Solar investment case

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

2. Long-Term Bullish Factors for Solar Sector
• Spending on new solar installs will be a massive $3.7 trillion through 2040
and solar will account for 35% of new electricity installs, according to
Bloomberg New Energy Finance.
• Room for double-digit growth for decades; solar is only 0.4% of U.S. utility
electricity generation now.
• Industry has matured after 2011-12 shake-out; survivors are established with
best technology and scale; margins are recovering; supply now better
matched to demand.
• Solar panel demand has persistently surprised to the upside
• Solar costs are falling due to improved technology and lower
system/installation costs; grid parity is being reached in a progressively
larger number of markets. Lower solar cost means increased demand,
bigger target market, more unit sales, more profit.

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
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 small or large scale; residential, commercial buildings, utility.
Disadvantages
• Day-Use Only – Solar but matches peak electricity usage times; add battery storage
• Variable solar intensity – but still economical in northern climes
• Installed Cost – Falling fast; grid parity in growing number of areas

4. Solar PV and Thermal could together become the world’s
largest electricity source by 2050 (IEA)
▪ Solar PV and Solar Thermal Electricity (STE) could together account for 27% of global energy share by
2050 (16% for PV, 11% for STE) versus current <1%, thus becoming the world’s largest electricity source.
▪ This would prevent CO2 emissions of 6 billion tonnes per year, more than today’s U.S. energy sector
emissions or world transport sector emissions.
Source: International Energy
Agency Technology Roadmaps
for Solar Electricity (2014).

5. High Growth Industry: 24% Annual Growth Last 5 Years

6. Leaders: China, Japan, U.S. Take Over From Europe

7. Solar Installs are Diversifying Geographically

8. China Solar
Developments:
•Strong Chinese government support for solar
to promote environment and jobs.
•Government 2016 new install target is 15 GW and
20 GW in 2017
•China’s goal is to triple solar installed capacity to
150 GW by 2020, up from 49 GW at end-2015.

9. Japan Solar
Developments:
•Fukushima nuclear disaster (Mar-2011)
prompted aggressive government push
for solar
•Japan installed 11.6 GW of solar in 2015 (+13%
yr/yr).

10. Europe Solar
Developments:
•European solar installs have declined due to
reduced subsidy support
•Germany in 2015 slipped to second behind
China in cumulative installed solar at 38 GW.

11. U.S. Solar
• Solar accounted for 29.4% of new U.S. electricity
generation capacity in 2015, beating natural gas at 29.0%.
• Top PV states in 2015: CA, NV, MA, NY, AZ
•Congress in Dec 2015 extended the federal solar
investment tax credit (ITC) by 5 years to 2021; 30% 2016-
2019, 26% in 2020, 22% in 2021, 10% thereafter.
• Solar will get strong support in 2022 and beyond when
EPA’s Clean Power Plan (CPP) is scheduled to take effect,
which anticipates 32% cut in greenhouse gas emissions
2005-2030 and goal for 28% of renewable energy by 2030
(more than double 13% in 2014).
• Solar has support in various states from state tax credits,
net metering, Renewable Portfolio Standards (RPS).

12. Solar Pricing – Polysilicon is Near a Record low of $13.20/kg

13. Solar Pricing – Modules down by 60% over last 5 years

14. Solar Cell Costs Have Dropped 99% Since 1970s

15. Steady Percentage Solar Module Price Decline Due
to Technology Advances and Scale Manufacturing

16. Solar Scientific Research Continues at Rapid Pace
to Reduce Solar Costs and Increase Efficiency

17. Solar Pricing Down ~60% in Past 7 Years to 12.9/7.8¢/kWhr
Cost reductions
shifting to balance of
system costs, e.g.,
inverters, hardware,
install, customer
acquisition and
financing costs.

18. Many PV Markets Now Below Grid Parity Without Subsidies
Source: “2014 Outlook: Let the Second Gold Rush Begin,” Deutsche Bank Solar Industry Update, 6-Jan-2014
Plus 10 U.S. states at grid parity (with subsidies) at 11-15 ¢/kWh: AZ, CA, CT, HI, NV, NH, NJ, NM, NY, VT.

19. MAC Solar Index - Methodology
• Global solar energy index of qualified solar stocks listed on
exchanges in developed countries.
• Passive index of qualified solar stocks – no stock picking.
• Modified market cap weighting.
• Liquidity minimums to add a stock: $150 million market cap and $2
million in average daily trading value.
• Exposure Factor 1.0 for pure-play solar stocks (solar revenue above
2/3); Exposure factor of 0.5 for medium-play stocks (1/3 to 2/3 solar
revenue) (Abengoa Yield, China Singyes, TerraForm Global).
• Quarterly index review on third Friday of March, June, Sep, Dec.

20. Advantages of Index/ETF Over Individual Solar Stocks
• Own the global solar sector in one trade – reduced transaction costs
• Long track record – 8+ year history (launched in April 2008)
• Dynamic Portfolio – add solar growth stocks and drop losers
• Diversification – across geography, technology, value chain

21. Diversification Across Value Chain
Manufacturer/Project
Developer
First Solar
Canadian Solar
Trina Solar
Sunpower
JinkoSolar
JA Solar Holdings
Shunfeng Photovoltaic
China Singyes Solar
Hanwha Q-Cells
Installer/Project Developer
Solarcity
Vivent Solar
SunRun
Polysilicon
GCL-Poly Energy Holdings
REC Silicon
Daqo New Energy
Capital Equipment
Meyer Burger Technology
Solar Panel Components
Xinyi Solar Holdings
Inverters
SMA Solar Technology
SolarEdge Technologies
YieldCos
TerraForm Power
TerraForm Global
Abengoa Yield
8point3 Energy Partners

22. Diversification Across Geography
By Company Headquarters:
• North America: 10 companies
• China: 9 companies
• Europe: 4 companies
By Stock Listing:
•North America: 16 companies
•Hong Kong: 4 companies
•Europe: 3 companies

23. For More Information
• Solar Sector Research at:
www.macsolarindex.com
• List of solar information sources at:
www.macsolarindex.com/resources