The near-term outlook for renewable assets and ETFs, including the ALPS Clean Energy ETF (ACES), is compelling. Fortunately, there are positive long-term implications associated with this burgeoning asset class.
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.
Data confirm that epic growth is ahead for the solar and wind industries, two of the largest weights in ACES.
“As of now, around 650 gigawatts of solar and 644 gigawatts of wind have been commissioned worldwide, accounting for around 8% of global electricity generation and covering around 52,000 square kilometers,” according to Bloomberg Green. “Onshore wind and solar will supply 48% of global electricity by 2050, according to BNEF’s New Energy Outlook 2019 scenario, which will require an eight- to nine-fold increase in land use, to more than 423,000 square kilometers.”
Shifts Underway
Seismic shifts in consumption are altering the energy landscape and while there will always be a place for fossil fuels, renewables offer the superior growth trajectory.
“Coal and natural gas have been fighting for the top spot in the U.S. generation market for the last 20 years,” wrote Charles Fishman in Morningstar. “In 2016, gas generation topped coal for the first time. Gas is the new king, with a 35% market share. Now the battlefield is shifting, and in the next decade we expect natural gas and renewable energy, particularly solar and wind, to slug it out.”
ACES takes a different approach than what is seen in other traditional clean energy ETFs. Many of the legacy funds in this space focus on one alternative energy concept, such as solar or wind power. Buoyed by double-digit growth rates in global solar installations over the next decade, ACES, with a substantial solar weight, could be a long-term winner.
“To keep emissions in line with the 2 degrees Celsius warming limit prescribed by the Paris climate agreement, the power sector would have to deploy around 26,000 terawatt-hours of wind and solar generation by 2050, which would cover a land area the size of Turkey,” according to Bloomberg Green.
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.
