The Path to Drawdown: PV Solar Manufacturing
To solve climate change and remain below 1.5ºC of global warming, the globe needs to switch to generating power from fossil fuels to using 100% emissions free sources.
The largest source of this clean energy is the sun (barring advances in nuclear fusion). Photovoltaic or 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.
The industry has been growing fast and, as of 2020, solar panels are now the cheapest source of electricity in most places on earth.
Solar produces ~2% of global electricity today. According to Project Drawdown, to be on a 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 is going to need to continue to massively scale over the few next decades:
- 720 TWh of solar electricity generated in 2019
- 28,200 TWh needed by 2050
- CAGR of 12.56% from 2019 - 2050
Another analysis from the IEA predicts that in order to reach a 100% clean electricity grid by 2050, annual solar panel manufacturing capacity will need to scale from 110 GWs in 2019 to 500 GWs in 2030.
Daqo New Energy (stock ticker: DQ) manufactures different types of ultra-pure silicon for the solar panel supply chain. Founded in 2007, the Chinese company is a major supplier to another Climate Index company, Jinko Solar.
DQ's Path to Drawdown
According to their 2019 annual report, Daqo New Energy has the capacity to produce 70,000 metric tonnes of high purity silicon every year. One KW of solar panels requires about 40kg of high purity silica (source). So as of 2020, Daqo had the capacity to provide the silicon for ~1,750,000 KW of solar panels (aka 1.75 GW) or about 1.6% of panel production in 2019
For DQ to maintain its market share, it will need to scale to ~318,000 MT of production by 2030, a 4.5x increase.
DQ: What We Like
We like Daqo’s focus on rapidly scaling its core business. They provide a challenging and critical component in solar panel manufacturing: high purity silicon. DQ used to have multiple product lines related to solar, but they sold them off to focus on scaling their silicon production. We think such focus is needed and we look forward to seeing them increase their market share.