Season 4, Post 19: Sunshine in Munich
When your author was in Munich earlier this week, the temperature hit a high of 26 degrees Celsius. Although very warm for May, it seemed only appropriate, for he was visiting Intersolar, billed as “the world’s leading exhibition for the solar industry.” Some 1800 visitors descended on the city’s conference centre to learn about everything from solar technology to finance as well as more innovative ideas such as agri-PV (photo-voltaic, or solar) and floating PV.
Similar to the wind conference your author attended last month, there was a clear sense of urgency and heightened awareness about the role that alternative energy solutions such as solar will (have to) play in the future energy mix. Brisk business was being done at multiple vendor stands, some of which were running appointment-only meetings (a relative rarity at conferences, in your author’s experience). The main reason for such demand has, of course, been recent unfortunate developments in Ukraine. As one delegate put it to me, whereas European energy policy had previously been about balancing security of supply with environmental and economic concerns, the shift has now been to “security of supply, first, second and third.”
Europe had 165GW of installed solar capacity at the end of 2021 and pre-war forecasts had assumed that this would grow fourfold to 672GW by the end of the decade. Revised priorities and hence assumptions now imply a 50% further increase in planned installed capacity, to 1050GW by 2030 (per Solar Power Europe, an industry body). When I asked conference delegates whether such ambitions were achievable, the typical response was an inevitable ‘yes.’ In terms of why, the “unmatched versatility” of solar was highlighted, namely that it can operate from very small distributed applications through to utility-scale power plants. It can also be added either to residential rooftops or to big warehouses as well as being integrated from day-one into new builds. On key metrics such as power, reliability and efficiency the panels on display at the show demonstrated clear improvements relative to older iterations.
The sun does not, however, shine every day. The darkest cloud overhanging the industry is inflation, a response given by almost every delegate with whom I spoke. While there are well-documented supply-chain challenges in components such as silicon and steel (used in panel semiconductors and frames respectively), the additional concern is freight transportation, where costs have increased by well over 100% in the past year. The response has been multiple: more innovative pricing structures, the search for novel material replacements and an increasing emphasis on holistic energy solutions. Increasingly, new solar projects are being combined with battery storage solutions to improve over lifetime project costs. Some 60% of utility grade projects in the US now deploy this combination (per the IEA). The future certainly looks bright.
12 May 2022
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
Photos taken by author
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