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Solar Energy Monthly Report | August

 

Learn more about our Solar Energy ETF here. 

 

Key Takeaways

  • Solar panel installations are surging in the U.S. and Europe as developed countries seek to cut their reliance on fossil fuels. However, these regions face a conundrum as many of the solar panels installed are produced in China with energy from carbon-dioxide-belching, coal-burning plants, favouring domestic sources of production.[1]  
  • Some Chinese polysilicon producers are well-positioned to respond to Western demand for low-carbon panels, with Tongwei, the world’s largest producer, having factories that run on hydropower.[2]
  • Chinese polysilicon manufacturers increased their market share in 2020 to 77% from 66% in 2019, according to BNEF research. South Korea saw one of the biggest decreases; Korea’s global share fell from 14% in 2019 to 4% in 2020. Polysilicon prices fell to an all-time low of $6.3/kg in June 2020, before recovering to $10.6/kg by year-end 2020. (BNEF)
  • According to the latest analysis from BloombergNEF, it is now cheaper to build and operate new large-scale wind or solar plants in nearly half the world than it would be to run an existing coal or gas-fired power plant.[3]
  • At least 455GW of new solar PV capacity will need to be installed each year by the end of this decade for the world to reach net zero status by 2050 according to new analysis (BNEF).[4]
  • Demand for solar electricity is surging in the U.S and buyers have had a busy first half of the year. Collectively, utilities, corporates and retailers disclosed power purchase agreements (PPAs) for 8.8 gigawatts of solar since the comparative survey in January 2021 to support new solar build in 2022 and 2023. (BNEF)

 

Performance Review 

The EQM Global Solar Energy Index, the underlying index of our Solar Energy ETF, has delivered a positive return of 12.20% since inception (14.04.2021) as solar stocks benefit from being the lowest cost source of renewable energy. Please note that all performance figures are showing net data. 

Hong Kong listed, GCL New Energy Holdings was the top performer in July as it announced several strategic deals including its purchase of the remaining interest in a Chinese solar plant that holds 2.7 GW of solar energy generation capacity.[5]  It also joined with others to form a new $800m New Energy Fund.[6]

Japanese solar energy solution provider West Holdings was another top performer after releasing its earnings results and raising FY operating guidance.  Shares of Taiwan-based Gigasolar Materials Corp, a manufacturer of solar conductive paste, also gained in July thanks to an announced $36m electric vehicle (EV) partnership with Foxconn.[7]

The bottom index performer in July was Maxeon Solar Technologies, a Singapore-based manufacturer of renewable energy equipment, after reporting disappointing earnings results. 

 

Solar Energy Performance Table (As of 31.07.2021)

 

1M

3M

6M

YTD

12M

SI

Solar Energy UCITS ETF

-3.13%

NA

NA

12.01%

NA

12.01%

EQM Global Solar Energy Index

-3.09%

3.19%

-17.11%

12.20%

115.50%

12.20%

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. Source: Bloomberg / HANetf. Data as of 31/07/2021. Please note that all performance figures are showing net data.

 

Industry News

  • Private equity firm EQT has struck a deal to acquire US-based solar and storage developer Cypress Creek Renewables from investment firms HPS Investment Partners and Temasek.[8] Headquartered in California, Cypress Creek develops, finances, operates and owns utility-scale and distributed solar and storage facilities. With a presence in 25 US states, the company has 1.6GW of operating assets and has commercialised 11GW of projects since its inception in 2014. The partnership with Sweden-based EQT will support Cypress Creek in expanding its fleet of operating assets and scaling its operations and maintenance business. The transaction, expected to close in the second half of 2021, will see the developer acquired by the EQT Infrastructure V fund.[9]
  • Japan aims to significantly change its energy mix over the next decade, with a major boost in renewables, as the country looks to meet its long-term and interim climate commitments. According to a draft of the Ministry of Economy, Trade and Industry’s (METI) upcoming energy strategy, Japan aims to roughly double the share of renewable energy to 36%-38% of the energy mix by 2030, compared to less than 20% today. Fossil fuels will account for slightly over 40% of energy under the new plan, with LNG at 20%, coal at 19% and oil 2%. This marks a major reduction for fossil fuels from over 75% in 2019-2020, and is well below the prior strategy’s planned 56%.[10]
  • U.S. residential solar company, Sunnova Energy International, is looking to tap into the green-bond market amid a surge of homeowner demand for solar.
  • Germany installed 2.75 GW of PV in the first half of 2021.  In June alone, new PV systems totalling 430 MW were connected to the German grid.[11]

 

Constituent News

  • The EQM Global Solar Energy Index rebalanced at the end of July.  There were 3 new additions to the index, and 1 deletion on market cap threshold.
  • US-listed FTC solar, which produces solar trackers to increase energy production at solar power installations by optimizing solar panel orientation to the sun was added as core holding.
  • Hong Kong listed, Louyang Glass, a producer of flat glass used for solar panels, was another new addition to the index as a core weighting.
  • US company Shoals Technologies Group, a provider of electrical balance systems for solar energy projects, was another new addition to the index in the core category.
  • US solar energy project operator Sunworks was deleted from the index as it fell below the minimum market cap threshold of $250 million USD, in favour of other names.
  • In non-rebalance news, index holding BEEM Global, a San Diego, CA-based solar firm announced it successfully set the world record for the longest flight in a production aircraft powered by off-grid, renewable solar power, demonstrating the potential for zero emissions aviation.[12]

 

Outlook

  • Record Growth in U.S. Renewables Investment – The American Clean Power Association reveals wind, utility solar, and battery storage capacity topped 170 GW, following a year of record clean energy projects coming online in 2020. Texas leads all states with 37,443 MW of cumulative clean power capacity installed, followed by California (20,354 MW), Iowa (11,394 MW), Oklahoma (9,395 MW) and Kansas (7,058 MW).[13]
  • European Solar Industry Renaissance - After years of dependence on imports from Asia, a solar renaissance is underway in Europe. European producers are leading in new solar PV technologies, meaning that there is an opportunity to establish new production lines in the region itself that include raw material sourcing, cell production and recycling. While this would mean Europe has to invest up to 400 million euros in solar PV production, the growth perspectives for the EU market should justify these efforts, with Germany being one of the main beneficiaries.[14]
  • Solar Acquisition Spree Continues – The solar shopping spree of deals continue in abundance with private equity firm EQT acquiring U.S.-based solar company Cypress Creek Renewables.[15] UK-based Octopus Renewables purchased a portfolio of five solar projects in Ireland and another in Australia.[16] Eni inked a deal to acquire a 1.2 GW solar and wind portfolio in Spain along with Dhamma Energy’s Spanish and French renewables business. These are just a few of the many deals being driven by robust demand for renewable energy.[17]

 

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