Alternative, clean energy-related exchange traded funds are weathering the storm as the slide in oil prices and Tesla Motors (NasdaqGS: TSLA) pressure the go-green mindset.
As oil priced declined, with West Texas Intermediate and Brent crude oil futures pushing bellow $50 per barrel, the market is deliberating on the competitive advantage of clean technology over cheap energy.
For instance, Elon Musk’s Tesla Motors (NasdaqGS: TSLA) has dropped 18.8% over the past three months while Solar City (NasdaqGS: SCTY) declined 9.9%.
Meanwhile, the Guggenheim Solar ETF (NYSEArca: TAN), which includes 9.1% position in SCTY, has dipped 11.7% over the past three months. [As Oil Tumbles, Clouds Gather for Solar ETFs]
Broader alternative energy ETFs, which include solar energy along with other sub-sector exposures, have been slightly better off. The Market Vectors Global Alternative Energy ETF (NYSEArca: GEX), which has a 10.5% position in TSLA, was down 4.6% over the past three months while the First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGS: QCLN), which has a 7.2% weight in TSLA, was 6.5% lower. [Cheap Oil Saps Tesla, Alternative Energy ETFs’ Vigor]
Despite the fall-off in energy prices, clean energy investments rose for the first time in three years over 2014, with wind, solar, biofuels and other low-carbon energy technologies attracting $310 billion last year, a 16% gain year-over-year, reports Louise Downing for Bloomberg.
Boosting the appeal for green tech investments, China enacted a 32% expansion in its commitment to renewables and added a record $19.4 billion investment into offshore wind projects.
“Healthy investment in clean energy may surprise some commentators, who have been predicting trouble for renewables as a result of the oil price collapse,” Michael Liebreich, chairman of Bloomberg New Energy Finance, said in the article. “Our answer is that 2014 was too early to see any noticeable effect on investment. The impact of cheaper crude will be felt much more in road transport than in electricity generation.”
Looking ahead, the clean tech space will continue to expand, brushing off concerns that low oil prices would pressure funding for low-carbon energy. For instance, BNEF calculates installations for solar and wind power will expand 10% this year.
“This increase in renewable energy investment demonstrates the resilience of the sector in the face of tumbling oil prices,” Ben Warren, head of environmental finance at EY, said in the article. “This trend is set to continue as technology around renewables becomes more affordable. The increasing role that renewable energy plays in emerging markets will also help ensure sustainable growth for the sector.”
For more global exposure, alternative energy investors can take a look at related ETFs that take on overseas companies. For instance, GEX includes a large U.S. position at 65.2%, along with Denmark 9.5%, China 7.7%, Italy 4.2% and Japan 3.2%. Additionally, the PowerShares Cleantech Portfolio (NYSEArca: PZD) includes large tilts toward developed economies, including U.S. 55.9%, Switzerland 6.9%, France 6.1%, Denmark 6.1% and Germany 4.6%.
Alternatively, the PowerShares Global Clean Energy Portfolio (NYSEArca: PBD) and iShares Global Clean Energy ETF (NYSEArca: ICLN) both include greater allocations toward China. Specifically, ICLN’s top country weights includes China 37.8%, U.S. 22.0%, Brazil 6.7%, Denmark 6.1% and Japan 5.5%. PBD’s top countries include U.S. 32.6%, China 16.3%, Germany 6.8%, Hong Kong 4.6% and Denmark 4.5%.
For more information on the alternative energy space, visit our clean energy category.
Max Chen contributed to this article.