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Solar Energy Monthly Report | October

 

Key Takeaways from our solar energy ETF monthly report

  • US renewables production reached an all-time high in the first half of the year, according to a Sun Day Campaign analysis that drew on new data from the US Energy Information Agency (EIA), with solar generation rising by almost 25%. Renewable sources of energy – solar, wind, biofuels, biomass, geothermal, hydropower – accounted for 12.91% of energy produced for electricity, transportation, heating and other uses. It also accounted for 12.71% of energy consumed. The figures come from the EIA’s latest monthly energy review with data running through to June 30 2021. Solar, currently makes up 12% of renewables in the U.S, and is expected to increase substantially this decade after the US solar sector smashed multiple records in 2020, with installations predicted to more than quadruple by 2030.  The Solar Energy Industries Association (SEIA) has called for solar to reach 30% of all US electricity generation by 2030, which it said would require the solar sector to deploy more than 700GWdc over the next decade to have nearly 850GWdc of installed capacity. [1]
  • Solar Prices Increase for the First Time in Seven Years. Supply chain constraints are leading to price increases across every solar market segment, despite the addition of 5.7 GW DC of solar capacity in Q2 2021, according to the U.S. Solar Market Insight report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie. This is the first time that solar prices have increased quarter-over-quarter and year-over-year in every market segment since Wood Mackenzie began modelling system price data in 2014. Prices increased the most for the utility-scale segment at about 6% year-over-year. Many solar developers have sufficient inventory for 2021 projects but will begin to see price increases in 2022, the report says. Despite these near-term headwinds, the solar industry accounted for 56% of all new U.S. electric capacity additions in the first half of 2021. The U.S. officially surpassed 3 million solar installations in Q2, driven by a strong recovery in the residential sector after it was hit by the COVID-19 pandemic. [2]
  • Shortages an Ongoing Concern. After many solar stocks reached 12-month highs in January 2021, stocks have been pressured as a result of the temporary polysilicon shortage and Covid-related supply chain disruptions. However, the longer-term outlook remains strong. Bullish long-term factors include strong demand for renewable energy as countries strive to meet their carbon-reduction targets set under the Paris COP21 global climate agreement and as more than 130 countries have set or are considering a target of reducing emissions to net zero by mid-century according to the United Nations, expectations for continued strong solar demand as solar has now reached unsubsidized grid parity in more than two-thirds of the world. Bearish factors for solar stocks include recent price increases and temporary supply chain disruptions, Section 201 tariffs in the U.S., which make solar panels in the U.S. about 50% more expensive than the global average. [3]
  • California Governor Newsom Signed Renewable Energy Bills outlining investments in a package that included solar, wind and electric vehicles in a $15 billion climate package. The 24 bills focused on climate and clean energy efforts, drought, and wildfire preparedness. AB 1124 focuses on solar energy systems and SB 757 was signed for solar energy system improvements and consumer protection. [4]

 

Macro Outlook

Demand for solar power continues to grow.

In the U.S. alone, the solar market has surpassed 100 gigawatts (GWdc) of installed generating capacity, doubling the size of the industry over the last 3.5 years, according to a U.S. Solar Market Insight Q2 2021 report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. However, attention is now turning to supply chain constraints, which have heightened since the latter half of 2020. A lag exists between commodity prices and subsequent solar system prices. Installers are managing current equipment shortages and having to decide whether to renegotiate contracts. The exact effects of supply chain constraints are expected to continue to manifest over the coming quarters. [5]

Despite supply chain constraints, the Solar Energy Industries Association (SEIA) calls for solar to reach 30% of US electricity generation by 2030. Reaching that level would require the solar sector to deploy more than 700GWdc over the next decade to have nearly 850GWdc of installed capacity. Having previously called for solar energy to reach 20% of generation by 2030, SEIA said the revision aligns with the Biden administration’s clean energy targets, which include an ambition for the country to have a carbon pollution-free power sector by 2035. [6]

The update follows a study published earlier this month from the US Department of Energy that suggests solar’s contribution to national power demand could rise from today’s 3% to 40% by 2035, requiring nearly 1TW of solar to be deployed, enough electricity to power all the homes in the U.S. by 2035 and employ as many as 1.5 million people in the process. While forecasts under a business-as-usual scenario would place solar at roughly 15% of electricity generation in 2030, SEIA said with bold policy action and continued private sector innovation, the 30% target “is absolutely achievable”. [7]

 

Solar Energy ETF and Index Performance (As of 30.09.2021)

 

1M

3M

6M

YTD

12M

SI

Solar Energy UCITS ETF

-6.54%

-8.74%

NA

5.52%

NA

5.52%

EQM Global Solar Energy Index

-6.48%

-8.19%

-10.33%

6.29%

45.83%

6.29%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/09/2021. 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. 

 

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