Investment case for solar energy stocks

1. The Investment Case for Solar
Tracking index for Invesco Solar ETF (NYSE ARCA: TAN)*
www.MACsolarindex.com

2. Long-term bullish factors for solar sector
• Impressive growth potential -- Solar has impressive growth potential with forecasts
for $4.2 trillion of solar spending through 2050, with solar representing 28% of all new
global electricity generation installs (Source: Bloomberg New Energy Finance). Solar
PV will generate 38% of all electricity globally by 2050, up from 11% today (BNEF).
• Low-cost electricity solution – Solar’s levelized electricity cost has already plunged
by 85% since 2010 (Lazard) due to dramatic technology advances and economies of
scale. Solar’s cost will plunge by another 71% by 2050 (BNEF). New solar plants have
already become significantly cheaper to build than new coal, nuclear, or natural gas
plants and solar is cheaper than coal on a marginal-cost basis (Lazard).
• Government support is only icing on the cake -- Solar has become a self-sustaining
industry due to sharply lower solar costs and no longer needs government subsidies,
although the industry still benefits from strong policy support across the globe.
• Solar-plus-storage provides robust 24/7 energy solution -- Solar-plus-storage
systems provide a 24/7 source of electricity and solve solar’s intermittency problem.
Solar-plus-storage systems are already cost competitive and will become even more so
as battery costs plunge by another 50% through 2030 (BNEF).
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3. Solar – Long-term solution for sustainable electricity
Advantages
• Clean & Safe - Solar is a clean & safe electricity solution; unlike nuclear, coal, natural gas.
• Cost certainty - Solar has a fixed up-front electricity-generation cost with no fuel cost risk, unlike
coal and natural gas where generation costs depend on unknown future fuel costs.
• Falling costs - Solar costs are falling steadily due to technology improvements and manufacturing
scale. Also, solar has a near-zero marginal cost once installed, unlike high marginal fuel
operating costs for coal and natural gas.
• Distributed Generation - Solar insulates electricity users from grid failures and protects against
future utility electricity price increases.
• Scalable - Solar can be large scale (utility) or smaller scale (residential, commercial buildings).
Disadvantages
• Day-Use Only – but matches peak electricity usage times and can be paired with battery storage.
• Variable solar intensity – but still economical in northern climes. 2

4. Greenhouse gas emissions are clearly driving global
warming
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Source: Fourth National Climate Assessment (p 79)

5. U.S. Climate Change Indicators
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Source: Fourth National Climate Assessment (p 38)

6. Current fossil-fuel-based energy system is massively
inefficient with two-thirds of energy wasted by heat loss
• Burning fossil fuels
wastes two-thirds of
potential energy to
heat loss
• Solar and wind, by
contrast, deliver 100%
of electricity
generated with no
heat loss and no
pollution or CO2
emissions, producing
a cleaner and much
more efficient world
energy system
For details, see “Universal Energy” by Benham at
www.dollarsperbbl.com/2018/07/22/universal-energy/
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7. High Growth Industry: 21% Annual Solar Growth Last 5 Years
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• Global solar installations have
grown sharply by an average 21%
over the last 5 years
• Pandemic caused only minor
disruptions, with 21% solar growth
in 2020
• For 2021, BNEF is forecasting 29%
solar growth to 185 GW

8. Leaders: China, India, U.S., Japan
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9. China leads by far on cumulative solar capacity
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10. Solar the largest source of electricity by 2032 with long-
term annual growth of 12%
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• IEA says solar will become
the “king of electricity,” with
the more cumulative capacity
than any other power
generation technology
• Double-digit annual growth
of 12% during 2019-2020.
(IEA Sustainable
Development Scenario)
Source:International Energy Agency (IEA)
World Energy Outlook 2020

11. Solar sees rapid growth as total global electricity demand
doubles by 2040
• Global electricity demand
doubles by 2040 to satisfy
larger global population and
electrification of transportation
• Doubling of electricity demand
drives even stronger solar
growth
(IEA Sustainable
Development Scenario)
Source:International Energy Agency (IEA)
World Energy Outlook 2020
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12. Climate change can be mitigated if zero-carbon power
generation rises to 78% of total generation by 2040
• IEA says UN sustainable
development goals can be met,
with net-zero emissions by 2070
and maximum 1.65oC temp rise if
renewable and nuclear electricity
rises to 78% of total by 2040
(Sustainable Development
Scenario)
Source:International Energy Agency (IEA)
World Energy Outlook 2020
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• Energy system changes
(electrification-plus-hydrogen):
▪ Zero-emission electricity
generation
▪ Electrify transportation
▪ Hydrogen for high-temp
industry needs
▪ Phase out fossil fuels

13. Solar shows double-digit annual growth over next 10 years
in all three IEA scenarios
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• Stated Policies Scenario (STEPS) –
current policy ambitions and targets
are met
• Sustainable Development Scenario
(SDS) – achieves UN sustainable
development goals; net-zero
emissions by 2070; limit temp rise
to 1.65oC
• Net Zero by 2050 Case (NZE2050) –
achieves net zero emissions by
2050; limit temp rise to 1.5oC
Source: International Energy Agency (2020), World Energy
Outlook 2020, IEA, Paris, Figure 4.8, p. 133

14. Solar cell costs have plummeted by 99% since 1970s
Solar costs have
plummeted due to:
• Technology innovation
• Manufacturing
economies of scale
Solar is a high-tech
product that follows a
technology learning curve
-- costs fall sharply as
production rises
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15. Solar is a high-technology product where costs will
continue to fall due to the technology learning curve
Solar cell and module costs
follow a technology learning
curve similar to that of other
technology products such as
semiconductor chips, DRAM
circuits, etc.
Solar PV learning curve is
known as “Swanson’s Law” and
follows the more general
“Wright’s Law”
Law states that solar module
prices fall 20% for every
doubling of cumulative shipped
volume (double log scale)
Chart source:
https://en.wikipedia.org/wiki/Swanson%27s_law#/med
ia/File:Solar-pv-prices-vs-cumulative-capacity.png
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16. Extensive solar scientific research increases
cell efficiency and reduces solar costs
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17. Solar electricity costs have dropped dramatically
by -85% since 2010
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▪ Levelized cost of electricity
(LCOE) of utility-scale solar
PV plants has plunged by
85% since 2010 and by an
average of -11% per year over
last 5 years.
▪ Solar PV will continue getting
cheaper in coming years,
making it an even more
formidable competitor
against other electricity
sources.

18. New Utility-Scale Solar PV plants are already
cheaper to build on average than nuclear and fossil fuel plants
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▪ Utility-Scale Solar PV plants
in the U.S. are now cheaper
to build than any other
technology (unsubsidized
basis)
▪ Solar PV is winning as the
cheapest electricity source,
even aside from climate
change tailwinds
▪ Solar is potentially the most
attractive sub-sector within
the clean energy revolution

19. Utility-Scale Solar LCOE ranges beat or match fossil fuels and
nuclear
U.S. Levelized Cost of Electricity (unsubsidized) – Lazard LCOE 14.0, Nov 2020
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20. Solar Pricing – Polysilicon has rebounded
from record low due to temporary factory closures
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• Polysilicon prices have
dropped sharply in the past
decade, reducing the cost of
the main material input for
solar cells
• Polysilicon prices in the past
year have recently shown a
temporary increase due to
disruptions at several large
polysilicon plants from fires
and flooding.

21. Solar Pricing – Module prices down -87% since 2010
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• Solar module prices have
plunged by -87% since 2010
• Solar module prices have
fallen due to technology
learning curve and
manufacturing economies of
scale
• Decline in solar module prices
expected to continue in
coming years

22. Solar-plus-storage is taking off as a 24/7 solution
• Energy storage expected to
surge in coming years and aid
solar in becoming a 24/7
electricity generation system.
• Storage expected to surge 122x
and 24% CAGR through 2040
with $662 billion of sales
(BNEF).
• Battery costs expected to drop
by another 50% through 2030,
adding to 85% drop 2010-18.
• BP-backed Lightsource says all
of its utility-solar proposals in
western U.S. now include
battery storage.
• U.S. Solar-plus-storage at 5.8
GW installed now, with 28 GW
pipeline (4x). 21

23. Renewable energy plus storage is the world’s long-term future;
Technology ultimately wins against burning fossil fuels
• Burning fossil fuels needs to be
phased out to preserve
sustainable human habitation on
earth
• Renewables plus storage
provide the long-term solution
• Technology learning curves for
renewables and storage will
continue to drive costs lower to
easily provide the lowest-cost
electricity
• Technology ultimately wins
against burning fossil fuels
• Solar and storage are only in the
second or third inning, with
decades of strong growth
Technology road-map to
2050 by International
Renewable Energy Agency:
• Renewable share to
increase to 85% from 24%
• Solar PV grows by 32x
from 2015 to 7,122 GW
• CO2 emissions drop by
85%
• Spending of $24.6 trillion
on power generation and
$18 trillion on storage and
grid
Source: IRENA Global Energy
Transformation: A Roadmap to 2050 22

24. MAC Global Solar Energy Stock Index - Methodology
Index Governance
• S&P is the benchmark administrator of the MAC Solar Index under
EU regulations
• 5-Member S&P Index Committee governs the MAC Solar Index
• S&P conducts quarterly index reviews and makes all decisions regarding index
constituents, weights, corporate actions, etc, as specified by EU BA regulations
Methodology key items:
• 100% rules-based passive index – no stock picking . Constituent stocks must be listed
on primary exchanges in specified markets (S&P Developed Markets plus Taiwan).
Quarterly index review on third Friday of March, June, Sep, Dec. Liquidity minimums to
add a stock: $250 million market cap and $750,000 in 3-month average daily trading
value.
• Index has 13-year history with inception on 31-Mar-2008
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25. Methodology – Solar Focus & Environmental Exclusions
Solar sector focus
• “80% Solar Investment Policy” – At least 80% of the weight of the index is required to
be in stocks with over 50% solar revenue (currently at 91%)
• No stocks below 1/3 solar revenue
• Exposure Score 1.0 for pure-play solar stocks (solar revenue above 2/3); Exposure
Score of 0.5 for medium-play stocks (1/3 to 2/3 solar revenue) reduces stock’s weight in
the index
Environmental exclusions – Stocks are excluded from the Index if S&P Trucost data
shows the company has any involvement with:
(1) fossil fuel extraction, or (2) electricity generation with coal, oil, or nuclear
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See MAC Solar Index methodology at https://www.spglobal.com/spdji/en/custom-
indices/mac-indexing-llc/mac-global-solar-energy-index-net-total-return/#overview

26. Methodology – Index Weighting
Modified Market Cap Weighting:
• Index weights are assigned quarterly at index rebalance by calculating the regular
market-cap weighting and then using a weighting-gap process to pull weights together
proportionally until stocks with a weight over 4.5% do not exceed a total of 45%.
• Result is that weights are as close to regular market-cap weighting as possible while
still meeting RIC index diversification requirements (combined weight of stocks over
5% cannot exceed 50%)
• Also, weight is capped at 10% for individual stocks at rebalance, although weight can
drift above 10% post-rebalance due to stock rally
• Weighting methodology promotes investability of smaller stocks in the Index
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See current MAC Solar Index constituent weights at www.macsolarindex.com/stocks-in-the-index/

27. Advantages of Index/ETF Over Individual Solar Stocks
• Diversification – across geography, technology, value chain
• Own the global solar sector in one trade – reduced transaction
costs
• Long track record – 13+ year history (launched in April 2008)
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28. Index Diversification Across Geography
By Company Headquarters:
• Asia: 20 companies
• EMEA: 14 companies
• North America: 12 companies
By Stock Listing:
•North America: 18 companies
•Asia: 15 companies
•EMEA: 13 companies
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As of June 2021

29. Index Diversification Across Solar Industry Value Chain
Solar Manufacturing & Integrated
• First Solar Inc (FSLR US)
• Hanwha Solutions (009830 KS)
• Sunpower (SPWR US)
• Canadian Solar (CSIQ US)
• JinkoSolar (JKS US)
• United Renewable Energy (3576 TT)
• Meyer Burger (MBTN SW)
• TSEC Corp (6443 TT)
• Motech Industries (6422 TT)
• Maxeon Solar Technologies (MAXN US)
• Giga Solar Materials (3691 TT)
• Anji Technology (6477 TT)
Solar Polysilicon/Wafer Manufacturers
• Daqo New Energy (DQ US)
• GCL-Poly Energy Holdings (3800 HK)
Solar Panel Glass Manufacturers
• Xinyi Solar Holdings (968 HK)
• Flat Glass Group (6865 HK)
• Luoyang Glass (1108 HK)
Solar Power DC-AC Electrical Inverters
• Enphase Energy (ENPH US)
• SolarEdge Technologies (SEDG US)
• SMA Solar Technology (S92 GY)
Solar Panel Support Structures/Trackers
• Array Technologies (ARRY US)
• Shoals Technology (SHLS US)
• Soltec Power Holdings (SOL SM)
Residential Solar Power Installers
• SunRun (RUN US)
• Sunnova Energy Intl (NOVA US)
Solar-Powered Charging Stations
• Beam Global (BEEM US)
Solar Project Finance
• Hannon Armstrong Sustainable
Infrastructure (HASI US)
Solar Power Project Developers/Operators
• Scatec Solar (SSO NO)
• Atlantica Sustainable Infrastructure (AY US)
• Encavis (CAP GR)
• Solaria Energia (SLR SM)
• Xinyi Energy (3868 HK)
• Neoen SA (NEOEN FP)
• Enlight Renewable Energy (ENLT IT)
• Renova Inc (9519 JT)
• Azure Power (AZRE US)
• Energix-Renewable Energies (ENRG IT)
• West Holdings (1407 JT)
• Solarpack Corp Tecnologica (SPK SM)
• Beijing Enterprises Clean Energy (1250 HK)
• Doral Group Renewable Energy (DORL IT)
• O.Y. Nofar Energy (NOFR IT)
• ReneSola (SOL US)
• Grenergy Renovables (GRE SM)
• GCL New Energy Holdings (451 HK)
• Sunworks (SUNW US)
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As of July 2021

30. For More Information
• Download solar sector research reports
at:
www.macsolarindex.com/solar-research/
• List of solar information sources at:
www.macsolarindex.com/resources/
*The MAC Global Solar Energy Index (SUNIDX) is licensed as the tracking index for the Invesco Solar ETF (NYSE ARCA: TAN). Index performance does not
reflect transaction costs, fees or expenses of TAN. This material is provided solely by MAC Global Solar Energy Index, not by Invesco which bears no
responsibility for the content or use of this material. Copyright. All rights reserved. MAC Solar Index. www.macsolarindex.com. The information contained herein
is not guaranteed as to its accuracy or completeness. No express or implied warranties nor guarantees are made. No responsibility is assumed for the use of this
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and derivatives trading may not be suitable for all recipients of this information. Please consult with your investment advisor before investing.
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