Between rising demand created by artificial intelligence data centers and the pressing need to shore up energy grids, market participants hear plenty about the electrification infrastructure investment thesis.
It’s one rooted in sound fundamentals and accessible via select ETFs, including the ALPS Electrification Infrastructure ETF (ELFY). ; ELFY, which tracks the Ladenburg Thalmann Electrification Infrastructure Index, is 13 months old and already has $202.8 million in assets under management.
Mania doesn’t explain ELFY’s success. Electricity demand is soaring around the world.
“Global electricity demand has surged over the past two decades. In fact, it nearly doubled from 2000 to 2023,” noted McKinsey. “In 2024, demand continued to accelerate, rising by approximately 4 percent (about 1,000 terawatt-hours [TWh]) and approaching the 30,000 TWh threshold for the first time.”
ELFY Set Up for Long-Term Success
Thematic funds were once criticized for being too nuanced and only relevant for short amounts of time. ELFY dispels those notions. The ALPS fund is comprehensible; viable long-term tailwinds support the concept of electrification.
“Global demand has surged due to rapid economic growth, industrialization, and urbanization as well as the increased use of digital infrastructure. Rising living standards in combination with increased use of air conditioning, electric vehicles (EVs), and heat pumps are also contributing factors,” added McKinsey.
Arguably overlooked are two points regarding the ELFY opportunity set. First, shoring up of national energy grids, including in the U.S. needs to occur around the world. It’s not just a matter of demand. It’s a matter of national security.
Second, research confirms that are links between increasing electricity demand and GDP growth. This indicates governments may commit capital to electrification infrastructure. Additionally, electricity’s percentage as a final share of energy consumption is trending higher.
“Electricity’s share in final energy consumption has increased from 18 percent in 2010 to 22 percent today and could reach 24 percent by the end of the decade, according to our modeling. This trend underscores electrification’s growing importance to future energy systems and supply chains, though the outlook varies by region,” observed McKinsey.
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VettaFi LLC (“VettaFi”) is the index provider for ELFY, for which it receives an index licensing fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.
