Renewables are quickly gaining traction as an alternative and cleaner source of energy, even overtaking coal as the world’s largest source of installed power capacity. With the greater reliance on renewables, investors may turn to clean energy sector-related exchange traded funds to capture further growth.
Around 500,000 solar panels were installed every day last year as a record increase in green electricity installations helped renewables overtake coal as the world’s biggest source of installed power capacity, reports Pilita Clark for the Financial Times.
In 2015, 153 gigawatts of green electricity was installed, mostly from wind and solar projects, or more than the total power capacity of Canada and more than the amount of conventional fossil fuel or nuclear power added for the year.
According to the International Energy Agency, two wind turbines were installed every hour in countries like China, and the pace of renewable energy growth could keep on rising ahead.
“We are witnessing a transformation of global power markets led by renewables,” Fatih Birol, executive director of the global energy advisory agency, told the Financial Times.
Contributing to the rapid growth of renewables, the improvement in technologies has drastically cut costs for solar and onshore wind power. The average global generation costs for new onshore wind farms declined by an estimated 30% between 2010 and 2015 while big solar panel costs plunged by two thirds. The IEA projects costs will further drop over the next five years by 15% on average for wind and by 25% for solar power.
[related_stories]The agency also expects renewables’ share of power generation to rise to 28% by 2021. To put things in perspective, coal power plants supplied about 39% of the world’s power in 2015 while renewables accounted for 23%.
Investors can play the rising growth in renewables through clean energy sector-related ETFs. For starters, the Guggenheim Solar ETF (NYSEArca: TAN) and the Market Vectors Solar Energy ETF (NYSEArca: KWT) track global solar photovoltaic panel producers. The First Trust Global Wind Energy Fund (NYSEArca: FAN) focuses on the wind industry.
ETF investors can also track the broader green energy industry through the PowerShares WilderHill Clean Energy Portfolio (NYSEArca: PBW) and First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGS: QCLN), which both track U.S. clean energy companies, including solar photovoltaics, biofuels and advanced batteries.
Additionally, the Market Vectors Global Alternative Energy ETF (NYSEArca: GEX) and PowerShares Global Clean Energy Portfolio (NYSEArca: PBD) cover global clean energy companies.
For more information on renewables, visit our clean energy category.