With the Biden administration’s intention to convert the U.S. electric grid to carbon-free energy sources by 2035, companies are looking to begin trying to reshore the manufacturing that is currently dominated by China, according to the Wall Street Journal.
It’s a tall order. China dominates the solar energy supply chain, producing the vast majority of the world’s solar components and photovoltaic arrays.
The History of China’s Solar Capitalization
In the early 2000s, China began to ramp up manufacturing, backed by the government, which created an oversupply. This led to the country exporting solar panels at cheaper prices than other manufacturers could compete with.
With China’s central government stepping in to regulate with subsidies and state financing, by 2011 China held a majority of the global solar panel market, comprising 60% of global sales.
The U.S. responded with strong tariffs that have allowed the domestic solar market to begin to grow, yet China continues to dominate the industry today.
Imports of solar panels in the US still make up 85% of U.S. sales. Bloomberg reports that only 1% of solar panels are actually produced in the U.S.
“They tried harder than us,” said Sarah Ladislaw, a senior adviser at the Center for Strategic and International Studies, speaking on China’s commitment to the solar market. “China had a plan and they executed to the plan. They had policies to create supply, they had policies to create demand, and they executed on it.”
Investing in China’s Solar Market Capitalization with KGRN
China is currently the world leader in total renewable energy capacity, with 31% of the world’s capacity. By 2030, China aims to have 35% of its energy consumption be produced by renewable sources, an amount equivalent to the entire current U.S. electricity system.
That could be good news for the KraneShares MSCI China Clean Technology Index ETF (KGRN).
KGRN tracks the MSCI China IMI Environment 10/40 Index and is based on 5 clean technology themes: alternative energy, energy efficiency, green building, sustainable water, and pollution prevention.
It allows investors exposure to China’s solar power global dominance with holdings in companies such as Xinyi Solar Holdings Ltd (carried at 4.77%), Longi Green Energy-A (4.01%), and GCL-Poly Energy Holdings Ltd (2.52%).
KGRN, which has $140 million in assets under management, is up 117% over the past 12 months. It has a total annual fund operating expense of 0.79%.
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