To mitigate climate change and remain below 1.5ºC above pre-industrial global temperature, we need to transition away from burning fossil fuels to 100% emissions-free energy sources.
A powerful source of this clean energy is the sun (along with nuclear, wind, hydroelectric, and geothermal energy). Photovoltaic (PV) solar panels (the kind you see on rooftops) have emerged as the predominant way of capturing the sun's energy and converting it into electricity.
Solar produces around 2% of global electricity today. According to Project Drawdown, to be on the path to remain under 1.5ºC of warming, rooftop and utility scale solar will need to be generating a combined ~40% of global electricity by 2050.
To get there, the PV solar industry will need to keep scaling massively over the few next decades:
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457 TWh of solar electricity generated in 2018
Analysis from the IEA also projects that, to reach a 100% clean electricity grid by 2050, annual addition to the solar panel manufacturing capacity will need to increase from 134 GWs in 2020 to 630 GWs in 2030 (p. 74).
About
SolarEdge Technologies, Inc. (stock ticker: SEDG) is a provider of power optimizer, solar inverter and monitoring systems for residential, commercial and small utility-scale solar installations. It has more recently expanded into other areas of energy technology, including energy storage systems, backup electric vehicle components and charging capabilities, and many more. Headquartered in Herzliya, Israel, SolarEdge has offices in the US, Germany, Italy, and Japan.
SEDG's Role in Drawdown
SolarEdge’s main products are inverters and power optimizers which are a critical component in making rooftop solar panels an efficient source of renewable energy.
Harvesting the energy from solar panels requires converting the variable direct current (DC) that the panels generate into utility frequency alternating current (AC). AC can then be fed into a commercial electrical grid or used by local, off-grid electrical networks. The piece of machinery that converts DC into AC is the inverter.
But if a solar PV system is partially covered by shade or debris, or has panels with multiple orientations, the energy generated by the system as a whole will be dragged down by the worst-performing panel.
A power optimizer accounts for this problem. By being connected to each solar panel and tracking and maximizing their voltage before sending it to the inverter to be aggregated, power optimizers enhance the efficiency of solar systems.
SEDG: What We Like
SolarEdge has been growing aggressively over the past several years by shipping more inverters and power optimizers, and by expanding into other areas of renewable energy technology:
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20.18% and 20.36% CAGR in the number of inverters and power optimizers shipped worldwide, respectively
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A number of partnerships (p. 7) and acquisitions to enter new spaces, including PV storage and backup power solutions, uninterruptible power supply, etc.
Amidst this expansion, SolarEdge has made commitments to reduce their GHG emissions:
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In 2020 they set a goal (p. 28) to reduce GHG emissions by 30% per one million dollars in revenue and to reduce emissions by 20% per GW inverter power supplied to customers
In 2019 they introduced (p. 28) zero-emission solar PV generation as a means of reducing their emissions footprint. Ultimately, the company aims to become a zero carbon manufacturer
What We Want to See Improve
Set Clear Timelines for Emissions Reduction Goals
We are excited that SolarEdge has set a quantitative target to reduce GHG emissions. But beyond declaring that this target is a
long-term one (p. 28), they don’t specify a timeframe. A clear emissions goal needs to be accompanied by a precise timeline so that investors can hold the company accountable.
Track Scope 3 Emissions
In their
2019 Sustainability Report (p. 35), SolarEdge began reporting their scope 1 and 2 emissions. This is a welcome practice that sets them on the path toward becoming a zero emissions manufacturer. But as a company with a
presence in 28 countries (p. 3) and with an extensive supply chain, we would like to see SolarEdge’s scope 3 emissions and to see them persuading their suppliers and customers to reduce their emissions as well.
Switch to Consuming Renewable Energy
We applaud SolarEdge’s move to incorporate
solar PV generation (p. 28) to offset the carbon impact of their energy consumption. But the energy generated from solar panels still accounts for far less than 1% of their total energy consumption. This compares to fossil fuel sources accounting for almost 13% (the rest is electricity from the grid). SolarEdge should transform itself into a completely zero emissions company by switching over to renewable sources of energy in their operations, transportation, and distribution.
Arcosa services wind farms and utilities to improve grid flexibility. It however makes more revenue from its storage, transportation, and construction products that serve the fossil fuel industry.
AECOM helps clients achieve net zero emissions in their buildings among other pro-climate projects, but it also works with many oil and gas companies. It is unclear what makes up a majority of its revenue.
Albemarle produces lithium compounds promoting energy storage, a Drawdown solution. It however makes more of its revenue from other compounds like bromine that have end-markets in the fossil fuel industry due to applications, such as oil and gas well drilling and completion fluids.
Avista produces 55% of its power from renewables, 43% from fossil fuels, and 2% from non fossil fuel combustion. While it passes the generation mix criteria of > 50% non fossil fuel sources, 9% of its power comes from coal and it has no plans to shut down its coal plants within the next 3 years.
Bloom Energy's Energy Servers can operate using both hydrogen and biogas, both climate solutions, but a majority of its Energy Server's use natural gas. This use of natural gas is considered fossil fuel revenue, particularly because we don’t want to lock in natural gas emissions by a commitment to weak transitionary infrastructure.
Babcock & Wilcox produces waste to energy and biomass solutions, both Drawdown solutions. It also works on carbon capture technologies, but not storage which we would define as fossil fuel revenue. A revenue breakdown is not present
BWX performs fabrication activities for missile launch tubes for US submarines, which fails the defense filter as this would be classified as weapons related.
Capstone Green Energy produces microgrids and microturbines with renewable applications, both of which are Drawdown solutions, but receives the majority of its revenue from application of its microturbines to fossil fuel industries.
Euro Tech Holdings does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Cummins derives a very small part of its revenue from hydrogen production solutions and electrified power systems, but a much larger portion of its revenue is from ICE parts and oil & gas markets, both of which would be categorized as fossil fuel revenue.
CMS produces 62.73% of its power from fossil fuels, 19.92% from nuclear, 7.67% from mixed sources, and 6.65% from renewables. Even if all of the mixed sources were renewable, CMS would still not have >50% power from non fossil fuel sources.
Cooper sells healthcare products like contact lenses, fertility products, and contraceptives, but makes less than 50% of its revenue from contraceptives
Capstone Turbine produces microgrids and microturbines with renewable applications, both of which are Drawdown solutions, but receives the majority of its revenue from application of its microturbines to fossil fuel industries.
Cree sells materials products and RF devices used in military communications, which fails the defense filter because it sells something to the defense industry that is not a Drawdown solution.
China Recycling Energy conducts waste to energy operations, but also utilizes gas from coal mining, which is considered as fossil fuel revenue. A revenue breakdown is not present.
BioCorteva's products help maximize crop yield, not reduce food waste, leaving them without a Drawdown solutionceres' products help maximize crop yield, not reduce food waste, leaving them without a Drawdown solution
DuPont de Nemours has some end-markets in solar energy and LEDs, both Drawdown solutions, but derives a larger portion of its revenue from various products that have end-markets in the fossil fuel industry.
Centrais Elétricas Brasileiras - Eletrobrás produces 92.45% of its power from renewables, 3.89% from nuclear, and 3.66% from fossil fuels. While it passes the generation mix criteria of > 50% non fossil fuel sources, 0.68% of its power comes from coal and it has no plans to shut down its coal plants within the next 3 years.
Ecolab offers products that can help businesses conserve water, a Drawdown solution, but also sells products built specifically for the fossil fuel industry. It is unclear which it makes more revenue from
Consolidated Edison produces 52.5% of its power from fossil fuels, 37.5% from nuclear, 8.6% from renewables, and 1.3% from unknown sources. Even if all of the unknown sources were renewable, CE would still not have >50% power from non fossil fuel sources.
Empresa Distribuidora y Comercializadora Norte Sociedad Anónima did not provide complete enough power generation info to determine if they pass or fail the utility filter
Emerson Electric Co. produces smart thermostats, a Drawdown solution, but also sells certain products to the oil and gas industry. It is unclear which segment it makes more revenue from.
Enbridge derives some of its revenue from solar and wind energy, both Drawdown solutions, but receives the majority of its revenue from pipeline work for the natural gas industry, which is categorized as fossil fuel revenue.
Enel Américas produces 62% of its power from renewables and 38% from fossil fuels. While it passes the generation mix criteria of > 50% non fossil fuel sources, 3% of its power comes from coal and it has no plans to shut down its coal plants within the next 3 years.
Energizer Holdings, makes only batteries for household products and lighting products for flashlights and headlamps, neither of which are Drawdown solutions.
Eversource Energy produces 62.28% of its power from fossil fuels, 19.64% from renewables, 13.83% from non fossil fuel combustion, 4.24% from nuclear, and 0.01% from energy storage.
ESCO derives its revenue in part from promoting grid flexibility, a Drawdown solution, by enabling electric power grid operators to assess the integrity of high-voltage power delivery equipment. It however receives a larger portion of its revenue from products that have an end-market in commercial aerospace applications.
Ford Motor produces some EVs, a Drawdown solution, but receives the majority of its revenue from traditional ICE vehicles, which are categorized as fossil fuel revenue.
FuelCell energy makes hydrogen fuel cells, a Drawdown solution. They also sell carbon capture services (but not storage) to the oil and gas industry, which we categorize as fossil fuel revenue. A revenue breakdown between the two is not present
Franklin Electric does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Whole Earth Brands makes plant-based consumer packaged goods, but it also makes flavored products used by the tobacco industry, thus failing the tobacco filter
Flexible Solutions International produces nitrogen conservation products, a Drawdown solution, but also produces products for the oil and gas industries. A revenue breakdown is not present
General Electric derived 19.4% of its revenue from wind energy, a Drawdown solution, but received 21.8% of its revenue from various products dependent on oil and gas, which is categorized as fossil fuel revenue.
General Motors produces some EVs, a Drawdown solution, but receives the majority of its revenue from traditional ICE vehicles, which are categorized as fossil fuel revenue.
Generac Holdings derives part of its revenue from the Drawdown solution of energy storage. It however has fossil fuel profucts and a large natural gas customer base that is not quantified and no revenue breakdown for that segment is present.
Genuine Parts sells auto parts and while it does seem to service the EV industry in part, its business is mostly oriented towards ICE vehicles. It even lists EV adoption as a risk to its business.
Granite Construction does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Helios Technologies does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Honda Motor produces some EVs, a Drawdown solution, but receives the majority of its revenue from traditional ICE vehicles, which are categorized as fossil fuel revenue.
Honeywell has an aerospace segment which is categorized as fossil fuel revenue that comprises a greater portion of its net sales than its production of smart thermostats, a Drawdown solution. They also fail the defense filter.
Hubbell derives a large part of its revenue from producing solutions that enhance Grid Flexibility, but also has customers in the gas industry whose portion of the revenue is not specified.
Hyliion Holdings derives its revenue by selling electrified and hybrid powertrain solutions, a Drawdown solution, but also sells powertrain systems that can be fueled with CNG, which is considered fossil fuel revenue. The revenue breakdown between these products is not provided.
IDACORP produces 59.8% of its power from renewables, 32.8% from fossil fuels, and 7.4% from mixed sources. While it passes the generation mix criteria of > 50% non fossil fuel sources even if the entirety of the mixed source power generation was from fossil fuels, 20.9% of its power comes from coal and it has no plans to shut down its coal plants within the next 3 years.
IES Holdings services both wind energy projects and solar projects, both Drawdown solutions. It also services refineries, which are categorized as fossil fuel revenue. It is unclear which takes up a greater portion of the revenue.
Littelfuse, sells products used in EVs and related infrastructure, but also has end markets in the traditional auto industry, as well as the oil and gas industry. A revenue breakdown is not present.
Limoneira 's Drawdown revenue comes from growing avocados, a perennial staple crop. It however derives the vast majority of its total revenue from other non-perennial crops.
Lindsay sells different irrigation systems and offers repair services for those systems. It also sells moveable barrier systems that help in many applications such as highway reconstruction.
Lyft theoretically enables rideshareing, a Drawdown solution, but in practice likely increases emissions due to drivers going further from their homes daily to service higher paying regions.
MDU produces 55.5% of its power from renewables, 25.6% from mixed sources, and 18.87% from renewables. Even if all of the mixed sources were renewable, MDU would still not have >50% power from non fossil fuel sources.
Montrose helps clients deal with water distribution issues among other pro-climate projects, but it also works with many oil and gas companies. It is unclear what makes up a majority of its revenue.
Mueller Industries does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Mueller Water Products, sells water leak detection systems, a Drawdown solution, but also has an infrastructure segment that has some customers in the natural gas industry. A breakdown of that segment is not present.
NV5 helps clients achieve net zero emissions in their buildings and deal with water distribution issues among other pro-climate projects, but it also works with many oil and gas companies. It is unclear what makes up a majority of its revenue.
Northwestern produces 61% of its power from renewables and 29% from fossil fuels. While it passes the generation mix criteria of > 50% non fossil fuel sources, 20% of its power comes from coal and it has no plans to shut down its coal plants within the next 3 years.
Corning produces LED products and also emissions control products for the fossil fuel industry. It is unclear which is a greater percentage of the revenue.
Ocean Power Technologies utilizes ocean power to provide electricity, a Drawdown solution. But 87% of its revenue comes from servicing the fossil fuel industry.
Public produces 54.91% of its power from fossil fuels, 40.41% from nuclear, 3.84% from renewables, 0.81% from non fossil fuel combustion, and 0.02% from fossil fuels.
Pentair offers products that can help businesses conserve water, a Drawdown solution, but also sells products built specifically for the fossil fuel industry such as fracking fluids. It is unclear which it makes more revenue from.
Polar Power, manufactures DC power systems that help with grid flexibility, a Drawdown solution, but diesel, natural gas, and propane appear to the predominant formats. A revenue breakdown is not present.
Portland GE produces 50.19% of its power from fossil fuels, 27.81% from nuclear, 14% from mixed sources, and 8% from renewables. Even if all of the power produced from mixed sources was from renewables, Portland still would not produce > 50% of its power from non fossil fuel sources.
Perma-Pipe International does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Roper Technologies does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Republic derives its revenue in part from recycling, a Drawdown solution, but captures landfill gas at fewer than 50% of its landfills, thus failing the landfill gas filter.
Electrameccanica Vehicles has no sales of electric vehicles to date. It has some sales in its custom build segment, which we categorize as fossil fuel revenue.
Spark produces 59.65% of its power from fossil fuels, 34.47% from nuclear, 4.82% from renewables, 1.03% from non fossil fuel combustion, and 0.03% from fuel cells.
Steel Partners Holdings L.P. produces LEDs, a Drawdown solution, but also produces tubing for the oil and gas industry, which is considered fossil fuel revenue. It also produces blades for meat/fish processing plants.
Sociedad Química y Minera de Chile sells fertilizer but not in a way that promotes nutrient management, meaning they do not produce a Drawdown solution.
Stellantis N.V. produces some EVs, a Drawdown solution, but receives the majority of its revenue from traditional ICE vehicles, which we categorize as fossil fuel revenue.
Sterling Construction does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Toyota Motor produces some EVs, a Drawdown solution, but receives the majority of its revenue from traditional ICE vehicles, which we categorize as fossil fuel revenue.
Tutor Perini builds military defense facilities, which fails the defense filter because it sells a product/service to the military that is not a Drawdown solution.
Tattooed Chef, sells vegetarian/vegan products, but in order to count towards the Drawdown solution of promoting a plant-based diet, a must not make products that include animal products.
Tetra Tech helps clients achieve net zero emissions in their buildings among other pro-climate projects, but it also works with many oil and gas companies. It is unclear what makes up a majority of its revenue.
Tata Motors Limited produces some EVs, a Drawdown solution, but receives 99.8% of its revenue from traditional ICE vehicles, which are categorized as fossil fuel revenue.
Uber theoretically enables rideshareing, a Drawdown solution, but in practice likely increases emissions due to drivers going further from their homes daily to service higher paying regions.
Ultralife derives the majority of its revenue from the promotion of electric vehicles and energy storage, both Drawdown solutions, through the sale of lithium batteries and electric vehicle charging solutions. It also makes scopes for rifles and SATCOM communications for the defense industry, leading it to fail the defense filter
WEC produces 62.2% of its power from fossil fuels, 19.6% from nuclear, 8.4% from mixed sources, and 7.4% from renewables. Even if all power produced from mixed sources was from renewables, WEC would still not have >50% power from non fossil fuel sources.
Williams Industrial Services Group maintains nuclear projects and some renewable projects, but also works on fossil fuel plants. It is unclear which is a majority of their revenue.
Advanced Drainage Systems does not produce any not leak detection or water conservation technologies and therefore fails our water distribution efficiency filter.
Xcel produces 53% of its power from fossil fuels, 30% from renewables, 13% from nuclear, and 4% from mixed sources. Even if all of the power produced from mixed sources was from renewables, Xcel still would not produce > 50% of its power from non fossil fuel sources.
Zymergen biofacturing and bio-based products like adhesives largely for electronics, but not creation of bioplastics. They IPO'd in April 2021, lack an annual report/investor presentation/description of their products & services
Cement is a major emitter of CO2e. CRH is leading the push towards carbon-neutral cement (commitment by 2050), having already reduced their emissions by 26%.
Covanta Holding operates facilities that burn waste to produce electricity and recycle industrial waste. Waste-to-energy is an important bridge solution
Belden sells basic connectiviting solutions for energy and telecom, but not products specifically designed to strengthen and expand the grid, and therefore does not produce a Drawdown solution
Lydall creates insulation for things like car interiors to reduce noise, not to help buildings stay temperate, meaning they produce no Drawdown solution
Lucid makes luxury electric sedans in the United States. Its IPO date was less than six months before the 2022 Climate Index update, leading it to be excluded from this years index.
Li-Cycle recycles old lithium-ion batteries to create new ones. Its IPO date was less than six months before the 2022 Climate Index update, leading it to be excluded from this years index.
Rivian makes electric pickup trucks, SUVs, and delivery vehicles. Its IPO date was less than six months before the 2022 Climate Index update, leading it to be excluded from this years index.
The Metals Company mines deep sea metals that are rare and critical for batteries. Its IPO date was less than six months before the 2022 Climate Index update, leading it to be excluded from this years index.
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