The ALPS Clean Energy ETF (ACES) isn’t short of catalysts this year and one of the primary drivers of the ETF’s scintillating showing is solar.
ACES is one of the more diverse renewable energy ETFs on the market, providing exposure to multiple clean energy industries, but solar is one of its largest industry-level allocations.
As the world moves more towards renewable energy sources, solar energy could be one of the main beneficiaries. According to a “United States Solar Energy Market – Growth, Trends, and Forecasts (2020 – 2025)” report, more growth is ahead over the next five years.
“The United States solar energy market is expected to grow at a CAGR of 17.32% during 2020-2025,” the report noted. “Factors, such as solar PV projects under construction, in the pipeline and planning stages, and supportive policies of the government are expected to boost the cumulative installed capacity of solar energy during the forecast period.”
ACES Has Data on Its Side
This year, solar is a dominant force for renewable energy investors.
“A bright spot in the energy complex, solar stocks are on a tear this year, with some companies at all-time highs,” writes Debbie Carlson for The Ticker Tape. “Solar is also outpacing other forms of renewable energy, such as wind. Wind company stocks are strong, but they haven’t seen gains like solar.”
ACES’ solar components included companies that derive a significant amount of their revenues from the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products. Declining costs a low interest rate in the U.S. are bolstering the case for solar equities, propelling ACES higher in the process.
“Ben Watson, education coach at TD Ameritrade, observed that (on the surface) there are two reasons why solar companies are besting fossil fuel companies,” reports the Ticker Tape. “First, solar panel costs are falling, and homebuilders who are doing new construction are incorporating solar. There’s also greater acceptance of renewable energy for both new construction and retrofits. Second, rock-bottom interest rates benefit solar panel manufacturers like RUN and SEDG as well as panel installers because they’re able to leverage debt to install products. “They’ve figured out their recapture costs down the road based on these low interest rates,” Watson said, explaining the resurgence in solar companies since March.”
Other alternative energy ETFs include the First Trust Global Wind Energy ETF (FAN) and the SPDR Kensho Clean Power ETF (CNRG).
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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.
