Solar – You’re Burning Us

Solar, the faster growing energy source in the world is facing a bit of a bit of dilemma which could cause 2021 to be the first year of negative growth in 17 years.

The years and years of declining solar costs that recently made it a great investment for many are coming to a screeching halt. Over the past 10 years, solar module production costs have dropped 90%. So far this year, prices have climbed 18% driven by a 400% increase in the cost of one of the key ingredients, polysilicon.

What makes the problem even worse is that the reason prices of polysilicon are soaring is similar to why Doge coin shot up, people are pumping and dumping. Toward the end of 2020, it was becoming clear that demand was outweighing supply. To capitalize, traders all over the world bought up polysilicon. Currently, at least 20% of the polysilicon is held by speculative traders hoarding the material and contracts.

This massive increase in price could not have come at a worse time for countries like America and Canada who have recently dumped massive investments into solar. Many think this is temporary, but any 18% increase feels like an eternity when there is this much money involved.

Mortgage Backed Securities are up 9 bps this morning and a fourth consecutive day in the green after the sell off two weeks ago. They have broken above their 25 DMA and broke through a strong Fibonacci level this morning. At the same time, the 10 year fell below the 1.60 floor that was so strong earlier this year. This is all good news for mortgage rates as you can see in the rate table below! We are holding a floating bias if you are able to monitor the market.