Solar ETFs Look for 2014 Sequel

After several years of struggling and reverse splits in 2012, solar exchange traded funds bounced back with a vengeance in 2013.

With the year almost over, the Guggenheim Solar ETF (NYSEArca: TAN) ranks as the year’s top-performing non-leveraged ETF, having more than doubled. The rival Market Vectors Solar Energy ETF (NYSEArca: KWT) has not quite doubled, but the fund is on course to be this year’s second-best non-leveraged ETF behind TAN. [Seduced by Solar ETFs]

Two other alternative energy ETFs rank among this year’s 10 best, but TAN is the name-brand ETF for the alternative energy and investors are wondering if that fund (and KWT) can keep the good times going next year. TAN and KWT have a chance and here’s why:

Solar companies are solving one of the industry’s long-standing problems: Driving costs low enough to compel end users to make the switch from traditional fuel sources.

“What’s happening now is bigger than that, it’s a full-scale commercialization of solar technology, the buildout of an entire infrastructure meant to rival the filthy, inefficient coal-burning complex at some point in the future. According to NPD, “the pipeline of large-scale solar power projects in the process of being built in the U.S. will hit 43 gigawatts his coming year,” which represents a 7% increase over such projects launched in 2013,” writes Josh Brown at The Reformed Broker.

There is even some talk that by 2020, if the current cost-cutting trajectory remains true, solar costs across the U.S. will be on par with some of the cheaper fossil fuels.