Vous êtes sur la page 1sur 28

Equities

Solar Energy Market

Shakti PANDEY Equity Analyst Renewable Energy Sector (Intern HEC MBA 2008)

Agenda

Equities
2

Energy market fundamentals


Global energy demand Energy sources Which energy source for which need Natural sources are not infinite: the need for renewable energy sources

Solar energy
What is solar energy? How does it work? The solar foodchain Demand drivers? Supply constraints?

Solar energy and financial markets


Listed companies in the solar foodchain Multiple comparison between solar companies and tech companies

Equities
3

ENERGY MARKET FUNDAMENTALS

Global energy demand

Equities
4

Global energy demand is projected to increase by 1.6% per year over 2004 - 2030, reaching 716 exajoules

(1 exajoules = 1 x 1018 joules)

Source : IEA (International Energy Association)

Energy sources

Equities
5

Solar, wind, tidal & geothermal to increase their contribution in total energy supply from 0.51% to 1.73% over the period 2004 - 2030 Fossil fuel remains dominant with around 80% contribution. Total share of renewable slightly increases from 13.17% to 13.74%

Source : IEA (International Energy Association)

Energy sources growth, 2004-2030

Equities
6

Solar, wind, tidal & geothermal increase by 6.5% per year over 2004-2030, at much higher rate than other energy sources.

wind, tidal, geothermal

Source : IEA (International Energy Association)

Equities

World energy consumption


7

World energy consumption in end-use sectors as a whole - industry, transport, residential and services increases by 1.6% per year over 2004-2030, the same rate as primary demand Among all major end-use energy sources, power generation is projected to grow most rapidly by 2.6% per year, nearly doubling between 2004 & 2030. Almost 50% of increase in total energy demand goes to power generation

Source : IEA (International Energy Association)

Equities

Renewable in power generation, 2004-2030


8

Solar shoots up its contribution in power generation among renewable from 0.13% in 2004 to 3.06% in 2030

Source : IEA (International Energy Association)

Equities

Need for renewable sources in power generation


9

Global energy related carbon dioxide (CO2) emissions increase by 1.7% per year over 2004 - 2030. While CO2 emissions from power generation increase by 2% per year over the same period, justifying strong demand for renewable energy sources

Total CO2 emissions (million tonnes)


3.00%

CO2 em issions annual grow th by sector, 2004-2030

2030

40,421

2.00%

Pow er generation 2.00% Industry Transport 1.70% Residential 1.60% Other & services 1.20% 1.00%

1.00%

2004

26,080
0.00%

Source : IEA (International Energy Association)

Equities
10

THE SOLAR MARKET

Equities

What is solar cell?


11

Solar cells (PV cells) are designed to convert (at least a portion of) available sunlight into electrical energy. They do this without the use of chemical reactions or moving parts. They are of around 2 cm in size and numerous PV cells are put together to form PV modules, which are flexible, waterproof and durable

Equities

Solar cell, how does it work?


12

Photons (light particles) bombard the upper surface and carry their energy down through the cell They give up their energy to electrons in the lower p-type layer. The electrons jump across the barrier into the upper n-type layer and escape out into the circuit Flowing around the circuit, the electrons make the lamp light

The solar foodchain

Equities
13

Silane (gas) REC Q-Cells SolarWorld Wacker


% sales

Silicon
% sales

Wafers
% sales

Cells
% sales

Modules
% sales

Trading

Equities

The solar value chain


14

Equities

PV value chain pyramid


15

Small number of solar grade silicon suppliers at the top and a very large number of systems installers at the bottom of the pyramid. As we move up the pyramid the barriers to entry increase due to the capital requirements, technological know how and scale required to be competitive.

Source : Solarbuzz

Equities

Demand / growth drivers?


16

Rising political support - Kyoto Protocol has been the most high profile political policy for environmental improvement Rising energy demand & limited fossil energy resources with increasing prices PV conversion effeciencies and manufacturing processes will continue to improve, causing prices to gradually decrease.

Source : Research Institute for Sustainable Energy

Equities

Supply constraints / Risks ?


17

Silicon shortage continues to weigh in on the growth of solar sector. Delays in expanding silicon production will have the effect of further increasing prices for PV and therefore slowing industry growth. Sudden cut in subsidies and R&D funding can have detrimental effect to industry Consolidation by large industry players in various parts of the value chain could reduce competition and create supply risks to downstream customers. Following 2008 there is the potential that the industry has over invested in capacity. Prices would need to decline to ensure capacity is utilized resulting in a boom bust cycle similar to that experienced in the semi-conductor industry. A sharp increase in interest rates would result in investment returns from PV becoming less attractive. As the costs associated with PV installation consist predominantly of up front capital costs any upward movement of interest rates will have a detrimental effect on the industry.

Solar cell manufacturing technologies

Equities
18
Thin Film 1 Technology a-Si CdTe CIS Monocrystalline 4 Multicrystalline 5

Crystalline wafer based

Cell efficiency 2

6-7%

8-10%

10-11%

16-17%

14-15%

Area 3

15 m2

11 m2

10 m2

7 m2

8 m2

1.

constructed by depositing extremely thin layers of photovoltaic materials on a low cost backing such as glass, stainless steel or plastic %age of electrical energy that a solar cell produces in response to the total amount of solar energy falling per KWp (for modules) manufactured from a single crystal ingot PV cells made from multi crystalline silicon are less expensive to produce

2. 3. 4. 5.

Types of PV system

Equities
19

Grid-connected - connection to the local electricity network allows any excess power produced to be sold to the utility. An inverter is used to convert the DC power produced by the system to AC power for running normal electrical equipment Off-grid - the system is connected to a battery via a charge controller. This stores the electricity generated for future use and acts as the main power supply. An inverter can be used to provide AC power, enabling the use of normal electrical appliances.

(Grid-connected PV system)

(Off-grid PV system)

How a grid connected PV system works?

Equities
20

The householder / generator has two choices: to sell all the output to the local power utility (if a feed-in tariff is available) to use the solar electricity to meet demand in the house itself, and then sell any surplus to the utility

Globally installed PV cells capacity

Equities
21

Global cumulative PV capacity is projected to reach 44 GWp by 2012 Installations of PV cells and modules around the world have been growing at an average annual rate of more than 35% since 1998

Source : EPIA (European Photovoltaic Industry Association)

PV market distribution (2006 -2012)

Equities
22

Germany was market leader in 2006 with 53% of market share USA projected to become market leader in 2012 with 24% market share and at the same time most of the other countries will also increase their market share.

Source : EPIA (European Photovoltaic Industry Association)

Equities
23

SOLAR AND STOCK MARKETS

Solar companies in value chain

Equities
24

Companies
BP Solar Conergy Kyocera MELCO Motech Q-Cells REC Sharp SolarWorld SunPower Suntech

Polysilicon

Wafers

Cells

Modules

Systems

Limited capacity

PV industry profit pool

Equities
25

Despite the silicon suppliers currently exerting a large amount of control over the industry, they certainly have not been able to extract profit at the expense of other portions of the value chain The change in control is apparent with the profit pool portion attributed to the silicon, wafer and cell produces expanding significantly, primarily at the expense of the solar installers.

Source : Solarbuzz

Profit margins across value chain

Equities
26

This clearly demonstrates the market power of the silicon producers and the reduction in power across the value chain. It also clearly demonstrates how the power dynamics have shifted as silicon production has become constrained.

Source : Photon International

Solar stocks performance

Equities
27

DRKWSOLAR Price Index has been higher than DJ Euro Stoxx and DJ Euro Stoxx Technology since 2006, showing strong interests in solar stocks among investors First Solar has gained remarkable premium over its peers

1200 1000 800 600

1400 1200

1000

800

1000 800 600


600

400

400 200 0 Jan 99

400 200 0 Mar 08


200

Jul 00

Jan 02 Aug 03 Feb 05 Sep 06


DJ Euro Stoxx

0 Nov 06

Jun 07
Q-Cells Suntech P ower Sunpo wer

Jan 08
First Solar A leo So lar Solar M illennium

DRKW So lar

DJ Euro Stoxx Techno lo gy

Source : Thomson Financials

Disclaimer

Equities

Important notice: Please refer to our complete disclosure notice available on www.exane.com/compliance This research is produced by EXANE SA and / or EXANE LTD (EXANE) on behalf of themselves. EXANE SA is regulated by the "Autorit des Marchs Financiers" (AMF) and EXANE LTD is regulated by the "Financial Services Authority" (FSA). In accordance with the requirements of FSA COB 7.16.7R and associated guidances Exanes policy for managing conflicts of interest in relation to investment research" is published on Exanes web site (www.exane.com). Exane also follows the guidelines described in the code of conduct of the AFEI (Association Francaise des Entreprises d'Investissement) on "managing conflicts of interest in the field of investment research". This code of conduct is available on Exanes web site (www.exane.com). This research is solely for the private information of the recipients. All information contained in this research report has been compiled from sources believed to be reliable. However, no representation or warranty, express or implied, is made with respect to the completeness or accuracy of its contents, and it is not to be relied upon as such. Opinions contained in this research report represent Exane's current opinions on the date of the report only. Exane is not soliciting an action based upon it, and under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While Exane endeavours to update its research reports from time to time, there may be legal and/or other reasons why Exane cannot do so and, accordingly, Exane disclaims any obligation to do so. This report is provided solely for the information of professional investors who are expected to make their own investment decisions without undue reliance on this report and Exane accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report may not be reproduced, distributed or published by any recipient for any purpose. Any United States person wishing to obtain further information or to effect a transaction in any security discussed in this report should do so only through Exane Inc., which has distributed this report in the United States and, subject to the above, accepts responsibility for its contents. BNP PARIBAS has acquired an interest in VERNER INVESTISSEMENTS the parent company of EXANE. VERNER INVESTISSEMENTS is controlled by the management of EXANE. BNP PARIBASs voting rights as a shareholder of VERNER INVESTISSEMENTS will be limited to 40% of overall voting rights of VERNER INVESTISSEMENTS.

Exane BNP Paribas research is also available on the website (www.exanebnpparibas-equities.com) as well as on Bloomberg (EXAA), First Call and Reuters.