Shares of solar and alternative energy providers received a well-deserved boost after news broke. China mulls $220 billion stimulus package to support its sluggish economy. Solar-related names posted big gains on Tuesday, led by Chinese solar makers Daqo New Energy (NYSE: DQ) +14.6% and JinkoSolar (NYSE: JKS) +13.2%, while solar tracking system provider Network Technologies (NASDAQ: ARRY) +10.3% and Canadian solar module manufacturer Canadian Solar (NASDAQ: CSIQ) +9.3% also impressed.
The other winners were Sun Power (NASDAQ: SPWR) +7.3%, Shoals Technologies Group (NASDAQ: SHLS) +7.3%, sunrun (NASDAQ: RUN) +7.2%, Sunnova Energy International (NYSE: NOVA) +7.1%, Maxeon Solar Technologies (NASDAQ: MAXN) +7.1%, First Solar (NASDAQ: FSLR) +6.8%, SolarEdge Technologies(NASDAQ:SEDG) +6.3%, Enphase Energy (NASDAQ: ENPH) +5.8%, ReneSolar (NYSE: SOL) +5.5%, and CTF Solar (NASDAQ: FTCI) +4.3%.
China is the largest solar market in the world and has aggressively developed its solar sector. In fact, the International Energy Agency (IEA) has warned that the global supply chain for solar products is at risk of becoming too dependent on China.
In a special report On the solar sector, the IEA indicates that China’s share in all stages of solar panel manufacturing currently exceeds 80%, and for key elements, including polysilicon and wafers, it is expected to reach more than 95%. in the years to come.
“The world will depend almost entirely on China for the supply of key elements for solar panel production until 2025. This level of concentration in any global supply chain would represent a considerable vulnerability.“, wrote the agency in the report.
The solar sector is also in turmoil after the United States and Canada announced a memorandum of understanding that lift tariffs on Canadian solar products,
Former US President Donald Trump imposed “Section 201” saves tariffs on imported solar panels and cells in January 2018 in an effort to protect domestic manufacturers of solar products. However, it also failed to exempt Canada and Mexico from duties, thus violating the terms of the United States-Mexico-Canada Agreement (USMCA) which eliminates most tariffs between North American partners. In February, President Joe Biden extended tariffs for another four years, but eased terms to exclude a dominant panel technology among major U.S. projects in a major concession to installers.
In February, a dispute settlement panel determined that the tariffs were “unjustified and in breach” of the trade pact. The MoU effectively settles the dispute over trade in solar products under the USMCA agreement.
According to Canadian Trade Minister Mary Ng, the United States and Canada “share objectives and commitments to combat climate change”, and that the abolition of tariffs “bring stability and predictability to our renewable energy sector and strengthen North American competitiveness.“
Canadian Prime Minister Justin Trudeau’s government has committed to net zero carbon emissions by 2050.
Unfortunately, solar stocks largely gave up on Thursday’s gains, reinforcing the thesis that this market has little appetite for growth stocks and continues to pivot heavily towards value stocks.
Indeed, this is becoming a recurring theme for the clean energy sector.
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After enduring a torrid season in 2021, renewable energy stocks continued to underperform in 2022, with the popular sector benchmark iShares Global Clean Energy ETF (NASDAQ:ICLN) down 8.9% year-to-date, versus a 22.8% gain for its fossil fuel equivalent, the SPDR Energy Select Sector Fund (NYSE: ARCAXLE).
But don’t let the anemic returns of clean energy stocks fool you: the green energy sector is healthy and enjoying robust growth.
In fact, Russia’s invasion of Ukraine lit a fire under the sector, with the IEA predicting that renewables are on track to set new records in 2022.
According to the IEA, new power generation capacity from solar, wind and other renewables is expected to hit new records this year as governments seek to leverage energy security and benefits renewable energy climate.
And it doesn’t sound like mere hype: for the first time ever, solar and wind installations in the United States are produce more electricity than the country’s nuclear power plants.
According to a US Energy Information Administration analysis by research firm SUN DAY Campaign, renewables accounted for 29.3% of all US electricity production in April, an all-time high, with solar and wind producing 18% more electricity than nuclear. During the month.
But this is not just an American phenomenon.
According to the latest IEA report Renewable Energy Market Updatelast year, a record 295 gigawatts of new renewable energy capacity was added to the global power grid, a remarkable achievement given crippling supply chain challenges, construction delays and high material prices firsts facing the industry.
Growth in renewables is expected to be even more impressive this year, with global capacity additions expected to reach 320 gigawatts, almost enough to match the European Union’s total electricity production from natural gas. Solar PV is expected to lead again, with the sector on track to account for 60% of global renewable energy growth in 2022, followed by wind and hydro. Global solar PV capacity additions are on track to break new records this year and next, with the annual market expected to reach 200 GW in 2023.
Indeed, the IEA says that the additional renewable energy capacity commissioned for 2022 and 2023 has the potential to significantly reduce the European Union’s dependence on Russian gas. Around 16% of the EU’s total electricity demand is currently met by natural gas-fired electricity generation, a significant part of which comes from Russia. Annual EU natural gas electricity generation ranges from 340 TWh to 600 TWh, with Russian gas accounting for 100 TWh to 200 TWh.
“Developments in the energy market in recent months, particularly in Europe, have once again proven the essential role of renewable energies in improving energy security, in addition to their well-established effectiveness in reducing emissions. Reducing red tape, speeding up permitting and providing the right incentives for faster deployment of renewables are some of the most important steps governments can take to address today’s energy security and energy challenges. market, while preserving the possibility of achieving our international climate objectives,said Fatih Birol, Executive Director of the IEA.
To achieve its goal of accelerated clean energy adoption, the bloc will begin allowing certain renewable energy projects to receive permits within one year. The European Commission will also propose rules obliging countries to designate land or sea “destination areas” suitable for renewable energy.
By Alex Kimani for Oilprice.com
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