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- 1. The Investment Casefor Solar Tracking index for Guggenheim Solar ETF (NYSE ARCA: TAN) www.MACsolarindex.com
- 2. Long-Term Bullish Factorsfor Solar Sector • Room for double-digit growth for decades; world needs $4 trillion of new electricity generation through 2030; solar is only 0.4% of U.S. utility electricity generation now. • Industry has matured after shake-out; survivors are established with best technology and scale; margins are recovering; supply now better matched to demand. • Solar panel demand has persistently surprised to the upside • Solar costs are falling due to improved technology and lower system/installation costs; grid parity is being reached in a progressively larger number of markets. Lower solar cost means increased demand, bigger target market, more unit sales, more profit.
- 3. Solar – Long-termSolution for Sustainable Electricity Advantages • Clean & safe electricity solution; unlike nuclear, coal, natural gas • Distributed Generation – avoid grid and utility price increases • Scalable – small or large; residential, commercial buildings, utility. Disadvantages • Day-Use Only – but matches peak electricity usage times; add battery backup • Variable solar intensity – but still economical in northern climes • Cost – Falling fast; grid parity in growing number of areas
- 4. Solar PV andThermal could together become the world’s largest electricity source by 2050 (IEA) ▪ Solar PV and Solar Thermal Electricity (STE) could together account for 27% of global energy share by 2050 (16% for PV, 11% for STE) versus current <1%, thus becoming the world’s largest electricity source. ▪ This would prevent CO2 emissions of 6 billion tonnes per year, more than today’s U.S. energy sector emissions or world transport sector emissions. Source: International Energy Agency Technology Roadmaps for Solar Electricity (2014).
- 5. High Growth Industry:42% Annual Growth Last 5 Years
- 6. Leaders: China, Japan,U.S. Take Over From Europe
- 7. Solar Installs areDiversifying Geographically
- 8. China Solar Developments: •Strong Chinesegovernment support for solar to promote environment and to support top Chinese solar companies and jobs •Government 2014 target is 13 GW •Chinese installs driven by 14-16¢/kWh feed-in tariff (FIT) for utility solar and FIT for distributed generation. •Government has solar company rationalization program to weed out weak players.
- 9. Japan Solar Developments: •Fukushima nucleardisaster (Mar-2011) prompted aggressive government push for solar •Highest feed-in tariff in the world at 35-40 ¢/kWh •Japan on track for 10-12 GW of new solar installs in 2014 although some bottlenecks have recently emerged
- 10. Europe Solar Developments: •Germany stillhas world’s largest amount of installed solar •European solar installs have declined due to reduced subsidy support
- 11. U.S. Solar Developments: •Top PVstates: CA, AZ, NJ, NV, CO •Residential – gold rush for customers due to zero-down and favorable economics. •Solar Securitization: SolarCity sold $54 million solar-lease-backed notes in Nov 13 at 4.8% with investment grade of BBB+. •Easier financing and reduced capital costs (ABS, Yieldcos) reduces solar financing costs. Yieldcos: TerraForm Power (TERP), Abengoa Yield (ABY). •Federal ITC falls to 10% in 2017 from current 30%, leading to 2014-16 install rush to capture 5 cent LCOE advantage; but Deutsche Bank still expects 36 states at grid parity in 2017 with 10% ITC.
- 12. Solar Pricing –Polysilicon Has Stabilized Above $20/kg
- 13. Solar Pricing –Modules Have Stabilized Near 70¢/watt
- 14. Solar Cell CostsHave Dropped 99% Since 1970s
- 15. Steady Percentage SolarCell Price Decline Due to Technology Advances and Scale Manufacturing
- 16. Solar Scientific ResearchContinues at Rapid Pace to Reduce Solar Costs and Increase Efficiency
- 17. Solar Pricing Droppedby Half in Past 3 Years to 12-14¢/kWh Source: “Cost of Energy Technologies,” by World Energy Council & Bloomberg Energy Finance Cost reductions shifting to balance of system costs, e.g., inverters, hardware, install, customer acquisition and financing costs.
- 18. Many PV MarketsNow Below Grid Parity Without Subsidies Source: “2014 Outlook: Let the Second Gold Rush Begin,” Deutsche Bank Solar Industry Update, 6-Jan-2014 Plus 10 U.S. states at grid parity (with subsidies) at 11-15 ¢/kWh: AZ, CA, CT, HI, NV, NH, NJ, NM, NY, VT.
- 19. Profit Margins HaveImproved after 2012-13 Shakeout
- 20. Solar Performance –Recovering After Shakeout
- 21. MAC Solar Index- Methodology • Global solar energy index of qualified solar stocks listed on exchanges in developed countries. • Passive index of qualified solar stocks – no stock picking. • Modified market cap weighting. • Liquidity minimums to add a stock: $150 million market cap and $2 million in average daily trading value. • Exposure Factor 1.0 for pure-play solar stocks (solar revenue above 2/3); Exposure factor of 0.5 for medium-play stocks (1/3 to 2/3 solar revenue) (Abengoa Yield, China Singyes, TerraForm Global). • Quarterly index review on third Friday of March, June, Sep, Dec.
- 22. Advantages of Index/ETFOver Individual Solar Stocks • Own the global solar sector in one trade – reduced transaction costs • Long track record – 7+ year history (launched in April 2008) • Dynamic Portfolio – add solar growth stocks and drop losers • Diversification – across geography, technology, value chain
- 23. Diversification Across ValueChain Manufacturer/Project Developer First Solar SunEdison Canadian Solar Trina Solar Sunpower JinkoSolar JA Solar Holdings Shunfeng Photovoltaic China Singyes Solar Hanwha Q-Cells Installer/Project Developer Solarcity Vivent Solar SunRun Polysilicon GCL-Poly Energy Holdings REC Silicon Daqo New Energy Capital Equipment Meyer Burger Technology Solar Panel Components Xinyi Solar Holdings Inverters SMA Solar Technology Enphase Energy SolarEdge Technologies YieldCos TerraForm Power TerraForm Global Abengoa Yield 8point3 Energy Partners
- 24. Diversification Across Geography ByCompany Headquarters: • North America: 12 companies • China: 9 companies • Europe: 4 companies By Stock Listing: •North America: 18 companies •Hong Kong: 4 companies •Europe: 3 companies
- 25. For More Information •Solar Sector Research at: www.macsolarindex.com • List of solar information sources at: www.macsolarindex.com/resources