Against the backdrop of the United Nations Climate Change Conference, known as COP26, it’s worth remembering that although renewable energy equities and exchange traded funds, such as the ALPS Clean Energy ETF (ACES), are encountering headwinds this year, the long-term outlook for these assets remains bright.
In fact, plenty of near-term data points indicate that markets may be getting it wrong this year with ACES and friends, suggesting that opportunity is afoot with renewable energy and clean technology equities. ACES tracks the CIBC Atlas Clean Energy Index, which is comprised of U.S. and Canadian companies involved in the clean energy sector, including renewables and clean technology.
The expanse and diversification offered by ACES is relevant because it’s not just one green energy concept that’s taking off — it’s several.
“Installations of renewable energy and sales of electric vehicles (EVs) set records in the US in recent quarters, as the economy rebounded from COVID-19 and the energy transition continued to gain steam,” according to IHS Markit. “The American Clean Power Association (ACP) said the US installed 3,336 MW of new wind, solar, and storage capacity during the third quarter of 2021, with additions totaling 15,317 MW in the first three quarters, a 23% increase compared with 2020.”
Home to nearly $1.1 billion in assets under management, ACES allocates nearly 45% of its combined weight to solar and wind equities. Electric vehicle and storage names are the fund’s third-largest industry weight at 13.45%, confirming that ACES offers more-than-adequate leverage to the increasing purchase of electric vehicles.
“The US electric vehicle (EV) industry lately is showing an even greater rate of growth than the renewable power industry,” notes Markit. “According to data from IHS Markit and from the Industry Alliance for Automotive Innovation (AAI), EV sales in the second quarter of 2021 surged to new records and obliterated the mark of the same quarter a year ago.”
Investors shouldn’t overlook the energy storage component, either.
“Also on the rise are hybrid systems that combine renewables and energy storage. ACP said 2,443 MW of solar-plus-storage was added to the grid in the past quarter, bringing the on-the-grid total to 3,574 MW, with another 1,931 MW partially online and 21,185 MW in the pipeline. For wind-plus-storage, 1,892 MW is online,” adds IHS Markit.
As for renewable power projects, which are important to the wind and solar names in ACES, nearly 50 were commissioned across 20 states in the third quarter, according to Markit, and 41 of those projects are either wind or solar.
Other renewable 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.
