On a year-to-date basis, many clean energy stocks and related ETFs are saddled with steep losses. However, some of those assets are proving responsive to recent positive headlines regarding renewable adoption.
For example, Texas — one of the most oil-rich areas in the world — now generates more energy from solar than coal. And in terms of large-scale solar generation, the Lone Star State has accomplished something previously unthinkable: it’s getting more power from solar than California does. That might be one reason some investors are renewing their affinity for clean energy equities and ETFs and that could be contributing to a one-month gain (as of May 24) of 19.14% for the ALPS Clean Energy ETF (ACES).
ACES turns six years old next month and follows the CIBC Atlas Clean Energy Index. The ETF could be ready to build on the aforementioned recent momentum. That’s due to its multipronged approach that gives investors exposure to a variety of clean energy themes. That could be advantageous, as renewable adoption is rising and that trend isn’t confined to a singular source.
Governments Supporting Clean Energy Adoption
As has been widely documented, government policy — both in the U.S. and abroad — is stoking renewables adoption. That could be constructive over the lon -term for ACES’ member companies.
“To develop renewable energy technology, governments are turning to various public policy measures. The European Union’s Green Deal Industrial Plan, India’s Production Linked Incentives (PLI) and the Inflation Reduction Act (IRA) in the US are all policies designed to further stimulate the integration of sustainable energy,” according to IBM.
That doesn’t include China’s efforts to entice drivers to embrace EVs in addition to government policy supporting increased deployment of solar and wind power. As North America follows a similar trajectory, ACES could be poised to benefit.
Regarding ACES’ exposure to various renewable energy themes, solar and wind typically grab the most press . The ETF allocates a combined 43.48% of its roster to those industries. However, other renewables are seeing upticks in adoption around the world. That could support ACES. Hydro/geothermal accounts for 10.11% of the ACES roster.
“Currently, hydropower generates more power—reaching 4,300 TWh in 2022 — than all other clean energy sources combined. [It] will remain the largest source through 2030,” noted IBM, citing the International Energy Agency.
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