Investing in Solar

Investing in Solar

Solar Energy Investing

In the US, a new solar energy system is installed every 60 seconds (1). More efficient and more affordable than ever before, solar energy companies like First Solar (FSLR) and Enphase Energy, Inc. (ENPH) hold promise to alleviate the strain on our energy supply and limit the rise in global warming to 1.5 °C above pre-industrial levels by 2030, and hit a net-zero emissions target by 2050.

There’s been progress—but not enough, according to 2022’s UN Climate Change Conference (COP27). In order to accelerate cutting greenhouse gas (GHG) emissions in half by 2030, renewable energy will need to replace fossil fuels as humanity’s primary energy source. One sector that has made remarkable progress is that of solar energy.

Companies in the solar energy industry are constantly trying to improve the technology in order to make the best solar panels possible. With the best solar panels, comes the best, most efficient way to harness the power of the sun.

3 Ways to Generate Solar Energy

Solar energy is energy that is generated from the sun and converted into thermal or electrical energy. There are three primary ways to generate solar energy:

• Photovoltaics (like the polar panels on the roof or in an array on a satellite) directly convert sunlight into electricity by harnessing the electrical current produced when semiconducting materials are exposed to sunlight.
• Solar thermal technology absorbs heat from sunlight and uses it to warm air, water, or other materials, as for a roof-mounted solar water heater.
• Concentrated solar power uses mirrors spread over a large area to concentrate the sun’s rays to one small point in which water is heated to steam to drive a turbine. The Ivanpah Solar Power Facility between Las Vegas and Los Angeles is one of the largest of its kind in the world, and powers more than 140,000 homes in California (2).

Investing for 2030 and Beyond

In late 2022, the UN Climate Change Conference (COP27) noted that meeting the 2030 target will require investments of at least $4 trillion per year (3). Phasing down fossil fuel reliance, promoting and training in climate technology solutions, and funding the mitigation of the climate change in vulnerable countries are just some of the agreed-upon initiatives.

The good news, as governments around the world revisit and strengthen their 2030 pledges, is that this push is accelerating the transformation of energy systems into more resilient and sustainable solutions, such as solar.

Simply put, investing in solar energy is investing in the global transformation to a low-carbon future. Urgent climate action includes moving away from fossil fuels and toward renewable energy. This transition has been underway for years, and though global carbon emissions are growing at a slower pace, it has not been enough to adequately address the overall increase in global energy demand.

However, with innovations that powered cost-effective generation and a public demanding a faster transition to clean energy, solar energy is primed for growth.

Why Invest in Solar Energy?

With renewable energy actively replacing fossil fuels as the dominant global energy source, solar energy is positioned to play a critical role in meeting the energy demand (4).

In fact, global solar capacity is predicted to nearly triple between 2022 and 2027, taking over coal as the largest source of power capacity in the world (5).

Investing in Solar’s Growth

After wind, solar energy displayed the second largest growth in generation of renewable technologies globally in 2021, and solar generation capacity is predicted to triple by 2027 (6). Despite a volatile energy market buffeted by supply chain issues and sanctions against China, one of the major suppliers of polysilicon, solar energy has tremendous room for growth.

Indeed, China, India, the US, and Europe are accelerating the building of new solar capacity, fueled by heightened urgency and recent regulations, reforms, and policies aimed to combat climate change, such as China’s 14th Five-Year Plan, the REPowerEU plan, and the US Inflation Reduction Act (IRA).

The numbers look sunny: in 2021, in the US a new solar project was installed every 60 seconds, powered by $33 billion of private investment (7). More than 255,000 workers in the US were employed at 10,000 companies in every US state. California was the solar leader, but Florida and Texas recently took the largest share of the market (8).

It’s not just small-scale solar operations either—Meta (META), Walmart (WMT), Amazon (AMZN), Microsoft (MSFT), and Apple (AAPL) are all investing in solar and renewable energy.

Then in 2022, US residential solar installations and utility-scale solar installations made up 45% of all new electricity-generation capacity. The Inflation Reduction Act (IRA) boosted long-term predictions, jumpstarting component manufacturing in the US, and solar installations predicted to more than double over the next five years (9).

By 2030, more than 1 in 10 U.S. homes will be solar (10).

Investing in the Modern Solar Innovation

Solar is positioned to capitalize on the rapidly changing energy landscape because the sector has undergone incredible innovation in recent years.

• Perovskite, a synthetically manufactured material that is more efficient and cheaper to produce than the silicon in traditional solar cells, makes solar energy more cost competitive with other green energy choices, as well as ultimately more affordable.
• Pyramidal lenses could concentrate the amount of light that hits a solar cell, which would allow solar panels to be more efficient on cloudy days and in indirect light.
• Battery storage allows for round-the-clock power, adding to solar’s competitive edge.
• No more stiff, heavy solar panels—the materials of roofs, siding, and windows can also be used to generate energy.
• And even e-waste could prove to be another innovative avenue of investment, harvesting valuable materials like silicon from obsolete technologies to help build the next generation of tech.

Investors looking to the future see increased cost-competitiveness and increased efficiency of solar energy—plus the urgency of combating climate change—making solar energy a smart option.

How Can Magnifi Help You Invest in Solar Energy?

For investors interested in this rapidly growing industry, your new AI investing app, Magnifi, shows you stocks of solar energy companies advancing the latest tech to those that focus on developing solar markets. From there simply buy the stocks or ETFs that are right for you. We can even help you get started:

• Invest in Solar Energy
• Solar Energy
• Invest in Sustainable Utilities

References:

1. Solar Energy Industries Association, Solar Data Cheat Sheet, December 13, 2022, https://www.seia.org/research-resources/solar-data-cheat-sheet
2. “Ivanpah Solar Electric Generating System, California, USA,” accessed January 29, 2023, Bechtel, https://www.bechtel.com/projects/ivanpah-solar-electric-generating-system/
3. “COP27 Reaches Breakthrough Agreement on New ‘Loss and Damage’ Fund for Vulnerable Countries,” UN Climate Press Release, November 20, 2022, https://unfccc.int/news/cop27-reaches-breakthrough-agreement-on-new-loss-and-damage-fund-for-vulnerable-countries
4. “Global Energy Perspective 2022,” April 26, 2022, McKinsey & Co., https://www.mckinsey.com/industries/oil-and-gas/our-insights/global-energy-perspective-2022
5. “Renewable power’s growth is being turbocharged as countries seek to strengthen energy security,” December 6, 2022, International Energy Agency, https://www.iea.org/news/renewable-power-s-growth-is-being-turbocharged-as-countries-seek-to-strengthen-energy-security
6. “Solar,” accessed January 27, 2023, International Energy Agency, https://www.iea.org/fuels-and-technologies/solar
7. Solar Energy Industries Association, Solar Data Cheat Sheet, December 13, 2022, https://www.seia.org/research-resources/solar-data-cheat-sheet
8. “U.S. Solar Market Insight,” updated 13 December 2022, Solar Energy Industries Association, https://www.seia.org/us-solar-market-insight
9. “U.S. Solar Market Insight,” updated 13 December 2022, Solar Energy Industries Association
10. Solar Energy Industries Association, Solar Data Cheat Sheet, 13 December 2022.

Disclosures:

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The information and data are as of January 30, 2023 unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

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