SolarEdge Technologies (SEDG)

Company website 2020 Financial Report Investor Relations Stock Analysis 2020 ESG Report

Gigawatts

SolarEdge has shipped 24 GW of inverter systems to over 130 countries since 2010

31.4^%

CAGR

in revenues, 2016 - 2020

4.4

Million Metric Tons

of greenhouse gas emissions have been avoided by SolarEdge' solar PV inverter systems as of 2019

View Our Analysis

The Path to Drawdown: PV Solar

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.

The industry has been growing fast. As of 2020, solar panels are now the cheapest source of electricity in most places on earth.

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:

<::marker> 457 TWh of solar electricity generated in 2018
<::marker> 28,200 TWh needed by 2050
<::marker> CAGR of 13.75% from 2018 - 2050

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:

<::marker> Revenue increased from ~$240 million in 2017 to $1.4 billion in 2020, a 508% growth
<::marker> 20.18% and 20.36% CAGR in the number of inverters and power optimizers shipped worldwide, respectively
<::marker> 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:

<::marker> 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.

Related Solar Energy Stocks in the Climate Index

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Allocated	Company	Description
2.00%	Enphase Energy (ENPH)	Enphase makes micro-inverters, which are critical components in making rooftop solar more efficient. It's a key solution to expanding rooftop solar
1.18%	SolarEdge Technologies (SEDG)	SolarEdge makes power optimizer, solar inverter and monitoring systems for rooftop solar. These are key equipment in making solar power more efficient
0.82%	First Solar (FSLR)	First Solar makes innovative solar panels from a single glass substrate, making it possible to make panels in one factory in 4.5 hours
0.76%	Sunrun (RUN)	Sunrun makes and installs residential solar energy systems. Solar is a crucial centerpiece of electrifying everything
0.36%	Daqo New Energy (DQ)	Daqo makes high-purity silicon that goes into solar panel. This is a critical ingredient in converting sunlight into electricity
0.36%	Sunpower (SPWR)	Sunpower offers residential and commercial solar power systems and solar storage. Rooftop solar PV is one of the keys to an emissions-free energy system
0.33%	Shoals Technologies Group, Inc. (SHLS)	Shoals makes all of the components necessary for solar PV systems to connect to the grid. They’re helping expand solar energy
0.31%	Sunnova (NOVA)	Sunnova provides residential solar and energy storage systems in the United States. Both are critical for electrifying the energy system
0.17%	Array Technologies, Inc. (ARRY)	Array Technologies offers machine learning-based solutions that track the sun so that solar PV systems can generate more electricity
0.17%	Jinko Solar (JKS)	Jinko Solar is the largest solar panel maker in the world and heavy investor in solar R&D. They’re a key player in expanding solar energy
0.16%	Canadian Solar (CSIQ)	Canadian Solar makes and ships solar panels all over the world. This is critical for electrifying everything
0.14%	Gibraltar Industries, Inc. (ROCK)	Gibraltar Industries makes the mounting racks for solar panels that are tailor-made for the buildings and fields where solar systems will be placed
0.07%	Azure Power (AZRE)	Azure Power develops solar power for central and state government utilities in India. Solar power is a key centerpiece of a zero-emissions energy system
0.07%	Maxeon Solar Technologies, Ltd. (MAXN)	Maxeon Solar Technologies makes solar panels and related solar system components worldwide - a critical piece in a zero-emissions energy mix of the future
0.05%	FTC Solar, Inc. (FTCI)	FTC Solar offers solar tracker systems so that solar PV systems can produce more electricity. Expanding solar energy is key to a decarbonized world
0.03%	Renesola Power (SOL)	Renesola Power develops utility-scale solar projects in over 10 countries. This is the type of effort needed to scale solar power to electrify the grid
0.02%	iSun, Inc. (ISUN)	iSun is one of the biggest commercial solar developers in the US. They’re a valuable contributor to expanding solar power
0.02%	Orbital Energy Group, Inc. (OEG)	Orbital Energy offers engineering, construction, and maintenance for utility-scale solar systems. They help expand solar power
0.02%	SPI Energy Co., Ltd. (SPI)	SPI Energy develops solar PV solutions for businesses, residential, government and utility customers. Expanding solar is key to a clean energy system
0.02%	Sunworks (SUNW)	Sunworks makes solar power systems for a wide range of markets. Solar is a key zero-carbon energy source