99.99%

Pure

is the minimum quality of silicon needed for solar PV panels

45.79%

CAGR

of Daqo's high purity silicon production

16.33%

CAGR

is needed for solar PV manufacturing from 2020 - 2030


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.

About

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.

DQ: What We Want to See Improve

Track Emissions


DQ provides no insight into their sustainability efforts or the environmental impact of their manufacturing processes. As their shareholders, we believe this poses a material risk. We believe more of the purchasers of their silicon will demand an emissions-free supply chain. If DQ does not act now, they could lose market share to a more forward thinking competitor.

Set Clear Goals


Unlike other companies in the space, Daqo New Energy has not set clear decarbonization goals for their manufacturing process or their supply chain. This makes it challenging for investors like us to hold them accountable for their sustainability commitments. For example, 100% clean electricity in their manufacturing process by 2028.

Expand Faster


DQ seems well positioned to take advantage and help fuel the massive growth needed in the solar PV industry. We would like to see their executive team raise additional capital to expand as quickly as possible and own greater market share. The last thing we want to see are solar panel deployments delayed due to silica supply chain issues.

Other Solar Manufacturing Stocks in the Climate Index

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