It’s no secret that the Inflation Reduction Act will help the US solar industry to shine, but industry players, including First Solar, have been waiting on clarification on what constitutes a ‘US-made’ solar panel. Elsewhere, demand for concentrated solar power technologies, such as that developed by Heliogen, is expected to take off.
– First Solar continues to expand its manufacturing footprint in the US.
– Concentrated solar power is growing in demand in industries that are difficult to decarbonise.
– The Invesco Solar ETF is up 24.92% in the past year.
President Biden’s moves to challenge Chinese dominance in the solar photovoltaic (PV)space have helped push the US to the brink of a clean energy boom.
According to BloombergNEF’s latest Clean Energy Market Outlook, the US renewables sector is set for “staggering” growth, and is expected to deliver 600 GW of storage through the end of the decade.
Wind power capacity is forecast to increase by 137GW, approximately doubling from its level at the end of 2022. But solar power will lead the way, adding 358GW between now and 2030, tripling its current capacity level.
The BloombergNEF report noted that “favourable economics and demand for clean power from states, utilities, corporations, households and investors” will outweigh any structural headwinds, as well as rising costs of deployments and installations.
Solar’s contribution to the US’s energy industry is expected to balloon from around 3% of current electricity supply to 40% by 2035%, then 45% by 2050, according to the US Department of Energy. It will support the electrification of the economy, providing 30% of energy for buildings, 14% of transportation energy and 8% of industrial energy.
Onshoring clean energy supply chains and boosting domestic production of PVs and other solar technologies could play a key role in achieving these targets.
First Solar expands US manufacturing
Renewable energy giant First Solar [FSLR] expanded its manufacturing footprint in the US at the end April after announcing it has agreed to supply Leeward Renewable Energy (LRE) with 2GW of thin film PV panels.
LRE CEO Jason Allen said in a statement that the partnership would fortify the US solar module supply chain as well as support the creation of new jobs.
Last week, First Solar announced that it has agreed to buy Swedish start-up Evolar AB for $38m to accelerate the development of next-generation PV technology. The fee could rise to $80m if certain milestones are met.
“We anticipate that high-efficiency tandem PV modules will define the future, speeding up decarbonisation by allowing us to convert sunlight into clean electricity more efficiently,” First Solar CEO Mark Widmar said in a statement.
Though PVs remain the most common way to harness the sun’s energy, Heliogen [HLGN] uses heliostats, “a fancy name for mirrors that track the sun”, CEO Christie Obiayatold OptoSessions. The company uses heliostats, combined with AI, to generate carbon-free steam and green hydrogen.
US-made solar panels primed for growth
The Inflation Reduction Act (IRA) is expected to stimulate domestic production of PVs on US soil in the long term, but solar installers have been awaiting guidance on what, precisely, is meant by ‘US-made’.
On this, there was good news last Friday, when the US Treasury Department clarified that subsidies will be granted to any manufacturing facility built with US-made products, even if the panels being made contain materials from China.
The First Solar share price soared 26.5% on the news. At the first quarter 2023 earnings call in late April, Widmar said that the Treasury’s decision would be a “key determining factor” in whether the company continues to invest in US manufacturing.
Heliogen CEO Obiaya told Opto Sessions that the company is “disproportionately able to capitalise on some of the clauses in the IRA” via several tax credits, including one of up to $3/kg for the production of green hydrogen.
Concentrated is the next big thing
While demand for PVs should remain high, particularly for residential and smaller buildings, demand for so-called concentrated solar power technologies, like the one Heliogen has developed, is only set to grow.
According to market research, the global concentrated solar power market was worth $4.37bn last year and is expected to grow at a CAGR of 9.20% to $8.82bn by 2030.
Heliogen’s technology is likely to be in demand from industries — among them agriculture, transportation and construction — that have historically been difficult to decarbonise.
One major advantage of Heliogen’s technology is that it enables customers to generate energy at a much lower cost than fossil fuels. This makes it an attractive alternative for industrial companies with low margins that are under pressure to reduce their emissions.
Obiaya has projected that the company’s total addressable market could eventually be as high as $800bn globally, based on what industrial companies are currently spending on powering production.
Green hydrogen will help fuel the future
Of the products Heliogen’s technology can generate, it’s possible that green hydrogen offers the most promise. In collaboration with Bloom Energy [BE], the company is using solid oxide electrolysers to split water molecules in the form of steam to isolate hydrogen.
Green hydrogen may not get as much attention as battery electric technologies, but it’s set to play a critical role in helping the global economy transition to a low-carbon future.
Global X research analysts Alec Lucas and Madeline Ruid are confident that green hydrogen will take off as corporations scale their sustainability efforts and buy into the technologies.
“We believe that this demand for corporate sustainability can help normalise green technologies and boost adoption, to the benefit of wind and solar power companies, electric vehicle producers, hydrogen fuel cell manufacturers and green hydrogen producers,” wrote Lucas and Ruid in research published in April.
Funds in focus: Global X Solar ETF
The Global X Solar ETF [RAYS] has First Solar as its top holding as of 12 May, while Heliogen is one of the smallest. The fund is weighted heavily in favour of information technology (IT; 64.3%) and industrials (22.3%) — utilities, energy, materials, financials, and consumer discretionary make up the rest of the portfolio as of 30 April.
The fund is up 7.9% in the past year through 12 May, though down 14.8% in the past six months.
The Invesco Solar ETF [TAN] also has First Solar as its top holding as of 12 May. IT(59.07%), utilities (20.53%) and industrials (15.69%) are the sectors with the highest exposure, while materials, financials and consumer discretionary each make up 2.5% or less of the portfolio.
The fund is up 16.6% in the past year, though down 12.1% in the past six months.
The ALPS Clean Energy ETF [ACES] is another fund that has First Solar as its top holding. Electric vehicles (26.58%), solar (25.12%) and wind (18.24%) comprise the majority of the portfolio. The fund is down 9.4% in the past year and down 24.8% in the past six months.