Friday, 13 March 2015

Solar energy reaching critical mass?

During 2015, a total of 115 GW (gigawatt) of renewable power projects were started up worldwide, of which China contributed about 45 GW - an investment in renewables of US$329 billion. One GW can power about 700,00 houses and a total of 914 GW has now been installed worldwide, enough to power 640 million homes.

Solar remains the largest renewable component and after overcoming many hurdles over the past decade, the solar industry is rapidly reaching sufficient momentum to become a major element of the world's energy supply.

With technological advances and falling costs (by 75% over the past few years), solar energy, especially the roof-top solar panels, are fast becoming competitive with coal (the cheapest and dirtiest form of power generation) and could be on par in terms of cost within 18 months, according to Deutsche Bank - and it can now survive virtually without government subsidies.

Home-based solar systems are becoming the norm in new housing in the southern and western United States where there is abundant sunshine and where 600,000 homes are already fitted with solar panels. It provides homeowners not only with electricity on par with traditional carbon-based energy supplies, but it enables them to go 'off-grid', especially in countries such as South Africa which cannot meet demand and suffer from serious supply interruptions. Homeowners with solar are also able to store excess power in batteries or to sell it to the grid at a profit.

In addition, with the growing environmental movement and concern about climate change, clean and renewable solar power has no competition from all other forms of energy production, except perhaps from thermal or hydro-electricity, but even then its footprint is so much smaller than that of hydro.

All of this provides huge opportunities for investors and there are a number of investment opportunities in the form of companies with leading-edge technology and efficient cost-structures and in the funds which invest in these companies. First Solar is arguably the leader in thin-film solar panel production and provider of utility-scale PV power plants, while SunEdison develops, builds, owns and operates solar plants and manufactures solar panels and components. SolarCity finances, constructs and then leases solar-power systems (typically for 20 years) to domestic customers in the United States. Former South African, Tesla's Elon Musk, is also the chairman of SolarCity and he is aiming to use the Tesla-SolarCity partnership to jointly develop lithium-ion batteries that can be used both for the electric cars and household solar power storage. SolarCity aims to increase its customers base from about 170,000 to one million by 2018 - this will represent only a 2.5% penetration of the American domestic market, leaving an immense untapped market. For investors who want to play it safe and diversify, the Guggenheim  solar ETF called TAN provides a good spread of the top solar companies - its six top holdings are Hanergy, Sunedison, First Solar, Sunpower, SolarCity and GCL.

Johann van Rooyen (for GlobalFinancesandPolitics)