As the end of federal subsidies and now the shale natural gas boom begin to weigh on U.S. wind energy companies, related exchange traded funds are beginning to feel some drag.
While still strengthening, the First Trust Global Wind Energy Fund (NYSEArca: FAN) is falling behind Solar stocks and related Guggenheim Solar ETF (NYSEArca: TAN) so far this year. FAN is up 8.5%, whereas TAN has gained 24.9% year-to-date.
The wind industry in the U.S., the world’s second-largest buyer of wind turbines, is seeing greater competition from cheap natural gas due to the hydraulic fracturing, shale oil boom and is slowing after federal subsidies for wind technology ended last year, reports Christopher Martin for Bloomberg.
“Without the Production Tax Credit, we don’t expect wind to be at cost parity with gas” in most places in the U.S., Stephen Munro, an analyst at New Energy Finance, said in the article.
Wind-power advocates argue that the gas industry, aided by master limited partnerships that allow pipelines to avoid paying income tax, has an unfair advantage. [Shale Oil Boom Will Bolster MLP, Energy Infrastructure ETFs]
“If gas prices weren’t so cheap, then wind might be able to compete on its own,” South Dakota’s Republican Governor Dennis Daugaard, said in the article.
Additionally, after Congress allowed the wind Production Tax Credit to expire last year, wind farm construction plummeted 92%.