Clean energy technology sector-related exchange traded funds could pick up momentum as the International Energy Agency projected a record new capacity to generate renewable energy in 2022 on growing concerns over energy security and climate change.

The IEA expects 320 gigawatts of renewable energy capacity will be added this year, or equivalent to the total annual demand from Germany, Europe’s largest economy, and up from a previous record of 295 gigawatts in 2021, Reuters reports.

The new capacity in 2021 was driven by expansions in solar energy across China and Europe, which exceeded the Paris-based agency’s expectations.

“Energy market developments in recent months  especially in Europe  have proven once again the essential role of renewables in improving energy security, in addition to their well-established effectiveness at reducing emissions,” IEA Executive Director Fatih Birol says.

The IEA’s optimistic projections come despite the negative impact of the COVID-19 pandemic and Russia’s invasion of Ukraine, which have fueled inflation to multi-decade highs and contributed to soaring energy prices in some advanced economies. However, the rising energy costs have helped push policymakers to find cheaper and more reliable alternative energy sources.

The IEA noted that the growth of renewable power has been hindered by ongoing supply chain issues, with the cost of installing solar photovoltaic panels remaining high this year and for the next year as well due to higher commodity and freight prices.

Renewable growth has been led by China, the European Union, and Latin America in 2021, but the segment has lagged in the United States.

“The U.S. outlook is clouded by uncertainty over new incentives for wind and solar and by trade actions against solar PV imports from China and Southeast Asia,” according to the IEA.

ETF investors who are interested in the clean energy space can turn to broad sector ETF plays like the Invesco WilderHill Clean Energy ETF (PBW), the ALPS Clean Energy ETF (ACES), the SPDR S&P Kensho Clean Power ETF (CNRG), the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), and the iShares Global Clean Energy ETF (ICLN).

For more news, information, and strategy, visit the ESG Channel.