Costs are declining and adoption is increasing. Those are two of the primary factors lifting alternative energy stocks and the related ETFs this year. That group includes the First Trust Global Wind Energy Fund (NYSEArca: FAN). FAN, which is up more than 19% year-to-date, tracks the ISE Clean Edge Global Wind Energy Index.
“Companies in the index universe that are identified as providing goods and services exclusively to the wind energy industry are given an aggregate weight of 66.67% of the index. Those companies determined to be significant participants in the wind energy industry despite not being exclusive to such industry are given an aggregate weight of 33.33% of the index,” according to First Trust.
Last week, the American Wind Energy Association (AWEA) noted that the U.S. is now home to over 100 gigawatts (GW) of wind energy capacity.
“According to the AWEA’s ‘U.S. Wind Industry Third Quarter 2019 Market Report’. 1,927 megawatts – a little under 2 GW – of wind power capacity was commissioned in the third quarter of 2019, the highest third quarter on record for installations. These installations pushed overall capacity above the landmark figure of 100 GW,” reports CNBC.
Focus On FAN
Solar and wind ETF investors should look to the long-term as record investments in clean technology could help fuel growth.
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.
Moreover, the clean energy sources could be replacing some of the so-called dirty energy, like coal, which richer Organization for Economic Co-operation and Development countries have cut demand for almost a decade.
The global wind industry is booming and FAN is positioned to take advantage of that growth because the fund allocates just 18% of its weight to U.S. stocks.
“Globally, the offshore industry is set for expansion over the coming years. Last week, the International Energy Agency said that offshore wind looked set to become a $1 trillion business by 2040, with global capacity set for a 15-fold increase,” according to CNBC.
For more information on the renewables space, visit our renewable energy category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
