Industry Deep Dive: Solar – The world’s cheapest renewable energy

HOSTS Alec Renehan & Bryce Leske|25 October, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Today, we’re going to discuss the energy transition and the investment opportunity of decarbonisation, with a focus on the solar industry.

This episode is proudly sponsored by Instyle Solar, one of the largest solar companies in Australia, and a Clean Energy Council-approved retailer. Not only is solar a clean energy solution, but there are plenty of financial benefits as well, some of which we’ll touch on later in this episode. So, own, don’t rent your power. Instyle Solar are offering the Equity Mates community 10% off a new solar system.

This episode is proudly sponsored by Instyle Solar, one of the largest solar companies in Australia, and a Clean Energy Council approved retailer. Not only is solar a clean energy solution, but there are plenty of financial benefits as well, some of which we’ll touch on later in this episode. So, own, don’t rent your power.

Instyle solar are offering the Equity Mates community 10% off a new solar system. Book a personalised solar consultation with Instyle Solar’s experts to start

If you want to let Alec or Bryce know what you think of an episode, write to them here

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Bryce: [00:00:12] And welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How are you going? 

Alec: [00:00:30] I'm good, Bryce. Great to be with you again. 

Bryce: [00:00:32] Yes, it is great to be with you today. 

Alec: [00:00:34] I should say excited for this episode. 

Bryce: [00:00:38] Yes, Ren excited for this episode. We are back doing an industry, a deep dive. We haven't done one in a while, but there's a lot of industries to cover, so we thought we'd crack into one. And this Deep Dive, we're going to be looking at the solar industry, which we know is pretty important given what's going on at the moment with climate change. And but we have the perfect partner to support this episode as well. This episode is proudly supported by Ins

tyle Solar, one of the largest solar companies in Australia, and the Clean Energy Council approved retailer Not Only Solar, a clean energy solution, but there are plenty of financial benefits as well, some of which we'll touch on later in this episode. So why not own your power? Don't Ren to install solar, offering the Equity Mates community 10 percent off a new solar system. So book a personalised solar consultation with Instyle Solar's experts to start head to install solar dot com slash mates that's in style solar dot com slash rates, or put this link in the show notes, but Ren plenty to chat about when it comes to solar. There's a lot going on in the news at the moment. We've spoken a 

Alec: [00:01:42] little bit about the renewable energy transition and why it's so important. I think our most downloaded episode this year, just with the two of us at least, was titled Can Australia become the Saudi Arabia of Renewables? And we've done two episodes on hydrogen this year because we're so excited about it, and there's plenty of reason to be excited. The best investing opportunities come in this like big societal disruptions, and the one that is sticks in our mind is the internet, and we've seen just how big the change was. You know, there were so many companies that were destroyed in some ways, but so many that have emerged and were undergoing another massive societal disruption driven by new technology driven by climate change, obviously enabled by a lot of government policy. And as investors, there's a real opportunity there. And we've spoken about hydrogen a lot. There's a lot of excitement. Obviously, lithium is just so hot in Australia because of batteries that both hydrogen and batteries storage. We haven't really talked about generation know how we actually create electricity, but the old school world of coal, oil and gas isn't. How we're going to create hydrogen isn't how we're going to create electricity to store in batteries. So let's take a step back in the supply chain or the, you know, the production chain, and let's talk about how we're actually going to generate the thing. 

Bryce: [00:03:08] That's it. And look, we have a it's a it's a huge transition going on at the moment with this generation of electricity, and it's it's a massive opportunity which we're going to touch on now. It's, you know, solar huge opportunity. And we should probably start with a bit of a history lesson Ren because the dynamic is changing the way in which we traditionally generated electric electricity is quickly changing. 

Alec: [00:03:32] Well, quickly and not so quickly. So let's let's put some numbers. Let's put some numbers to it because I think that frames where we were, where we are and also how much of this change is still to come. These numbers that I'm about to talk about include oil. You'll see a lot of numbers talking about renewable generation for electricity generation, and they'll exclude oil. Because oil is not generally used to create electricity, it's used to power cars. But I think when we're talking about energy transition, we're going to have to start talking about oil as well, because where we want to get to is everything being electrified, cars being electrified and stuff like that. So in terms of an apples to apples transition, you have to include oil as well because solar, wind, hydro, nuclear, whatever it is, is eventually going to have to replace oil as well. Yeah. So let's put some numbers to it. Let's start with the world globally. In 1980, zero percent of the world's electricity was generated from solar and wind and 80 percent from coal, oil and gas. 1990 zero point zero one percent. So we're on the board of coal, oil and gas. Still 78 percent 2000 solar and wind zero point zero seven percent coal, oil and gas 78 percent. So that's that held steady. And the remainder is a mix of nuclear, hydro and biomass like a bunch of other stuff. Twenty ten solar and wind zero point six five percent of the world's energy, coal, oil and gas tik-tok. Up 81 percent interesting. Not going anywhere. 2019, where this started, goes to solar and wind three point seven percent The big jump. Big Jump. Coal, oil and gas. 79 percent. Pretty flat. Very flat. All of this data that I'm going to talk in this section, you can see the websites our world in data dot org slash energy mix. If you want to go directly to the cracking website, a lot of lot of really interesting data on on this stuff. So that's a global scale. Yeah. So the global scale solar and wind on the board, hydro and nuclear are on the board as well, that coal, oil and gas is still just such a big. Unmoveable chunk of where the world's getting electricity from, but I think what we can say is that the last decade has really been a decade of acceleration. So in 2010, in Australia, if we start at home, solar and wind was one percent coal, oil and gas 95 percent. Okay. I mean, not that surprising. Yeah. 2019 solar and wind 5.2 percent Coal, oil and gas 91 percent. So it's shifted. But again, like such a dramatic shift in how the world is thinking about electricity generation hasn't really translated to the numbers yet. And I think for us, that's why it's such an exciting opportunity because it's early days. If you go to the state's 2019 solar and wind, 3.8 percent three point nine percent coal, oil and gas 83 percent. So it's still a massive chunk. Yeah, I had a look at some other countries India. Yeah, here we go. Solar and wind two point nine percent coal, oil and gas 91 percent. 

Bryce: [00:06:58] I mean, as a proportion of what was the state's three point three percent. So 87. So yeah, 

Alec: [00:07:03] OK. China solar and wind just under four percent. Coal, oil and gas. 85 percent. But here's an interesting thing about China. I think the world's biggest emitter, but the last decade they have moved the needle. So solar and wind now just under four percent. Ten, zero point four or five percent? Oh wow. So they've moved. And then coal, oil and gas in 2010 was ninety two percent. Now it's eighty five percent. So there is a transition underway there. The UK was pretty impressive. Solar and wind almost nine percent. Coal, oil and gas. Seventy nine percent. But interesting, the U.K., where they really, you know, the U.K. kicked off the industrial revolution and the coal mining industry. And, you know, for 200 years, it was really the U.K. that led us into to coal. Yeah, they in 1980, coal was thirty five percent of the energy mix. Twenty nine point three percent. Oh, wow. 

Bryce: [00:08:04] Yeah, OK. So they have moved the needle. 

Alec: [00:08:06] They've moved the. Europe has moved on. 

Bryce: [00:08:08] Yeah, I feel like that's where the global leaders are. 

Alec: [00:08:11] Yeah. If you jump into our world in data, you can filter by country and no surprising some of the best countries in the world the Nordics, Iceland particularly impressive. New Zealand also particularly impressive hallmark of those countries. Don't have a guess. 

Bryce: [00:08:30] Um, that cold, 

Alec: [00:08:33] you're not, I can. Yeah, no, no. I mean, wind is a big part. 

Bryce: [00:08:41] Yeah, I'm going. Temperature for some reason, 

Alec: [00:08:43] not quite closely related to temperature water. Yeah, massive share of electricity generation comes from hydro. Yeah, right. Yeah. So, you know, Malcolm maybe had his head in the right place where he was doing Pump Hydro and Snowy 2.0. So I think for me that data frames where we are. Think of all of the headlines about the energy transition. We need to make all the commitments that governments are making, all the action and new companies that is springing up in response to this challenge. And we have barely started moving the needle globally. Obviously, if you go country by country, NATO's and moving at different rates and are at different points. But that's the context in which this discussion takes place and in which where we are in the transition. 

Bryce: [00:09:33] So there are a couple of factors that are pushing this transition. Ren we've obviously the first one being climate change. We know that, yeah, it doesn't need to be spoken about too much. 

Alec: [00:09:43] The second Bryce was a climate denier for years, but not sure. 

Bryce: [00:09:49] And then obviously, government policy is now starting to take a pretty significant part of this transition. Yeah, there's a lot of commitments being made by governments around the world for, you know, hitting zero emissions 

Alec: [00:10:01] would love to say Australia would love to see 

Bryce: [00:10:03] Australia make a commitment to 

Alec: [00:10:05] get it right through the commitments in a second. And you'll see how out of step Australia is, 

Bryce: [00:10:10] but also the cost of renewables, particularly solar as well, has decreased dramatically over this period of time. And we know when that happens, it just becomes easier for other businesses to adopt and make investments, and it's sort of a flow on effect from that. Yeah, this 

Alec: [00:10:24] is most pronounced in solar. It's pretty unbelievable. What's happened? The cost of solar has decreased 80 percent in the last 20 years. 

Bryce: [00:10:32] I mean, yeah, that's incredibly significant. 

Alec: [00:10:35] Yeah. And have you heard of Moore's law when it comes to computing? Yeah. The number of transistors on a semiconductor doubles every two years. Computing power doubles every 18 months or something like that. Yeah, there's Lawson's law in the solar space. Snow Swanson's Oh sure, it's a slow 

Bryce: [00:10:51] sims in solar. Swanson's all in solar. 

Alec: [00:10:57] Yeah, in the solar space. Yeah. The price of a solar photovoltaic module decreases by about 20 percent for every doubling in global solar capacity. So it's already fallen 80 percent in the last 20 years. If Swanson's law holds, it will mean that as more and more solar rolls out. Yeah, it'll continue. The price will continue to come down on that curve, which should then have a sort of self-reinforcing cycle that more projects can be justified. You know, there'll be enough paybacks, so then they'll get built and then that will reduce the cost further. And then that will open up a whole lot more projects as costs come down. So we should hopefully say this will play out and we should say a lot more. A lot more projects get up purely on an economic basis rather than the climate basis, 

Bryce: [00:11:48] and we'll touch on that 

Alec: [00:11:49] and that, yeah, that's going to be a real thing. That's sort of where we've come from, some of the forces driving it. But let's talk about the industry today. Mm-Hmm. 

Bryce: [00:11:58] Well, we know we've just seen that there's a big transition is taking place still early days, but renewables are now obviously becoming an increasingly larger part of the world's energy mix here in Australia. In 2019, renewables renewables was about 21 per cent, excluding 

Alec: [00:12:13] oil, 

Bryce: [00:12:14] excluding oil. But in 2021, it's up to about twenty four per cent. Yeah. And solar is the largest contributor to our generation renewable generation. Here in Australia, it's about nine per cent of total generation, up from two per cent in 2019, 

Alec: [00:12:30] up from seven percent sorry, seven percent

Bryce: [00:12:32] in 2019, and a pretty surprising start. Ren When you hit me up with this in the offices that one in four Australian homes have solar, which is the highest uptake in the world. Yeah, I find that incredible. 

Alec: [00:12:45] Do you? Yeah. 

Bryce: [00:12:47] If you look at my place in Wagga, you look out across the rooves and I'm not saying when's 

Alec: [00:12:50] the last time you were together? 

Bryce: [00:12:52] I'm not sure. I mean,

Alec: [00:12:53] I reckon it's like eight months. 

Bryce: [00:12:55] Yeah, I mean, we have solar, but look at across Sydney, well, you [00:12:59][4.1]

Alec: [00:12:59] know, looking very hard. If your house has solar, just look at your own risk. 

Bryce: [00:13:04] That's what I mean. I don't think I think we're one in 50 houses that I look at. 

Alec: [00:13:08] If you're in Wagga and you got solar panels, Bryce Equity Mates dot com, send him a photo. He obviously isn't looking very hot. 

Bryce: [00:13:15] A quarter of Australians have solar. I do find that. I find that surprising. I think 

Alec: [00:13:18] we'll take it up with the Clean Energy Council because they're the ones that told me 

Bryce: [00:13:22] I should say that. I think it's great 

Alec: [00:13:25] for Sam Bryce. Much like News Corp has become a light glove to the whole. We need to act on climate change and 

Bryce: [00:13:34] I think it's great. A quarter of Australian households have solar, according to. These stats great, say, 50 percent. Hmm. If we continue with where we're at today, Ren, we've obviously spoken about fossil fuels still providing the major backbone to our electricity grid. Coal was 54 percent of total generation in 2020. Here in Australia, outside oil, outside oil, 54 

Alec: [00:13:58] percent if we exclude oil. 

Bryce: [00:13:59] Yeah, yeah. The global commitments show that we're only moving in really one direction and that is towards renewables. America, Biden. He's come out to say that they want 100 percent carbon free electricity by 2035. Yeah, pretty significant. UK want net zero by 2050. Same with South Korea carbon neutral by 2050. Similar to Japan 2050, China have gone carbon neutral by 2060, and Australia have come in soft, with the 26 to 28 per cent reduction from 2005 levels by 2030. So they haven't really stepped it up and matched what other countries around the world have said that they're going to be doing. I hope that is going to change later on this year, as when what's his name is kind of goes to Glasgow. Yeah, but it doesn't seem that that's where he's putting his stake in the ground at the moment. 

Alec: [00:14:57] It will change. You would hope so. No, it will. He'll have to because like the EU are trying to figure out how to do basically like a carbon tax on export, Australian exports that go to Europe and, you know, basically charge us because we don't put a price on carbon. So that will hurt Australian exporters. And then, you know, the US is going to put a lot of pressure on us and it'll happen. Yeah. 

Bryce: [00:15:21] 2050 still seems like a fair way away. 

Alec: [00:15:24] But yeah, well, I think what we're going to say in Glasgow is 2030 commitments. So Paris, there are a lot of 2050 commitments, but we should expect to see 2030 commitments coming out of Glasgow. So let's say if ScoMo can represent Australia, well, yes. 

Bryce: [00:15:42] So Ren, that is where we're at. We've obviously seen a transition or seeing a slow transition away from traditional forms of energy into our renewable mix. And we're seeing some world leaders as well now start to commit to carbon neutral. But before we start talking specific investment opportunities and sort of why solar, we're just going to take a quick break to hear from our sponsors. 

Alec: [00:16:08] So Bryce before the break, we spoke about the history and where we are in this transition, that needs to happen. You know, the world has realised that we need to move away from carbon emitting forms of energy generation, coal, oil and gas, and we need to move towards carbon free options. Now this industry Deep Dive, we're focussing on solar, but I think we need to answer the question why we're focussing on solar here because it's not the only choice. And you know, at the start, we spoke about New Zealand and Iceland being two countries that are well ahead of the curve in terms of this transition. And solar isn't a major component for either of those two countries. Hydro and wind a really big contributors there. And so when we talk about carbon free electricity generation, we've got sort of four big options and then smaller options after that solar, wind, hydro, nuclear. 

Bryce: [00:17:05] What are the small ones 

Alec: [00:17:07] like running on treadmills, 

Bryce: [00:17:10] like getting on the push

Alec: [00:17:11] by what other small ones? There's geothermal geothermal noise? That's it. No, that's not it anyway. Really, the big choices and other big levers that you can pull. I guess the question is, why are we focussing on solar? And there's some reasons that are universal. And then the we're obviously speaking in an Australian context, and there's some that are quite relevant in Australia, also in the states. And that really can be summed up as we're hot. Yes, let's let's talk about the universal ones because there are reasons why solar is is really an attractive option in comparison to some of the other ones. Let's start with cost, because cost 

Bryce: [00:17:59] is not as 

Alec: [00:18:00] well. Cost obviously matters, but like cost is the biggest enabler of a lot of these projects getting up, you know, businesses justify investment decisions based on a return. And solar is the cheapest and it is continuing to get cheaper. So Lazard, which is a research house or a person? Yeah, I think research, how did a study released in 2020? I think they did this every year global levelized cost of generation US dollars per megawatt hour. And when we chose about solar for everything, OK, yeah. And when we talk about levels that includes the cost, like the capital cost of building the thing which 

Bryce: [00:18:38] is incredibly important to consider. 

Alec: [00:18:40] Yeah. Well, that that's how you get a return on a project. Yes. Yeah. So do you wanna go cheapest and most expensive? The most expensive. The cheapest. 

Bryce: [00:18:49] Let's go. Most expensive. Cheapest. 

Alec: [00:18:51] Okay, given that you've already looked at the notes, you'll know the answer to this. But what do you think the most expensive is in? And this is important, including the cost of building the thing? 

Bryce: [00:19:00] Well, if even if I hadn't looked at the notes, if you were to include the cost of building the thing, you just can't go past nucleos. 

Alec: [00:19:06] Yeah. So there's a lot of love for nuclear and the great reasons for that. But the cost of it is just so much higher. One hundred and sixty four US dollars per megawatt hour of nuclear next most expensive coal. Yeah, one hundred and twelve US dollars, then geothermal 80, then gas fifty nine, then wind now onshore wind $40 a megawatt hour offshore wind. Have you seen like those big turbines in the to. Yeah, $86 megawatt onshore. Yeah, yeah. And then Solar 

Bryce: [00:19:44] 36 comes in at the cheapest. 

Alec: [00:19:46] Yeah. You know, in Australia, there's a whole debate around why aren't new coal power stations being built and certain politicians want the government to underwrite it. This is the reason why that is just economically irrational. 

Bryce: [00:20:01] A quarter of the cost of coal a 

Alec: [00:20:02] hundred and twelve dollars a megawatt hour compared to even if like gas gas is half the cost. Solar is a third of the cost. A quarter of the cost.

Bryce: [00:20:13] Very political. 

Alec: [00:20:14] Yeah. So that needs to frame the debate. The first response to why solar is the cost all in to generate a megawatt hour of electricity, it's the cheapest. That's why we say it takes such a share in Australia and we've seen it grow so much. So that's from a policy perspective that that's the key thing. The other thing is that Australia's climate and conditions lend itself to a lot of solar. We got a lot of space. We're very hot, a lot. We've got a lot of sun. 

Bryce: [00:20:40] Yeah, likely to get more sun. Yeah. 

Alec: [00:20:43] At the start of this episode, you said one in four Australians have solar panels and you're surprised by that. And I think this is another key driver so that all that stuff we just spoke about is from like a policy perspective. There's also a number of reasons why individuals are really driving solar adoption and generation cost electricity bills. Yeah, same thing. 

Bryce: [00:21:05] Yeah, you're right. Look in New South Wales. Solar reduces power bills by around $400 per kilowatt per year per year. So if you're installing an eight kilowatt system, you can save around $3400 a year. And the Clean Energy Council estimate that 2.5 million Australian households have installed solar panels on their rooftops and are taking up this advantage. And I can say safely say that when my parents installed solar on their roof and seeing what impact it has had on their electricity bills, it's phenomenal. Absolutely phenomenal putting electricity back into the grid. As I said there in Wagga, a lot of sun, a lot of hay. It's fantastic, really like it's an actual investment. You're getting ready to return, putting some money back into the grid, not paying any electricity bills 

Alec: [00:21:58] away you go. My parents tried to do the same and they were told their roof wasn't suitable. What? Yeah, I think it like 

Bryce: [00:22:04] it didn't face the right 

Alec: [00:22:05] things. So that was like another building that, like, blocked the Sun for a lot of the time or something like that. Yeah, yeah, yeah. But yeah, so why solar cost is a big driver? And then, you know, as we look to the future, we look to the role that Australia can play in a global, I guess, energy transition. And, you know, we want to be a net exporter of energy. If you're excited about hydrogen, you need to be excited about these solar and wind generation because green hydrogen, the hydrogen that is generated from renewable sources, relies on solar, wind, hydro. So that's that's something that Australia wants to take advantage of. There's a lot of investment in the space, but Australia is also competing with a lot of other countries that are investing heavily in the space. Joe Biden's made a number of commitments around hydrogen. 

Bryce: [00:22:57] Yeah it's interesting. It's maybe the Equity Mates bump again. But it seems as soon as we did the episode on Hydrogen, the Deep Dive, the New South Wales government came out with hydrogen plan. So that was interesting. 

Alec: [00:23:08] They go, Matt Cain, shout out to you if you're listening. Well, you now the treasurer, but you were the environment minister. Outdoors, always open. 

Bryce: [00:23:15] So look, we've answered why solar, you know, from a policy and national perspective, from an individual's perspective and also from, you know, the need to transition more towards hydrogen. We need to get excited about solar and these other forms of electricity generation to get that clean green hydrogen that we speak of. But Ren, there are a couple of big projects in the works when it comes to solar. There's a really large scale battery storage project that's linked to solar underway in Australia. Was this related to the Tesla 

Alec: [00:23:48] batteries in Adelaide? Nah. The Tesla batteries are lighter, often firing. They're apparently so. When I was at Coles, they obviously looked at them when they were looking at like, you know, electricity cost of electricity, all that stuff. They fire incredibly well. They just don't have a lot of capacity. Yeah, OK. So like grid goes down, they can keep the grid stable for 15 minutes. But really, what they do is they provide price stability so that they just fire so quickly. If prices spike and they turn off so quickly, prices drop. Think about that compared to a coal plant. Can't flip a switch and turn it turn a coal plant on and off. So that's why coal plants just have to cop the really like depressed prices or even negative prices at times. And that's why they're losing a lot of money. Whereas Allen's batteries are just on off, on, off, on, off. Yeah, wow. 

Bryce: [00:24:39] So we're seeing a lot of state governments in Australia working towards meeting that zero carbon emission target, and there are a couple of initiatives such as the 15000 megawatt Sun Cable project in the NT. 

Alec: [00:24:51] This is connecting Australia with Asia through a big electricity generating cable. Wow. No, not electricity generating electricity transporting cable backed by Mike Cannon-Brookes from Atlassian and Twiggy Forrest. 

Bryce: [00:25:07] The way using our natural resources sort of from a renewable point of view to send electricity to Asia. 

Alec: [00:25:14] Yeah, massive. I think it's like a $30 billion solar farm in the Northern Territory. Big undersea cable to Singapore. And then yet in WA, they're trying to build a massive Asian renewable energy hub as well. Like there's a lot of there's a lot of activity going on here. 

Bryce: [00:25:33] Yeah, yeah. So look that that's a bit of a rundown on what's going on. But given that this is an equities podcast, we have got to chat about the investment opportunities because there are plenty of opportunities through direct investments in companies. And then later on, we'll touch on some of the ETFs and managed funds that you can get into should you be interested in taking advantage of the large transition in renewables and solar that's going on. So let's start with direct companies. 

Alec: [00:26:02] Yeah, and I think the caveat here is that this change is happening, but that. In terms of like, investment opportunities, that remains to be seen like, you know, there will be winners and losers, just like with the internet, just like with everything else. And so the due diligence, the investment research can't start and stop with. There will be more solar in the future there for all. These companies are going to weigh 

Bryce: [00:26:24] in on solar. 

Alec: [00:26:25] We're going to step through some of the players so you can sort of get an idea of who's in the industry and then do some research. But just like and had very different faiths. Some of these guys might have very different faiths as well. So the way I conceptualise the industry is, I guess, picks and shovels and then the generators themselves. Yeah, there's also like other players, there's like solar installers and stuff like that. None of that. That's pretty small potatoes. None of them are really listed. So picks and shovels, as you know, the companies that create things for the industry, the solar panels, the different, you know, micro inverter systems and, you know, optimising systems and all that stuff, monitoring systems like the service, the industry with products and services. And then the generators themselves, those that are building sort of large scale electricity generation plants. 

Bryce: [00:27:15] So let's start Ren with the picks and shovels companies, the manufacturing components and panels. Mind you, the companies and funds that we go through here, we only have to look at the USA and Australia. So I'm sure there are plenty of other options over in Europe and Asian countries as well. First solar listed on the Nasdaq, the ticker is FSL. The manufacturers in the thin film that goes across those solar panels to go through a few more Enphase Energy ANP h. They're a developer and manufacturer of micro inverter systems for the solar photovoltaic industry. Solar Edge Technologies list on the Nasdaq ADG there in Israel based provider of solar power optimisation and PV monitoring solutions, and then a couple more power group listed on the ASX here in Australia. They build and distribute power solutions, including solar panels and battery storage systems, but also moving into the generation, aiming for 20 solar farm sites in the coming years with 100 megawatt capacity. That's interesting, and another one here in Australia is Aygo Ltd. There are nickel, copper, cobalt and lithium miner. We know that a number of those components are very critical for batteries, so a couple of direct plays there for the picks and shovels. 

Alec: [00:28:39] The key thing there is that the technology is changing rapidly. So, you know, a lot of these are a lot of these companies create solar panels. First Solar have found a new way to create solar panels, but there will be more that come down the pike. And so if you're going to invest in the picks and shovels play, you just need to be aware that the technology is constantly changing and the companies that are selling a lot of panels to solar generators around the world, they need to stay ahead of the technology curve to keep their edge because otherwise, if that technology becomes less effective, then you know there will be others that usurp them. Yes. So then if we turn to the large scale solar generators, so those that are actually building massive solar farms and feeding electricity into the grid and that we're buying and using to power things in Australia, new energy solar is probably the biggest name. ASX ticker is new and a new and a W even. And they they only started a few years ago, like 2015, I think, and they basically rolled up a bunch of solar farms and then they're building a whole bunch of their own and they operate them. So that's a that's a big name in Australia over in the US. Brookfield Renewables, they pay is the ticker. They operate a number of solar generating facilities, but also wind farms, hydroelectric plants. What you'll see in the US and Europe is that a lot of these renewable generators play across solar, wind, hydro in Australia, Infigen Energy, AFN, a handful of solar projects, three in Queensland, one in New South Wales. Gen-X power another generator that's building a solar plant up in Queensland, tilts renewables, a big operator of wind, and it also has some solar generation. One European company that we've included is IPRA Dollar, which is a big Spanish energy generator. I think it's one of the biggest in the world, and it's made massive investments in solar and wind generation. And I think it's important here to note that a lot of the traditional power generators, the agl's and the origins in Australia are making investments in renewable renewables. So. Most of the companies here we've touched on are like pure play solar or wind or renewable generators. But then there are also the legacy electricity generators that are moving into the space as well. So one thing to watch in terms of the industry? Yeah. And then a final one, you'll see a number of infrastructure companies that own a whole array of infrastructure that includes some renewable energy generation. One company that I've included here is Infratil Infratil Infratil. ASX ticker is left, but it's a New Zealand based company. It owns airports, electricity generation, retail telecom services. So it's a big infrastructure player, but it includes some solar operations. Key caveat When you're looking at a company like this that owns things across a whole array of industries is that even if they're solar, operations do really well. Is that really going to drive overall earnings and overall share price growth compared to some of the other sectors that they play in? 

Bryce: [00:32:08] And you've got another one here that is unlisted, but cool. 

Alec: [00:32:12] Yeah, this is just a hobby industry. Yeah. So Sun Drive is a company, an Australian start-up that recently received a $3 million grant from the Australian Renewable Energy Agency. They create rooftop solar panels that use copper instead of silver. Now, why is that important, you might ask? Cost close? Well, yes, cost cost is the outcome. But did you know that globally, solar power units currently account for 20 percent of overall silver consumption? Wow. I did not know that. Yeah, yeah. So in the spirit of what we were talking about earlier when we're talking about the picks and shovels of the technology is changing. You've got to be aware of where it's going. If Sun Drive are able to take the silver out of solar panels, but keep them as effective in terms of converting sunlight into electricity that should bring costs down, and then they will be able to take market share from other picks and shovels players. So they're the kind of developments to watch. 

Bryce: [00:33:13] Fascinating. Speaking of unlisted, we should also give a shout to the supporter and sponsor of this episode, which is in style solar, and we'll give a bit more info on what they do at the end of this episode if you would like to take advantage of a solar system. But Ren, let's have a chat and about ETFs and some of the managed funds to close out the investment opportunities. So if we look at some of the ETFs available here in Australia, all your big providers do have an option. So VanEck Global Clean Energy ETF, the ASX ticker, is CLSA. It tracks the S&P Global Clean Energy Index, BetaShares Climate Change Innovation ETF, ERTH is the ticker. They have 100 leading companies that derive at least 50 percent of their revenue from products and services aimed at addressing climate change and other environmental problems. Then there is the ETFs, a battery tech and lithium ETF. The ASX ticker is ACDC. A very popular one here in Equity Mates community invests in companies in the Selective Battery Value Chain Index, which is 30 companies so a bit more concentrated involved in the supply chain and production of energy storage batteries. Mining companies that produce minerals that are crucial to the manufacturing process. For example, one fund here and you'll hear from the PM of this expert later this week is Mary Manning. She runs the Affinity Fund, which looks at renewables as well. 

Alec: [00:34:41] I don't want to be a handbrake, but I do just want to go back to those ETFs because I think there's a point that's worth making that you mentioned three there, but all sound similar vibes climate change, clean energy. But it's important to note the scope. So like the betashares climate change, innovation is quite broad. It's companies that are working on products and services aimed at addressing climate change and other environmental problems. Then it gets a little bit narrower, which is clean energy, and then ETF securities is even more narrow in scope its batteries. So I think it's just when you're making that investment decision, it's really important to be aware of exactly what the companies are because they all are playing in a similar space. But in terms of what they're actually investing in, there are nuances there. 

Bryce: [00:35:25] Yeah. So as I said, Ren join us on Thursday as we hear from Mary Manning. She is PM over at affinity and will do a bit of a deep dive on on her thoughts in the renewable space. But let's turn to some of the ETFs globally. 

Alec: [00:35:39] So when we look globally and when we've looked globally here, we've just looked at America. But you know, you can look at Europe as well. But I think as far as I could say in the states, there's one pure play solar ETF and that's Invesco Solar ETF, ticker is Tanti, and this ETF is comprised of companies focussed solely on the solar energy industry, as opposed to a lot of these ETFs in Australia, the U.S. around the world, which are clean energy more. Generally, so again, important to know the scope, but when you're talking the U.S., the amount of options is just so much bigger. First trusts have a clean energy ETF listed on the Nasdaq Alps, which is the data provider I haven't heard of before. Also, do 26 percent of that ETF is in solar stocks. Big focus on the US and Canada, but iShares have a clean energy ETF. Invesco have a Clean Energy ETF. SPDR, which is State Street, have a clean energy or Clean Power ETF. So the choices when you're looking in the states are so big, so then it's really what feeds my paying. Look under the hood, see what the biggest holdings are and understand what the methodology is to decide what the biggest holdings are. But yeah, I think there's so much choice out there, and most of us can invest in the states just as easily as we can invest in Australia. But it is good to say that the Australian ETF providers are also coming to the party around it because for years we've had sustainable funds. Yeah, sustainable funds aren't focussed on this transition as much so full credit to the VanEck BetaShares and ETF securities of the world for giving us an option to go hard on this energy transition. Yeah. 

Bryce: [00:37:22] And then in terms of managed funds over in the US, there's two key ones. There's the Fidelity Select Environment and alternative energy portfolio. And then BlackRock have a sustainable energy fund, both very similar to the approach that these ETFs take in terms of not sustainable, as Ren just mentioned, but more of a focus on the clean energy side of things.

Alec: [00:37:47] They options. That's the industry. Any final thoughts here? 

Bryce: [00:37:52] No, I think for me, I'm not in any of those ETFs. But the more that we talk about this, we've done a deep dive on hydrogen. We've got Mary Manning coming up later this week, which I'm sure is going to convince me even more. It's a space that I certainly want to start getting more active in in terms of investments, and I'm starting to understand the companies more and the dynamics of the industry. And as you said, right at the top Ren, it's it's big changes like this, societal changes that produce a lot of opportunity. It doesn't mean that you go all in and it's just going to be a winning opportunity from from right now. But it's one where we have the option. I guess the advantage of being at the very start of this as as this transition takes place. So yeah, it's an exciting time from doing 

Alec: [00:38:39] doing the research for this episode, thinking about it. I'm the same as you. I haven't really invested in the solar industry in particular. My four key takeaways are, first of all, this energy transition is just getting started and it's going to continue and accelerate. So that's that's undeniable. The second thing is that the cost of solar makes it the best option, both at a policy level and also at an individual level, like people are saving money from solar. And so like, that's indisputable. But the third thing is that electricity generators are price takers so that a commodity product electricity is electricity is electricity, regardless of how it's generated. It all powers lights the same. And so you're really subject to market forces there. If you're an electricity generator, that's not a great position to be in in terms of having. You'd rather have pricing power as a company than be a price taker. And then the fourth thing is that the technology is just changing so quickly in terms of the picks and shovels space and who's going to win that. It's not particularly within my area of competence, but it's understandable. But just the technology is changing really fast. New ways of manufacturing cells, new ways of what goes into cells and the effectiveness of the cells themselves is constantly changing. So for me, it's a fascinating industry. It's an industry that is only going to grow. But in terms of who wins market share in that industry, for me, that's the uncertainty when it when it comes to actually investing in it. Yeah. 

Bryce: [00:40:16] So look, we hope by the end of this episode, we've been able to help you understand the solar industry a little more. As we discussed, there are plenty of benefits, and this episode was proudly sponsored by Instyle's Solar, a Clean Energy Council approved retailer with over 20000 installations to date. Not only is solar a clean energy solution, but you can consider it an investment opportunity. On average, install solar customers get a 20 percent return every year over 25 years for their solar system. So own, don't rent your power. With $0 deposit and zero interest finance options, you can now pay for your system instead of paying a power bill in style solar, offering the Equity Mates community 10 percent off a new solar system. So you can book a personalised solar consultation with Instyle Solar's experts to start today. Head to Instyle solar dot com slash mates that's install solar dot com slash mates. We will have that in the show notes. I can attest my parents love their solar system. If I was owning a house, I'd certainly get one on my roof as well. But unfortunately, Ren we don't own any property. 

Alec: [00:41:22] Yeah, maybe there's maybe there's a business in getting solar panels for renters business.

Bryce: [00:41:29] I reckon we'll take that up with the 

Alec: [00:41:30] portable solar panels. Yeah, I love that. Not a fixer. It's channel. You take it with you. 

Bryce: [00:41:34] Yeah, take it with you wherever you go. But anyway, Ren always good to chat. We'll be back next week with an a.m. chat on Monday, but stick around with us on Thursdays. We have Mary Manning, who we had on earlier this year. It's fantastic conversation, so I'm really excited for that one. 

Alec: [00:41:51] next week sounds good.

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