinement uses a fluidized bed reactor

2. Ingots

An ingot is a piece of relatively pure material, usually metal, which is cast into a shape suitable for further processing. In steelmaking, it is the first step among semi-finished casting products. Ingots usually require a second procedure of shaping, such as cold/hot working, cutting, or milling to produce a useful final product.

3. Wafers

In electronics, a wafer is a thin slice of semiconductor, such as a crystalline silicon used for the fabrication of integrated circuits. In photovoltaics, it is used to manufacture solar cells. The wafer serves as the substrate for microelectronic devices built in and upon the wafer. It undergoes many microfabrication processes, such as doping, ion implantation, etching, thin-film deposition of various materials and photolithographic patterning. Finally, the individual microcircuits are separated by wafer dicing and packaged as an integrated circuit.

4. Solar Cells

A solar cell or photovoltaic cell is an electrical device that converts the energy of light directly into electricity by the photovoltaic effect, which is a physical and chemical phenomenon. It is a form of photoelectric cell, defined as a device whose electrical characteristics, such as current, voltage or resistance, vary when exposed to light. Individual solar cell devices are often the electrical building blocks of PV modules or solar panels. The common single junction silicon solar cell can produce a maximum open-circuit voltage of approximately 0.5 to 0.6 volts.

5. PV Modules/Solar Panels

A PV module or solar panel is an assembly of photo-voltaic cells mounted in a framework for installation. Solar panels use sunlight as a source of energy and generate direct current electricity.


Components of Building a Solar Power System

More than half of the cost of building a solar power system goes into installing cables, racking and labor. Other cost components include building an inverter, PV modules, DC and AC breakers, as well as interconnection.

Source: National Renewable Energy Laboratory. The illustration shows the cost of building a solar power system. Cables and racking make up 30% of the cost, 26% goes into installation labor, 20% goes into building an inverter, 15% into PV modules and 9% goes into installing DC and AC breakers/interconnection.



Direct Current (DC) and Alternating Current (AC) Circuit Breakers

The function of a breaker is to detect when too much current (amps) is flowing through the circuit, then disconnect the circuit from the main power source to protect the wiring from overheating. During the act of disconnecting, the internal contacts separate. As they pull apart from each other, an arc will form as the current jumps across the air gap. (You may have experienced this on a smaller scale with a static electric shock.) If this arc continues to jump the air gap, the current will continue to flow through the circuit, defeating the purpose of the breaker. This arc must be extinguished. The AC and DC breakers extinguish this arc differently. This design difference is why AC and DC breakers are not interchangeable.[7] 


Aluminum or copper are the two common conductor materials used in residential and commercial solar installations. Copper has a greater conductivity than aluminum, thus it carries more current than aluminum at the same size.[8] 


Used to safely fix solar panels to various surfaces such as roofs, building facades, or the ground. The system is designed to easily be retrofitted to existing rooftops and structures.[9]

PV Modules

An assembly of photovoltaic cells mounted in a framework for installation.


One of the most important pieces of equipment in a solar energy system. It's a device that converts DC electricity, which is what a solar panel generates, to AC electricity, which the electrical grid uses.[10]   


Solar Battery Storage[11]

Solar panels collect sunlight and transform it into electricity. But they can make that energy only when the sun is shining. That’s why the ability to store solar energy for later use is important. It helps to keep the balance between electricity generation and demand. Lithium-ion batteries are one way to store this energy.

A lithium-ion battery is a type of rechargeable battery commonly used for portable electronics and electric vehicles. In the batteries, lithium ions move from the negative electrode through an electrolyte to the positive electrode during discharge, and back when charging.

Source: Office of Energy Efficiency & Renewable Energy


This illustration shows the solar-plus-storage system, which is charged by a connected solar system, such as a photovoltaic system.

Many solar-energy system owners are looking at ways to connect their system to a battery so they can use that energy at night or during a power outage. Simply put, a solar-plus-storage system is a battery system that is charged by a connected solar system, such as photovoltaic.


Clean Energy Goes Global[12] 

Many countries are expected to invest in clean energy in the coming decades to help meet their net-zero carbon emission goals.[13] 

  • Globally, over $15 trillion is expected to be invested in new power capacity (an average of $486 billion per year) between 2020-2050.
  • Solar is expected to account for 28% of all renewable energy investment globally. Over $4 trillion ($135 billion per year on average) will be invested in solar.


As over 100 countries strive to meet their net-zero carbon emission targets by 2050, many will prioritize converting or substituting dirty-energy powered utilities for clean-energy alternatives.

For example, U.S. President Joseph Biden has set a goal of zero emissions from electric utilities by 2035 and a broader goal of net-zero greenhouse gas emissions by 2050.

Approximately 50% of all U.S. carbon emissions come from utilities [see chart below], while the rest come from sectors like transportation and industries where technologies may be slower to evolve from dirty energy to clean energy (i.e., airlines still need to fly on jet fuel, not electric vehicle technology).

Global Electricity and Heat Producers: Largest Contributors to Carbon Emissions

Sources: IEA and Morgan Stanley Research, November 2020; Based on IEA data collected from countries. The illustration shows electricity and heat producers account for 51% of carbon emissions globally, while industries account for 28% of total emissions, transportation’s share is 10%, residential’s share is at 4%, other energy industries at 3%, commercial and public services at 2% and others at 2%.


However, there are expectations that worldwide electric utility power capacity will almost triple between 2019-2050 as more and more technologies adopt clean electric energy solutions and technologies.

Investment in New Power Capacity by Region, 2020-2050

Sources: BloombergNEF;; Includes investments in generation and storage capacity, 2020. This illustration shows the forecast for investments in power capacity by global regions in US dollars ($ billions).


As the total installed capacity of electric power rapidly grows, solar and other renewable energy sources will also increase their share of the global electricity generation mix from now through 2050, as shown in the chart below.

Global Electricity Generation Mix

Source: Bloomberg NEF and International Energy Agency, *New Energy Outlook 2020. This illustration shows that the global share of renewable energy is expected to increase to 69% by 2050, with solar and wind energy accounting for 56% of that figure. The share of fossil fuels is expected to decrease by 24% by 2050.


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