Rebounding oil prices are helping more than just energy equities. There are inklings of a resurgence, albeit modest for the moment, with alternative and clean energy stocks and exchange traded funds, such as the iShares Global Clean Energy ETF (NYSEArca: ICLN).
ICLN is higher by 2.7% over the past week as oil prices have rallied. Solar and wind exchange traded fund investors should look to the long-term as record investments in clean technology could help fuel growth. While the plunge in oil prices have dragged down the renewable energy, investors may find a cheaper entry point into a growing sector.
Government subsidies helped green energy technology get its foot in the door, but lower costs will help the industry compete with fossil fuel. Economies of scale has been the top driver of falling prices – for example, the cost of solar power has plunged to 1/150th of its level since the 1970s and solar installation has surged 115,000-fold. [Clean Performance for Clean Energy ETFs]
According to Bloomberg New Energy Finance, power generation capacity additions in fossil fuels will slowly diminish from a projected 110 gigawatts in 2015 to 64 gigawatts in 2030. Meanwhile, clean energy capacity will steadily rise from an expected 164 gigawatts this year to 279 gigawatts in 2030, with the majority of new capacity coming out of photovoltaic solar panels.
[related_stories]While solar makes up less than 1% of the electricity market today, it will become the largest single source by 2050, according to the International Energy Agency.
“Renewables are now receiving twice as much funding as fossil fuels. If you believe in following the money, you might want to take this into consideration. Also consider that renewable costs are consistently moving lower. When a once expensive technology becomes more affordable, it goes mainstream. When that technology goes mainstream, the potential is high,” according to Investopedia.
The $82.4 million ICLN holds just 29 stocks. Over 51% of the ETF’s combined weight is allocated to U.S. and Chinese companies.
iShares Global Clean Energy ETF
