Solar ETFs: Demand Outpacing Supply for First Time Since 2006

ETF Trends

Solar sector stocks and exchange traded funds are seeing clear skies and brighter days as photovoltaic panel makers try to keep pace with rising demand.

Year-to-date, the Guggenheim Solar ETF (TAN) has gained 21.9% while the Market Vectors Solar Energy ETF (KWT) gained 12.3%. [Sun Rising or Setting on the Solar ETF?]

Solar panel installations are expected to jump 29% this year, and companies are facing the first supply shortfall since 2006, reports Ehren Goossens for Bloomberg.

The improved demand and supply fundamentals will benefit some of the largest manufacturers, such as Yingli Green Energy Holdings (YGE) and Trina Solar (NYSE; TSL). TAN has a 4.1% position in TSL and a 3.9% position in YGE. KWT includes 1.6% in YGE and 2.5% in TSL. [China Steps up to Lift Solar ETFs]

“It would be fair to say our panels are in short supply,” Tom Werner, CEO of SunPower Corp. (SPWR), said in the article.

TAN includes a 4.8% weight in SPWR and KWT has 5.2% in SunPower.

The solar industry has suffered through a two-year slump due to a global glut in supply. Consequently, the oversupply pushed down prices, causing greater competitiveness in the industry, forcing some to go bankrupt and bolstering demand.

“The cell and module glut has certainly dried up,” Stefan de Haan, a solar analyst at IHS Inc., said in the article. “There is no massive overcapacity anymore.”

The sector could install as much as 52 gigawatts this year and 61 gigawatts in 2015, compared to 40 gigawatts in 2013 and over seven times what developers demanded five years ago.

Meanwhile, the solar industry has about 70 gigawatts of production capacity, which includes older equipment that is not profitable. De Haan believes usable capacity is closer to 59 gigawatts.

Guggenheim Solar ETF

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For more information on the photovoltaic panel industry, visit our solar category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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