The Invesco Solar ETF (TAN) is heavily allocated to Chinese and U.S. solar companies, but investors shouldn’t overlook the importance of Europe in the solar demand equation.
The TAN ETF is based on the MAC Global Solar Energy Index. The Fund will invest at least 90% of its total assets in the securities, American depositary receipts (ADRs), and global depositary receipts (GDRs) that comprise the Index.
TAN has some leverage to soaring solar installations in Europe, and more data confirm that to be a positive trait for investors.
“Solar PV deployment in Europe is entering a new era of growth, largely fueled by a bright future for utility-scale systems,” notes IHS Markit. “In 2019, new installations in the utility-scale segment (systems larger than 5 MW) more than tripled from 2018, to 12 GW. By 2025, IHS Markit forecasts annual installations of these large PV plants in Europe to reach 34 GW. This growth is driven by a combination of EU 2030 targets and the sheer economics of generating renewable power from solar PV.”
With Solar, International Diversification Matters
TAN’s ex-U.S. exposure is a plus as a investors wait for the White House to push ahead with green energy plans. President Biden’s focus on renewable energy on the campaign trail was a primary catalyst for TAN’s stellar 2020 showing.
See also: Two Clean Energy ETFs Are Cleaning House
Year-to-date, renewable energy funds are giving back some of the 2020 gains as investors take profits while waiting for the Biden plan to become reality. That doesn’t mean solar upside from here is limited. In fact, some market observers argue TAN is down too much on a year-to-date basis. Gains in Europe may still be realized.
“In terms of technology, these new-built PV projects are following a global trend of using 1500V inverters (or even higher voltage over the coming years) and a growing penetration of string inverters,” notes Markit. “The use of tracking structures is gaining interest also in less sunny European markets where fixed systems have been the norm. Across Europe, PV system designs incorporate larger modules with increased efficiency, and we see a growing share of bifacial modules in suitable locations. The profitability of individual PV projects will depend highly on technology decisions.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
