Interest in renewable energy, such as wind and solar, has been growing since society has become more aware of climate change. However, the recent energy crisis in Europe has accelerated the adoption to some extent.  The rationale was that critical energy transportation links carrying gas to Europe, which they had heavily relied on, were reportedly damaged, although the incident was deemed to be apparent sabotage  (FLY, 2022). Furthermore, in response to a drop in demand and oil prices, as well as the G7’s intention to restrict prices on Russia’s oil exports, the OPEC+ Group (Organization of the Petroleum Exporting Countries) decided to cut output (Gramer, Rathi and Lu, 2022). 

Thereby, energy transitions and ESG hype start kicking in as those shortages have led to energy insecurity and high costs associated with oil. The volatility and fluctuations in cost of living has made the whole situation more apparent. All of sudden, investing in renewables becomes more attractive again as ESG emphasizes on practicing clean energy and natural resource conservation in the journey of achieving net zero. 

Sun, being associated with abundance as it shines across the globe, makes every country a potential energy producer (Johnston, 2022).  With zero-carbon features, utility-scale solar power produces between 394 and 447 MWh per acre per annum, according to the Lawrence Berkeley National Laboratory. Meanwhile, in Virginia, the primary source of electricity, natural gas, emits 679 pounds of carbon dioxide per megawatt-hour (MWh), not including other greenhouse gases (Eisenson, 2022).  Hence, an acre of solar panels producing emission-free electricity saves between 267,526 to 303,513 pounds of carbon dioxide per annum! Solar energy not only provides security and independence at the national level but also provides power that does not rely on a larger electrical grid. 

This article aims to explore the solar industry by first determining the viability of solar relative to other renewables, then breaking down its supply chain, and ultimately discussing how to capitalise on the tremendous rise of the industry through investing. 

To increase the adoption of solar energy, the government has implemented several policies meant to incentivise manufacturing players all the way to consumers. Jacobo (2022)  states that the US and India’s new policies in manufacturing could reduce around 17% share of China’s global solar manufacturing capacity by 2027.  In Malaysia, there is the Net Energy Metering Scheme (NEM) and Feed-in-Tariff (FiT), according to Seda (2022). The concept of NEM allows consumers to export any excess energy produced from solar PV back to the grid, which will be used to offset a portion of their electricity bill on a “one-on-one” offset basis.  On the other hand, a Feed-in-Tariff (FiT) is a policy designed to support the development of renewable energy sources by paying a fixed premium rate to producers for a specific duration. 

The Competitive Edge of Solar vs Other Renewables

Did you know that solar energy offsets more CO2 than forests?

Solar energy is actually very carbon-neutral, not only because it involves no combustion but also because it captures CO2 better than forests. According to the EPA, the average acre of forest in the United States captures 1,852 pounds of carbon dioxide per annum. In contrast, an acre of solar panels in Virginia offsets roughly 144 to 166 times more carbon dioxide per annum than an acre of forest. 

What about the carbon that is released when an acre of forest is removed? 

According to the EPA, the average acre of forest contains 594,000 pounds of carbon dioxide. Approximately half of that amount is captured on the ground. Even if all 594,000 metric tons of carbon dioxide were released upon conversion of a forest to a solar farm, those emissions would be offset within 2-3 years of operation.

Authority over electricity – why does Malaysia face so many blackout problems?

Electricity costs tend to be higher during the peak periods, from 8 am to 10 pm, when demand is the highest (Aziz, 2022). Solar energy can help avoid peak electricity rates as it generates electricity internally. However, wind and hydropower still rely on the grid to deliver electricity. During a blackout, solar power stands out among other renewable sources to remove worries and inconveniences, given that energy storage powered by solar is used.

Moreover, not only is solar energy cost-effective, but it can also yield a return on investment

Solar-powered homes can increase the value of the property (Brill, 2022). According to the National Renewable Energy Laboratory, the value of a home increases by $20 for every dollar that a solar panel saves on electrical bills. Additionally, homes with solar panels have a four percent higher sales margin than those without, according to Zillow.


Solar in comparison to other types of renewables

Non-solar renewables Cons of non-solar renewables How solar is better
Wind It consists of more moving parts which require larger maintenance than photovoltaic cells, the technology behind solar panels (Harrison, 2022)

Another argument against wind power is its potential  disruptiveness given the noise generated.

Solar power is known for its lack of noise.
Hydro It is more costly given the employment of large dams  (Cleanmax, n.d.).

Dams may also be more disruptive to ecosystems, given hydro plants change the natural flow of waterways, establish new lakes, and restrict water flow downstream, blocking fish migration and altering habitats.

Solar, on the other hand, can be installed without changing the surrounding environment, either on the ground or on rooftops.
Biomass While animal matter and agricultural crops create less waste than fuels or coal, there is still an element of pollutant gas being produced, such as carbon dioxide and nitrogen oxides (Energysage, 2022).

Biomass is considered highly inefficient, as it converts less than 1% of energy into electricity.

In contrast, solar can convert as much as 19% of energy into electricity  (Cleanmaz, n.d.).

Malaysia’s solar players in the supply chain

Malaysia has several solar-related companies that operate downstream in the supply chain, with the majority involved in the Engineering, Procurement, Construction & Commission (EPCC) sector. One of the most prominent companies in this sector is Greatech Technology Bhd, which provides Production Line System (PLS) services to First Solar, a leading American PV solar system manufacturer (Fire, 2021). Other well-known companies such as Semaiden, Cypark and Solarvest specialise in the installation of solar panels in Malaysia for residential, industrial, and large scale solar plants (LSS).

Policies by governments across the globe to increase the adoption of solar

Inflation Reduction Act 

The Inflation Reduction Act, a $738 billion bill passed by Congress in 2022, will not directly alleviate inflation, but it will accelerate the transition to renewable energy in the United States (David, 2023). Over half of the budget, $391 billion, will be allocated to clean energy, so why don’t they call it the Carbon Reduction Act? Jokes aside, this will prompt growth in manufacturing and production capacity in the US as well as increasing consumer awareness. 

As the US Inflation Reduction Bill is mainly targeted towards US-based renewable companies, it may disadvantage companies like Volksvagen that are based in Europe, causing geopolitical tensions. To address this issue, the EU is also planning to launch its own renewable energy bill (Zhao, 2023) to prevent European companies from shifting their production to the US. This friendly competition will accelerate the transition to renewable energy instead of sparking a Cold War. 

Downside of Solar

The generation of solar energy is limited to sunny days and interrupted during nighttime and overcast days. This can cause supply shortages, however this can be resolved as extremely sunny periods can generate excess capacity if there were low-cost ways of storing energy. As the global capacity for solar power continues to rise, industry leaders are focusing on developing adequate energy storage to deal with this problem. 

The construction and installation of large-scale solar plants may consume a significant amount of land, and clearing land for this purpose may have long-term impacts on the habitats of native flora and fauna. However, placing solar energy systems on land with agricultural value or integrating them on farms may provide a diversity of economic and environmental benefits to farmers (, 2017) . Some solar power plants may also require water for cleaning and cooling, andusing large volumes of groundwater or surface water for cleaning in some arid locations may affect the ecosystems that rely on these water resources (EIA, 2020). In addition, the concentrated sunlight created on the solar power tower can be harmful to birds and insects that fly into the beam. 

Moreover, solar technology contains many of the same hazardous materials as electronics (Johnston, 2022). The issue of disposing of hazardous waste becomes an additional challenge as solar becomes a more popular energy source. However, assuming a proper disposal solution is met, the reduced greenhouse gas emissions that solar energy offers make it an attractive substitution to fossil fuels.

Bonus – the science behind solar

The Manufacturing process

The manufacturing of most solar panels starts with Polysilicon which is the main feedstock. It is processed into ingot, wafer, cell and then finally into the solar panels we see on our rooftops. The solar panels are then installed by the local solar Engineering, Procurement, Construction & Commission (EPCC) sector companies, which we will cover below. 

Raw material comparison: Is polysilicon better than cadmium? 

Cadmium telluride is the next most popular alternative to polysilicon with a 5% market share (Steven, 2022). With at least 80% of polysilicon production having to pass through China, fears of supply chain disruption and the US-China Trade war has shifted First Solar and other US firms to cadmium telluride. Cadmium telluride materials are used to manufacture solar panels by acting as a semiconductor to convert absorbed sunlight into electricity. An advantage of Cadmium is that it is cheaper to manufacture as it requires less materials. Furthermore, Cadmium is more flexible when it comes to volatile temperature as polysilicon can overheat and heavily deteriorate their efficiency. (Maria, 2021). That being said, it all comes down to cost and efficiency. For now, Polysilicon still has an edge of 20-25% efficiency compared to 19% for Cadmium but this may change in the future. 

Geographical distribution

The world heavily relies on China for the supply of key building blocks for solar panel production. According to the International Energy Agency (IEA), China currently produces 96.8% of wafers, 85.1% of cells, 79.4% of polysilicon and 74.7% of modules. This is due to China’s cost advantage, with a 10% cheaper production cost than the next country, India, and 20% lower than the United States. Apart from strong financial incentives and manufacturing support by the government, Chinese companies benefit from significantly lower electricity costs and economies of scale, which will further enhance their position as the market leader. 

Bonus 2.0 : If you’re interested in ‘investing’ in Solar…

Is solar a worthwhile investment?

Here are some ideas on how you can benefit from the solar ‘boom’. The most convenient way to gain exposure to the solar industry is through Invesco Solar ETF (TAN) which tracks the MAC Global Solar Index. Essentially, all an ETF or exchange traded fund does is track the general movement of solar related counters.

If you wish to invest specifically in solar panels, you can invest in solar modules manufacturing companies such as First Solar or Jinko Solar. First Solar has by far the largest market cap as it is a US-based company that is due to benefit directly from the tax policies. Despite the rapid growth of the solar industry, solar stocks have not been performing well because of the intense competition that erodes the margin of solar players. According to Investopedia, the price of solar panels has fallen by 70% from 2010-2020.

At the other end of the supply chain spectrum is Daqo, which manufactures polysilicon, the main feedstock for solar panels as discussed earlier. 

A bonus stock (not a buy call) –  Enphase Energy is a niche player that manufactures solar micro-inverters and battery energy storage and has risen 82 times in 5 years!


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Researcher(s): Calvin Kwa, Calvin Lim

Reviewer(s): Muhammad Bahari, Jennifer Ley

Editor(s): Angellina Choo

Designer(s): Sonia Cheong

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