FT : Solar power expected to surpass coal in 5 years, IEA says

Solar power expected to surpass coal in 5 years, IEA says
Renewable energy forecast to become largest source of electricity generation as soon as 2025


Solar power is undergoing a boom as the energy crisis drives a shift to renewable energy following the war in Ukraine and is expected to surpass coal power by 2027, the International Energy Agency has forecast.

Renewable energy overall will become the largest source of global electricity generation by early 2025, the IEA said, and the world will add twice as much renewable capacity from 2022 to 2027 as in the previous five years.


Not only were countries driving “the expansion of new renewables” to achieve climate goals, but energy security and the need to “diversify” renewables supply chains away from China had become increasingly important, IEA executive director Fatih Birol said in an interview.

“There is a strong competition between the largest economies of the world to have a pole position when it comes to the next chapter of the industry sector,” he said, whether in solar, wind power, batteries or electric vehicles.

The rush to replace the oil and gas that is no longer coming from Russia, and to build domestic renewables sectors, has led to a push for industry incentives and subsidies.

The US is forging ahead with its landmark climate package, the $369bn Inflation Reduction Act, which includes incentives for solar manufacturing through $10bn allocated for tax credits for clean energy overall and $27bn set aside in a “green bank” to support clean energy projects in communities.

Between 2022 and 2027, global renewable power capacity will increase by 2,400 gigawatts, an amount equal to China’s power capacity today, the IEA estimated in its latest annual report on renewable energy. This is 30 per cent higher than the IEA had forecast a year ago.

The US and India are expected to lead diversification of the solar manufacturing supply chain, the IEA said, reducing China’s dominance. Solar investment by the two countries is expected to reach almost $25bn between 2022 and 2027, a sevenfold increase from the past five years.

China, however, will remain a “dominant player”, the IEA said, with its market share estimated at around 75 per cent in 2027 compared with 90 per cent today.

The IEA warned in June that China’s hold on the solar panel supply chain could slow the global shift to cleaner energy. The country will account for almost half of newly added renewable power in the years to 2027, helped by policies included in China’s latest five-year plan, the agency said this week.

The solar boom is expected to pick up pace in the next two years. Iberdrola, a leading European renewable energy company, planned to “more than double our global solar capacity to 10.6 gigawatts by the end of 2025”, said Xabier Viteri Solaun, director of the sustainable energy business.


Solar projects can be developed and built more quickly than other renewable sources, he added, and the company is “seeing an increase in solar capacity being added to new and existing wind farms”.

Even faster growth can occur if European countries make it easier to obtain permits for new projects, improve incentives for rooftop solar installations and offer better terms in renewable energy auctions, the IEA noted.


Despite the encouraging overall trends, the European wind industry was suffering a “major challenge”, Birol said. The combination of Chinese and US competition and soaring raw material and supply costs is creating financial stress.

Birol also repeated warnings about the replacement of fossil fuels from Russia with new oil and gas projects. Supply should come from existing fields, he said, while steps should be taken to drive down demand.

“The invasion of Ukraine by Russia should not be a justification for large scale fossil fuel investments,” he said, as these would not only put “climate targets at risk” but end up as stranded assets.

However, even with the IEA’s “accelerated” scenario — where renewable capacity grows more quickly than in the main case due to policies and other measures that are not currently in the works — the world will fall short of what is needed to limit global warming.

Temperatures have already risen by at least 1.1C since the late 1800s. Under the Paris accord, almost 200 countries agreed to cut emissions enough to keep the rise to well below 2C, and ideally 1.5C.

Renewable energy growth “would significantly narrow the gap” to the pathway, bringing the total capacity to 2,950GW by 2027, the IEA said. But this would still leave a gap of 800GW to reach net zero greenhouse gas emissions by 2050.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-Senator Kyrsten Sinema’s announcement that she would become an independent left Democrats in her state, many of whom have long wanted to defeat her in a primary, facing a new political calculus.
-Past hostage exchanges have sparked criticism, but the response to Brittney Griner’s homecoming has been fueled by the politics of race, gender and sexual orientation.
-US officials say Moscow had been pushing for the release of a Russian assassin being held in Germany before finally agreeing to release Ms. Brittney Griner for Viktor Bout, a Russian arms dealer.
-Recruited for the Navy SEALs, many sailors wind up scraping paint. The high failure rate of the elite force’s selection course shunts hundreds of candidates into low-skilled jobs.
-Lina Khan, aiming to block Microsoft’s Activision deal, faces a challenge.
Ms. Khan, the chair of the Federal Trade Commission, has staked an ambitious trustbusting agenda on a case that may be difficult to win.
-The department of Justice had asked a federal judge to force a representative of Donald J. Trump to swear under oath that there are no more classified documents at any of his properties.
-Kari Lake has sued Arizona’s largest county, seeking to overturn her defeat. Ms. Lake, who fueled the false claims that the 2020 election had been stolen from Donald Trump, lost the Arizona governor’s race by 17,000 votes.
-The kind of critically praised dramas that often dominate the awards season are falling flat at the box office, failing to justify the cost to make them.
-New Yorkers are urged to wear masks indoors as covid and flu cases rise
An increase in Covid, flu and RSV cases prompted health officials on Friday to tell residents to wear masks indoors and in crowded outdoor settings.
-Israeli Prime Minister Benjamin Netanyahu’s right-wing bloc won Israel’s general election last month. But several issues have complicated the forming of his government.

THE FINANCIAL TIMES
-Russian president Vladimir Putin has threatened to cut oil production in response to the G7’s price cap on Moscow’s crude exports, a measure western countries hope will keep oil flowing while denting revenues for the Kremlin’s war in Ukraine.
-The US alleged on Friday that Russia is providing Iran with “an unprecedented level of military and technical support” as Moscow’s full-scale invasion of Ukraine draws the increasingly isolated countries closer together.
Citing US intelligence, National Security Council spokesperson John Kirby said Iran is set to receive stepped up military and technical support from Russia in exchange for supplying it with drones.
-Europe’s ban on crude oil imports from Russia, the world’s biggest oil exporter, is a genuine sanction, aiming to force Moscow to reroute supplies and halt the ugly optics of allies of war-torn Ukraine funneling petrodollars to President Vladimir Putin. But the G7’s price cap plan aims to take the edge off. When the EU announced it would impose sanctions on any tanker hauling Russian crude, even one sailing to Asia, there was concern in some western capitals that the measures would bring a crash in Russian exports and a rise in oil prices.
-The Federal Trade Commission’s legal challenge on Thursday to the software company’s $75B purchase of gaming company Activision Blizzard marks the first direct regulatory threat to the US software giant in more than two decades. With competition authorities in the UK and EU intensifying their own investigations, it has threatened to touch off a spate of actions that could unravel the gaming industry’s biggest deal.
-Arab states and China pledged deeper ties at a summit with president Xi Jinping on Friday, with Saudi Arabia saying it would balance its relationships with Beijing and the kingdom’s traditional partner, the US.
Xi wrapped up a three-day stay in the Saudi capital Riyadh, saying China would work more closely with the region and boost oil and gas trade, after a visit the US was watching closely.
-Brad Pitt’s Plan B Entertainment, the acclaimed Hollywood producer behind Moonlight and The Big Short, has been bought by France’s Mediawan in a rare transatlantic deal that values the US group at more than $300M in cash and shares.
-Venture capitalists are rushing to invest in artificial intelligence start-ups as growing hype around “generative AI” fills the void left by failing cryptocurrency and blockchain ventures.
-Kyrsten Sinema, a centrist senator from Arizona, is leaving the Democratic Party, in a blow to Joe Biden and his party just after a successful midterm election in which they added an extra seat to their majority in the upper chamber of Congress.
-Most in Peru’s business community were relieved to see President Pedro Castillo, who took office in July 2021, ousted from office, while many of Peru’s newspapers cheered his downfall. “Democracy holds,” read the headline of an editorial in El Comercio.
But for thousands demonstrating across the country, the former primary school teacher from rural Chota province is a victim of persecution by a corrupt Congress and elite.
Last month, polling by the Institute of Peruvian Studies found Castillo’s approval rating was 19% in Lima and 33% in urban areas nationwide but 45% in rural areas.
-China is under-reporting coronavirus cases and fatalities, obscuring the scale and severity of the health crisis just as the world’s most populous country enters its deadliest phase of the pandemic, analysts warn. Official statistics on Friday revealed no new deaths and only 16,363 locally transmitted coronavirus cases in China, less than half the peak caseload reported last month.

NY POST
-Influential U.S. soccer journalist Grant Wahl died in Qatar while covering the World Cup, his brother announced. He was 49. While covering Argentina’s quarterfinal win over the Netherlands on Friday, Wahl, who had run his own Substack after a long career at Sports Illustrated, collapsed at Lusail Iconic Stadium and was rushed to a nearby hospital. It’s unclear whether he died at the hospital or in transport.
His brother, Eric, believes foul play from the Qatari government may have been involved.
-Violent and disrespectful classroom behavior has led to a staggering 50 teachers and bus drivers to quit a Florida school district in the last two years. Brevard County School District, the state’s 10th-largest, held a heated meeting Thursday that offered an unvarnished and often disturbing glimpse into the state of its classrooms.
-A New York art gallery is featuring Hunter Biden’s artwork in a show that opened on Friday night. This is the latest triumph on the president’s son’s Redemption Tour. Hunter Biden is totally corrupt, sporadically depraved, and utterly untrustworthy. His “Laptop from Hell” exposed enough dirt to spur a deluge of federal charges. But instead of doing time, Hunter is being feted as if he were the resurrection of Vincent Van Gogh.
-Ex-Marine Paul Whelan wasn’t freed with back-in-the-USA basketball star Brittney Griner because Russia demanded the release of a killer spy who’s imprisoned for life in Germany.
Negotiations to swap Russian “Merchant of Death” arms dealer Viktor Bout for both Griner and Whelan broke down over Russian demands that convicted assassin Vadim Krasikov be included in the deal, according to multiple reports.
-Uber is suing Washingtoin DC over its plan to raise the minimum wage for ride-share drivers by nearly 24% per mile – claiming the drastic hikes will damage the entire ride-sharing industry, new court papers allege.
The city Taxi and Limousine Commission last month approved the first increase in metered fares since 2012 — including increases in per-mile and per-minute rates for Uber and Lyft Inc. drivers.

Barrons : This Luxury Stock Is Still in Fashion. It Could Be Time to Buy.

This Luxury Stock Is Still in Fashion. It Could Be Time to Buy.

Luxury-goods stocks have been hit by higher costs for raw materials, lockdowns in China during the pandemic, and the prospect that a global recession could dampen consumer spending.

Hermès International (ticker: RMS.France), the French maker of Birkin handbags, watches, and silk scarves, has seen its shares fall 3.8% in the past 12 months to a recent 1,516 euros ($1,599), worse than Vuitton bag maker LVMH Moët Hennessy Louis Vuitton (MC.France), which is flat, but better than the 19.2% decline of Gucci owner Kering (KER.France).

The dip in Hermès shares might be a buying opportunity because luxury goods are typically resilient during hard times—wealthy consumers tend to cut back less on spending.

Hermès is in a strong position. Sales in the key China market “picked up strongly” in the third quarter, according to the company, and group sales for the third quarter exceeded analysts’ consensus by 9%.

The company also has an army of high-end enthusiasts willing to pay whatever it takes to snap up the latest exclusive limited-edition leather goods, which means that Hermès won’t have problems passing on price increases.

Jean Danjou, an analyst at broker Oddo, has an Outperform rating on the stock. “The undeniable desirability of the brand and of all of its collections, unmatched pricing power, and a more defensive profile in the event of a marked economic slowdown remain the pillars of the investment case,” he wrote recently to clients.

Eric du Halgouet, Hermès executive vice president of finance, has indicated that prices will increase 5% to 10% in 2023, a significant jump from the 4% rise in 2022.

This means the brand is unlikely to see profit margins squeezed. Deutsche Bank analyst Matt Garland noted that higher sales growth could increase Hermès margins to 40.3% for 2022, a jump from the 39% consensus tracked by Bloomberg. Oddo’s Danjou has lifted his estimate for 2024 sales growth to 9.9% from 9.3%.

Antoine Riou, an analyst at Société Générale, has a price target of €1,645, a 6.7% climb. Deutsche Bank’s Garland has a €1,320 price target, noting that the majority of gains in the share price into 2023 is likely to be “earnings rather than multiple driven.”

Hermès dates back to Paris in 1837, where it started out as a harness maker and saddler. It has come a long way, growing into a company with a market value of €155 billion that employs more than 18,000. Shares are still pricey: They fetch a high ratio of 44.6 times this year’s expected earnings and is valued at an 70% premium to its peers.

Hermès posted net profit of €1.6 billion for the first half of the year through June, a jump from €1.2 billion in the same period a year ago. Revenue was €5.5 billion, up from €4.2 billion in the first half of 2021.

In an update in October, Axel Dumas, Hermès’ executive chairman, wrote that “we move forward with confidence and caution while continuing to bolster our integrated model, rooted in France and committed to job creation.”

That’s another show of strength: The company is hiring more and making investments, such as its new leather-goods workshops.

A further catalyst for the stock could come from reduced marketing costs in China. Covid lockdowns have meant that expensive promotional events may be delayed or canceled.

If sales growth remains robust despite less marketing, writes Deutsche Bank’s Garland, that’s a cost savings the market has yet to price in.

>>> US Close Dow -0,90% S&P -0,74% Nasdaq -0,70% Russell -1,19%

Closing Stock Market Summary

Today's session started on a weaker note as market participants digested the hotter-than-expected Producer Price Index (PPI) for November. For most of the session the main indices clung to narrow trading ranges near their flat lines with both buyers and sellers lacking conviction. Things deteriorated noticeably, however, with about 30 minutes left in the session when the S&P 500 cracked an intraday support zone in the 3955 area. The selling pinned the indices deeper in negative territory and left them at their lows for the day when the closing bell rang.

The PPI report kept market participants on edge ahead of next week's Consumer Price Index and FOMC meeting, the latter of which will also include an updated Summary of Economic Projections that will provide some insight on terminal rate projections.

On a month-over-month basis, the PPI and core-PPI readings were higher than expectations, but the year-over-year readings (7.4% for total PPI and 6.2% for core PPI) were down from 8.1% and 6.8%, respectively, in October.

Still, the stock market's reaction was relatively subdued with the three main indices falling less than 1.0% today. 

Longer-dated Treasuries had a more noticeable reaction. The 10-yr note yield rose eight basis points today to 3.57%. The 2-yr note yield, meanwhile, rose by two basis points to 4.34%.

The late afternoon sell off, which had the semblance of a sell program, left ten of the 11 S&P 500 sectors in negative territory. Energy (-2.3%) was the top laggard despite oil prices squeezing out a slim gain this session ($71.46/bbl, +0.06, +0.1%). 

On the flip side, the communication services sector (+0.02%) was the lone holdout in positive territory. A nice gain in Netflix (NFLX 320.01, +9.75, +3.1%) bolstered sector performance after the company received an upgrade to Overweight from Equal Weight at Wells Fargo.

Despite the noticeable decline ahead of the close, most of today's outsized moves were reserved for individual stocks like lululemon (LULU 326.39, -48.12, -12.9%) and DocuSign (DOCU 49.16, +5.41, +12.4%), which reacted in different ways to their latest earnings reports and outlooks.

  • Dow Jones Industrial Average: -7.9% YTD
  • S&P Midcap 400: -13.1% YTD
  • Russell 2000: -20.0% YTD
  • S&P 500: -17.5% YTD
  • Nasdaq Composite: -29.7% YTD

Reviewing today's economic data:

  • The Producer Price Index for final demand increased 0.3% month-over-month in November (consensus +0.2%) following an upwardly revised 0.3% increase (from 0.2%) in October. The index for final demand, less foods and energy, increased 0.4% month-over-month ( consensus +0.2%) following an upwardly revised 0.1% increase (from 0.0%) in October.
  • On a year-over-year basis, the index for final demand was up 7.4%, versus 8.1% in October, and the index for final demand, less foods and energy, was up 6.2%, versus 6.8% in October.
    • The key takeaway from the report is that it will pique concerns about next week's Consumer Price Index not being as friendly as expected either, which in turn will keep the market on edge about the Fed's monetary policy path. Beyond that consideration, it is good nonetheless to see the year-over-year change in PPI and core PPI moving lower, although the current levels are still far too high.
  • Wholesale Inventories fell to 0.5% in October from a revised 0.8% in September (from 0.6%).
  • The preliminary December University of Michigan Index of Consumer Sentiment checked in at 59.1 ( consensus 57.0) versus the final reading of 56.8 for November. In the same period a year ago, the index stood at 70.6.
    • The key takeaway from the report is that sentiment improved in conjunction with rising stock prices and falling gas prices. Notably, inflation expectations also improved with the downturn in gas prices.

Looking ahead to Monday, market participants will receive the following economic data:

  • 9:45 a.m. ET: Final IHS Markit Services PMI reading for November (prior 46.1)
  • 10:00 a.m. ET: October Factory Orders ( consensus 0.7%; prior 0.3%)
  • 10:00 a.m. ET: November ISM Non-Manufacturing Index (consensus 53.5%; prior 54.4%)