As alternative energy technologies advance, companies are cutting costs and improving their bottom line, which has translated into continued strength in related green sector exchange traded funds.
“The business model is getting better and better,” Ulf Moslener, a professor at the Frankfurt School of Finance & Management, said in a Bloomberg article. “The value-for-money trend for renewables is improving – and in the traditional sources, it’s deteriorating.”
Moslener points out that while some investors have pulled back from the sector, given misgivings about an end to government subsidies, some investors are still taking advantage of improving technologies and financing. For instance, costs for solar panels has declined 60% over the past three years.
The booming alternative energy sector has helped clean energy stocks outperform, with the PowerShares WilderHill Clean Energy Portfolio (NYSEArca: PBW) up 8.3% and the First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGS: QCLN) up 12.0% year-to-date. In comparison, the S&P 500 index only gained 1.4% so far this year. [Time Again for Tesla ETFs]
Photovoltaic, or solar, companies still lead the clean energy sector. The Guggenheim Solar ETF (NYSEArca: TAN) has increased 24.9% year-to-date. [Solar ETFs Shine As Sector Shows Added Strength]
Clean energy, not including hydro-power, makes up 8.5% of global generating capacity, compared to 7.8% in 2012. In 2013, around 44% of all new installed power was from clean sources.
Overseas, countries are also increasing spending on alternative energy sources. China has spent $56 billion in renewable energy investments, and Europe invested $48 billion.
Investors can gain exposure to the global growth in clean energy through the Market Vectors Global Alternative Energy ETF (NYSEArca: GEX) and PowerShares Global Clean Energy Portfolio (NYSEArca: PBD). Along with a heavy allocation toward the U.S., GEX includes China 10.1%, Denmark 8.0%, Italy 4.7%, Japan 3.6% and Spain 2.6%. PBD also includes China 14.8%, Germany 6.3%, Taiwan 5.2%, Denmark 4.2% and Spain 4.0%. GEX is up 9.4% and PBD is up 11.7% year-to-date.
For more information on clean energy companies, visit our clean energy category.