Invesco Solar ETF (TAN) Rises Modestly As Market Prices in Solar Bill

Jun 24, 2021 05:43 PM ET
Invesco Solar ETF (TAN) Rises Modestly As Market Prices in Solar Bill
  • The Solar Energy Manufacturing for America - (SEMA) Act will boost the solar supply chain by offering tax credits through 2028. 
  • There is a supply shortage of semiconductor chips and essential metals used in the solar industry. 
  • The US reached its 100 GW milestone in 2021 as the EU's solar capacity exceeded 137 GW by the end of 2020, driven by SolarPower Europe.

Invesco Solar ETF (TAN) lost 0.57% on June 21, 2021, from the previous day's trading to close at $82.00. TAN’s share price dropped as the market took time to price in introducing the business credits in the solar bill. 

TAN’s price YTD 

TAN’s price YTD

TAN has dropped 20.20% YTD and -31.88% after rising to heights of $121.94 on February 9, 2021. It gained 0.46% on June 22, 2021, to trade at a low of $81.48 and a high of $83.26.  

The US Senate announced the Solar Energy Manufacturing for America - (SEMA) Act, which would help to boost the solar supply chain. Under the Act, Americans are assured of additional jobs in the clean energy sector and growing energy independence. In addition, it seeks to offer tax credits running through 2028 that would also help semiconductors and carbon solar companies. 

The US solar industry celebrated a milestone after reaching 100 GW in photovoltaic capacity buoyed by robust demand in the first quarter. An additional 5 GW of photovoltaic solar power capacity was introduced in Q1 2021, representing a +46% (YoY) increase from 2020. Texas took the top spot at 1.52 GW, followed by California (563 MW) and Florida (525 MW). 

However, there is a supply shortage of semiconductor chips, polysilicon, and other essential metals used in the solar industry. This shortage will likely lead to an increase in price that will raise the price of acquiring solar panels. Also, other renewable options such as wind and hydropower have dominated the market at the expense of solar energy. 

Energy Market Share in the US   

Energy Market Share in the US

Solar energy cost

Rising costs of raw materials have dented the acquisition of solar energy in the US. For example, steel prices have jumped 270% to record a high of $1,616 per ton after bottoming in August 2020. 

China’s Steel Rebar Prices  

China’s Steel Rebar Prices

China's steel per ton fell to 4,771 yuan after it had rallied to 5,975 yuan a ton on May 11, 2021, responding to global pressures. The decade leading to 2020 saw the cost of solar energy drop 80%. However, the price of galvanized steel has also jumped as well as China’s freight rates by 41%. 

Solar energy installations are on the rise, and further increases are expected with the passage of the SEMA Act. President Biden’s proposal to rid the US electric grid system of carbon by 2035 will bolster the incorporation of renewable energy in more homes. Companies like First Solar Inc. are planning to build a novel solar panel factory worth $680 million as the US takes on China's dominance.

While the US reached the 100 GW milestone in 2021, Europe had already surpassed the mark by the end of 2020. The EU’s solar capacity exceeded 137 GW into 2021, driven by SolarPower Europe. 

The US solar market may take a while to expand due to the rising costs of microchips/ semiconductors, metals, and freight charges. In addition, utility-scale generation in the US is shared predominantly by Natural gas at 40.3% and coal (19.3%). 

Technical analysis

Invesco Solar ETF (TAN) began a steady rise on May 14, 2021, after bottoming at a low of 67.59. 

Invesco Solar ETF chart

There is a steady rise in volume due to a surge in buying momentum. The 14-day RSI supports strong buying activity at 60.51, as the indicator is trending upwards and approaching the overbought zone. The ETF has moved above the 9-day EMA at 80.68 and headed towards 90.00.

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