When it comes to renewable energy adoption at a regional level, the U.S., China, and Europe are usually viewed as the major players, but some other areas could drive growth in the years ahead for ETFs, such as the ALPS Clean Energy ETF (ACES).
A surprise region that could engineer renewables growth is Southeast Asia. While the bulk of ACES’s components are domestic companies, the fund has global reach and as new markets open up, some of the fund’s member firms are poised to expand beyond the U.S.
“Southeast Asia is a very attractive market for renewable energy, owing to its rich renewable resources and surging energy consumption,” notes IHS Markit. “Growing at an average pace of more than 5% per annum, power demand in Southeast Asia is projected to keep rising over the next decade.”
ACES International Allure
Emerging markets are also taking a cleaner approach as they try to cut down on pollution. For example, China, the world’s second-largest economy, suffers from heavy pollution after it quickly industrialized its economy, but it has also heavily adapted to solar as a means to combat the rising pollution and shift away from dirty coal.
“By 2040, IHS Markit forecasts that renewable energy will make up more than 18% of total power generation in the region,” according to IHS Markit. “The region has an aspirational target to increase renewable energy’s share of the primary energy mix to 23%, and this is coupled with the individual country’s renewable targets.”
ACES follows the CIBC Atlas Clean Energy Index. That benchmark is comprised of U.S. and Canada-based companies that primarily operate in the clean energy sector. Constituents are companies focused on renewables and other clean technologies that enable the evolution of a more sustainable energy sector.
Solar is likely to lead the way in terms of renewables adoption in Southeast Asia. As just one example, Malaysia serves as a template for that trend.
“Since 2016, over 4.6 GW of renewable tenders have been called across Southeast Asia, mainly for solar PV capacity. Currently leading with 2.73 GW of renewable tenders, Malaysia has demonstrated the effective use of tenders to both lower the cost of solar generation and grow renewables capacity. Malaysia introduced large-scale solar PV tenders in 2016 and has already issued four tenders to date,” according to Markit.
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.
