Global Research
- Energy transition
- Understand ESG

Solar solutions

By Amit Shrivastava, ESG Analyst and European Equity Strategist

21 June 2023

Article

Article

Key to decarbonising energy generation.

Decarbonising the energy sector is essential to achieving a goal of reducing emissions to net zero
Solar power, a key climate theme in the HSBC Climate Solutions Database (HCSD), power could play a key role in achieving that
Falling costs and supportive policies could spur further investment along the supply chain and be supportive for solar power generation

The energy generation sector is the largest contributor to global greenhouse gas (GHG) emissions, being responsible for 40% of global CO2 emissions in 2022. So decarbonising the sector is essential if the world is to achieve its goal of reducing emissions to net zero.

Renewables accounted for around 28% of global power generation in 2021, according to the International Energy Agency (IEA). But much more is needed, and solar power could play a key role. Indeed, the IEA estimates that to meet its net-zero scenario, solar power generation would have to increase more than seven times by 2030, compared to 2021 levels.

Increase in solar power generation needed by 2030 in the IEA's net-zero scenario

Falling costs and favourable government policies could help boost investment in solar over the coming years, in our view.

Falling costs…

The cost of solar power plant has consistently fallen over the past few years, mainly due to increases in the supply of photovoltaic (PV) solar equipment and innovations in manufacturing. In the five years to 2020, the global solar system cost has more than halved, according to Bloomberg New Energy Finance (BNEF) estimates. And there could be more to come: BNEF says global solar system costs are expected to fall further by c.43% by 2030 and c.63% by 2050 (both compared to 2020), making solar power generation significantly cheaper than fossil-fuels based power generation.

…and supportive policies…

The policy environment is also evolving quickly. PV Solar cells are the most commonly used solar power plant technology across the world, and the global supply chain is concentrated in China. The country accounts for c.79% of global polysilicon, c.97% of wafers, c.85% of cells, and 75% of modules as of 2021, as per the IEA.

the solar photovoltaic global supply chain is concentrated in China.

Other jurisdictions, however, are trying to incentivise domestic solar equipment manufacturers. Making solar equipment manufacturing more competitive outside China would likely require substantial policy support. Last year, the US introduced the Inflation Reduction Act (IRA), which aims to create incentives for renewable power producers, including solar producers. The European Union’s RePowerEU Plan includes measures on renewable energy and energy efficiency. And the Australian Renewable Energy Agency (ARENA) has announced AUD14m in funding for a private utility scale solar array manufacturer.

…could spur further investment along the supply chain

A broad range of companies are involved in the solar sector, including those which offer products and services in the following areas:

Power Generation – companies that generate and sell electricity from solar power plants
PV Solar Cells – companies that manufacture and sell solar cells, panels or modules traditionally used to generate solar power from building rooftops or solar parks
Solar Thermal – companies that offer solutions for solar thermal power plants which use sunlight to heat fluids to high temperatures, which drives traditional steam turbines or engines to generate electricity
Concentrating solar panels (CSP) – companies that offer mirrors or lenses which concentrate sunlight (solar energy) to create high temperatures to convert water into steam
Wafer – companies that manufacture and/or sell solar wafers
Other – companies that manufacture other products which form part of the solar value chain such as solar inverters, raw materials for solar cells, solar cell manufacturing equipment, precision equipment, adhesives, ingots, testing equipment, and solar glass

Would you like to know more? Click here* to read a related note drawing on the HSBC Climate Solutions Framework. This link is accessible only to subscribers to HSBC Global Research.

The HSBC Climate Solutions Framework is designed to screen and analyse companies that offer solutions to offset and overcome the effects of climate change, thus enabling the transition towards a low-carbon economy. This framework is aided by the HSBC Climate Solutions Database, our proprietary database comprising a universe of more than 3,000 global companies, identifying investment opportunities within the climate change space and covering companies with exposure to 21 climate themes.

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Disclosure appendix

The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Amit Shrivastava

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