In an attempt to meet its new greenhouse-emissions goal, China has planned an ambitious solar energy target, potentially brightening photovoltaic panel industry-related exchange traded funds.
Year-to-date, the Guggenheim Solar ETF (NYSEArca: TAN) is up 1.3% and Market Vectors Solar Energy ETF (NYSEArca: KWT) dipped 6.6%.
TAN includes a 21.4% weight toward Chinese solar panel makers while China is the largest country weight in KWT’s portfolio at 38.3%.
For the first time, Chinese President Xi Jinping has announced that the country will cut fossil-fuel emissions by 2030. To help meet its goals, China is expected to install as much as 8 gigawatts of small solar systems this year, or 10 times more year-over-year, Bloomberg reports.
While China has about 20 gigawatts of solar capacity as of the end of 2013, the electricity is generated on large solar farms. Now, Beijing is pushing for increased rooftop installations. [Improving Fundamentals Keep Solar ETFs Powered Up]
“Solar is actually the most attractive when you do rooftop because it eliminates transmission and distribution investment,” Ahmad Chatila, chief executive officer of SunEdison Inc. (NasdaqGS: SUNE), said in the article.
SunEdison is negotiating with a Chinese partner to build a factory to produce as much as one gigawatt of solar projects. SUNE makes up 10.0% of TAN’s underlying portfolio and is 7.4% of KWT.
With more local rooftop installations, China expects to promote wider use of solar energy and cut down costs for transmission cables. Additionally, the wider use of solar panels would help wean the country off dirtier coal-fired power more quickly.
Looking ahead, observers believe China will add as much as 8 gigawatts of distributed solar systems in 2015 out of 15 gigawatts of total photovoltaic power.
“Beijing’s solar policy of concentrating on distributed generation with ongoing tweaks to make it more effective is actually very solid in the mid- to long-term,” Charles Yonts, head of sustainable research at brokerage CLSA Asia-Pacific Markets, said in the article.
Guggenheim Solar ETF
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Max Chen contributed to this article.