The Investment Case for Solar
Tracking index for Guggenheim Solar ETF (NYSE ARCA: TAN)
Long-Term Bullish Factors for Solar Sector
• Room for double-digit growth for decades; world needs $4 trillion of new
electricity generation through 2030; solar is only 0.3% of U.S. electricity
• Industry has matured after shake-out; survivors are established with best
technology and scale; margins are recovering; supply now better matched to
• 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.
Solar – Long-term Solution for Sustainable Electricity
• 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.
• 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
Solar PV and Thermal could together become the world’s
largest electricity source by 2050 (IEA)
Solar PV and Solar Thermal Energy (STE) could together grow from current level of less than 1% to 26%
of global energy share by 2050, thus becoming the world’s largest source of electricity.
Source: International Energy Agency Technology Roadmaps for Solar Electricity (2014 Edition).
High Growth Industry: 44% Annual Growth Last 5 Years
Leaders: China, Japan, U.S. Take Over From Europe
•Strong Chinese government 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
•Government has solar company rationalization
program to weed out weak players.
•Fukushima nuclear disaster (Mar-2011)
prompted aggressive government push
•Highest feed-in tariff in the world at
•Japan on track for 10-12 GW of new solar
installs in 2014 although some bottlenecks have
•Germany still has world’s largest amount of
•European solar installs have declined due to
reduced subsidy support
•Top PV states: 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.
Solar Pricing – Polysilicon Has Stabilized Above $20/kg
Solar Pricing – Modules Have Stabilized Near 70¢/watt
Steady Percentage Solar Cell Price Decline Due
to Technology Advances and Scale Manufacturing
Solar Scientific Research Continues at Rapid Pace
to Reduce Solar Costs and Increase Efficiency
Solar Pricing Dropped by 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.
Many PV Markets Now 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.
Solar Shakeout Is Ending – Profit Margin Recovery
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) (AEIS, Abengoa Yield, China Singyes, 5N Plus).
• Quarterly index review on third Friday of March, June, Sep, Dec.
Advantages of Index/ETF Over Individual Solar Stocks
• Own the global solar sector in one trade – reduced transaction costs
• Long track record – 6+ year history (launched in April 2008)
• Dynamic Portfolio – add solar growth stocks and drop losers
• Diversification – across geography, technology, value chain
Diversification Across Value Chain
Yingli Green Energy
Hanergy Solar Group
JA Solar Holdings
China Singyes Solar
Comtec Solar Systems
GCL-Poly Energy Holdings
Daqo New Energy
Thin Film Materials
Meyer Burger Technology
Solar Panel Components
Xinyi Solar Holdings
SMA Solar Technology
Advanced Energy Industries
Diversification Across Geography
By Company Headquarters:
• China: 14 companies
• North America: 8 companies
• Europe: 5 companies
By Stock Listing:
•North America: 17 companies
•Hong Kong: 6 companies
•Europe: 4 companies
For More Information
• Solar Sector Research at:
• List of solar information sources at: