Demand for renewables generation is soaring amid the rocketing gas prices and the solar sector is looking particularly healthy.
Solar industry acquisitions are surging as solar panel installations continue to grow strongly in the US and Europe, with demand for solar electricity expanding and renewable energy investment hitting new records.
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US renewables production has reached an all-time high in the first half of the year with solar generation rising by almost 25%, while investment in the sector has hit a record high following a record 26 GW of clean energy projects coming online.
The EU industry is also starting to establish its own production lines after years of relying on imports from Asia.
“As natural gas prices have sky-rocketed, pressuring households with higher energy bills we expect this trend to continue,” commented Jane Edmondson, developer of the Solar Energy UCITS ETF.
“We have seen that supply chain constraints are leading to price increases across every solar market segment and this is the first time that solar prices have increased quarter-over-quarter and year-over-year in every market segment.”
“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. 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.”
Strong demand from the US and Europe for solar panels is also driving changes. Many of the panels installed are produced in China from CO2 and carbon intensive factories, but some Chinese manufacturers are well-placed to respond to demand with factories which run on hydropower.
Studies show at least 455GW of new solar PV capacity will need to be installed by the end of the decade to enable the world to reach net zero status by 2050.
The Solar Energy UCITS ETF, which is listed on the London Stock Exchange, Deutsche Borse Xetra and Borsa Italiana, tracks the EQM Global Solar Energy Index which delivered net returns in the past 12 months of 45.83%.
“The Solar Energy UCITS ETF ‘TANN’ provides a more focused opportunity than simply looking at clean energy and is the first pure-play exposure to the global solar energy industry and its growth prospects distinct from the wider clean energy investment universe which takes in more companies and different technologies,” said Hector McNeil, co-founder and co-chief executive at HanEtf, an independent provider of UCITS ETFs.
“It not only expands our offering in the thematic space but adds significantly to our expanding range of clean and renewable energy and ESG ETFs.”