S&P Global —20 August 2024
Daily Update: August 20, 2024
Solar Power — Dizzy with Success
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
There is something about the heat of August that naturally drives consideration of solar power. Three recent podcasts from S&P Global Commodity Insights look at the growth of solar power from different angles. From the investor perspective, an interview with Sheldon Kimber, founder and CEO of independent power producer Intersect Power, explores the business case for solar power in the “Energy Evolution” podcast. S&P Global expert Cormac Gilligan joins the “EnergyCents” podcast to talk about diverging supply and demand for solar power. Finally, the “Platts Future Energy” podcast discusses the recent unprecedented growth of solar energy.
All three podcasts agree that solar power has enjoyed a few years of massive growth, much of which was driven by higher energy prices. In 2022, 245 GW of new solar was installed globally. Last year, new installations climbed to 424 GW, and installations are expected to top 520 GW in 2024. While this demonstrates the attractiveness of solar energy across many markets, a slowdown is expected. China is forecast to increase solar capacity by only 1%, and some markets in Europe are expected to be flat for the year.
“One of the key trends is the difference between supply and demand and that we’re probably entering an oversupply of solar panels being generated at the moment,” host Sam Humphreys said on the “EnergyCents” podcast. “Demand is not quite meeting up with that.”
All these additional installations, plus a glut of global solar panel manufacturing capacity, have led to the market oversupply. Billions of dollars have been pumped into manufacturing, particularly in China and Southeast Asia. The US and EU have established policies to protect the development of domestic manufacturing. The Inflation Reduction Act (IRA) in the US stimulated the solar panel industry, though new solar manufacturing facilities can’t come online overnight. For solar companies, margins have been squeezed.
“When the IRA was passed, we kind of went into enthusiastic ignorance,” Sheldon Kimber said. “I would say we’ve now transitioned into the second phase, which is complaining complacency where people are beginning to realize that it’s not that easy. The IRA has given us some financial supports, but it hasn’t solved all of the industry’s problems.”
China is the world’s leading producer and consumer of solar panels, but domestic demand in China may have reached its limit. Some analysts believe that China could further stimulate demand to cope with oversupply, but there is concern in other markets about the “dumping” of Chinese solar panels at low prices.
Oversupply and lower prices also generate opportunities for the energy sector. In July, solar capacity dropped prices to zero euros per megawatt hour between midday and 3 p.m. Free energy, even if it only lasts for a few hours a day, provides a powerful incentive to add battery capacity.
“Has anybody really made money in renewables?” Kimber asked. “It’s a good question because it has been a painfully thin industry for a long time because we have chosen to build it this way.”
Today is Tuesday, August 20, 2024, and here is today’s essential intelligence.
Listen: The Business Case For Solar Power In The US Energy Transition
Solar power is the fastest growing source of electricity in the US. But as adoption of solar and other renewable power generation grows, developers are facing new realities when it comes to financing projects and setting expectations about their returns. In this episode, guest Sheldon Kimber, founder and CEO of independent power producer Intersect Power, speaks with correspondent Camellia Moors about the business case for solar power development in the US, some of the policies surrounding the industry and solar power's role in the US energy transition.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Global Economic Outlook: August 2024
Early August's extreme market turbulence has abated, yet more volatile conditions are likely to persist. The exceptional volatility at the start of the month ought to be viewed in the context of "thin" markets, frothy equity valuations and an overreaction to the noise in some weaker-than-expected US economic data. The path forward will likely remain bumpy given numerous US-related uncertainties, including the risk of a hard landing, the timing and magnitude of policy rate cuts, the outcome of elections in November and their policy implications. The material change in Japan's monetary policy prospects and the related unwind of so-called carry trades will likely remain a source of market volatility.
—Read the article from S&P Global Market Intelligence
Default, Transition, And Recovery: Distressed Exchanges Reached Their Highest Level Since 2009
Nine companies defaulted in July, the same number as in June and compared with seven in July 2023. However, the global year-to-date corporate default tally is still elevated at 87, which is just above the five-year average of 86 and only slightly below the 2023 year-to-date count of 91.
—Read the article from S&P Global Ratings
US Targets LPG Ships In Latest Sanctions Aimed At Houthis, Hezbollah
The US Department of the Treasury announced a fresh round of sanctions on companies, ships and one individual involved in trading Iranian oil and LPG used to finance the Houthi rebels' attacks on commercial ships in the Red Sea, as well as one company accused of shipping LPG on behalf of Hezbollah in Lebanon. The sanctions come after multiple attacks Aug. 13 on a Liberian-flagged oil tanker in the Red Sea that were confirmed by the Joint Maritime Information Center. Regional tensions stemming from the Israel-Hamas war continue to threaten oil supply routes.
—Read the article from S&P Global Commodity Insights
South Korean Refiners Wary Of China's Oil Product Export Quota Usage Amid Fragile Margins
South Korean refiners are generally content with a slight improvement in refining margin so far in the third quarter but China's ample clean oil product export quotas and tepid regional economic activity pose a serious threat to the overall cracks and export margins, industry sources said Aug. 13-16. Asia-wide refiners hardly faced any crude supply security or feedstock procurement issues despite the prolonged OPEC+ production cuts and geopolitical tensions in the Middle East.
—Read the article from S&P Global Commodity Insights
New Vehicle Inventory Declines For First Time In 14 Months
Retail advertised vehicle inventory in the United States declined last month for the first time since May 2023. Available new inventory closed July at 2.788 million vehicles, up 52.5% vs. last July, but down 2.3% from June 2024. The 2.3% decrease is the largest percentage decrease seen within the full time period of S&P Global Mobility data, going back to January 2022 and is the first decrease since May of last year.
—Read the article from S&P Global Mobility
Beyond ESG With Scaling Capital For The Energy Transition (Aug. 21, 2024)
Clean tech is key to scaling the energy transition, but its adoption remains stifled by the deployment of fossil fuel infrastructure far from the end of its economically useful life. How can investors and companies finance this shift, while the threat of early retirement of assets still looms large?
—Register for the webinar from S&P Global Sustainable1