Solar industry-related exchange traded funds are seeing clearer skies ahead as solar electricity costs fall below the average electricity-bill prices across the majority of U.S. states.
Year-to-date, the Guggenheim Solar ETF (NYSEArca: TAN) has increased 7.5% and Market Vectors Solar Energy ETF (NYSEArca: KWT) dipped 2.3%
According to Deutsche Bank, solar electricity is on track to be as cheap or cheaper than the average utilities electricity-bill for 47 U.S. states in 2016, reports Tom Randall for Bloomberg.
While the projections factor in a 30% tax credit on system costs, which are set to expire in 2016, Deutsche Bank calculates that even if tax credits dip 10%, solar electricity costs will still reach parity with conventional electricity across 36 states.
As technologies improve and financing become affordable, solar photovoltaic panels are becoming more mainstream and prices will continue decline. Since the photovoltaic panels are a technology, technological advances will help increase efficiencies, which will help depress costs over time.
For instance, solar panel electricity costs have reached grid parity in 10 states that generate 90% of the U.S. solar electricity production. Deutsche Bank analyst Vishal Shaw believes that in these states, installed capacity growth is expected to jump sixfold over the next three to four years.
Shaw projects that both U.S residential and commercial markets will expand over 30% year-over-year in 2015, despite a slowdown over the third quarter this year, reports Christian Roselund for pv magazine.
DB also points out that while some companies are exploring the U.S as a potential locale for module capacity expansions, “most indicated that Asian countries were more likely sites.”
TAN and KWT both include a heavy tilt toward Asian solar companies. TAN includes a 28.4% position in China and 14.2% in Hong Kong. KWT allocates 34.7% to China and 15.5% to Taiwan.
Looking ahead, solar is expected to be the world’s largest single source of energy by 20150, according to the International Energy Agency. Currently, solar energy only accounts for just a fraction of one percent of total global electricity generation. [Solar ETFs: A Long-Term Energy Play]
Guggenheim Solar ETF
For more information on the solar panel industry, visit our solar category.
Max Chen contributed to this article.