Winds of Change Blow for This ETF and that's a Good Thing | ETF Trends

The ALPS Clean Energy ETF (ACES) is consistently finding itself at the right place at the right time amid the world’s shift to cleaner energy sources and that’s true regarding the fund’s 22.18% exposure to wind power equities.

Just ahead of solar and smart grid, wind is the largest of the eight industry exposures in ACES. Those facts confirm not only that the fund is levered to growth in the wind power space, but also that ACES is one of the more comprehensive ETFs in the alternative energy arena.

Data confirm that wind exposure is paying off for ACES. Adding to the case for ACES is that wind power installations are increasing around the world, not just in a single market.

“HS Markit tracked 62.5 GW of new wind installations in 2019, 22% higher than the year before. While over 90% of this was in onshore, the offshore sector also remained bullish with annual installations growing by 45%,” notes the research firm. “Installations in the Asia Pacific, Europe, and North America grew by 15%, 38%, and 42% respectively in 2019, while contracting in other regions. Nearly 60% of all new installations were in mainland China and the United States where imminent subsidy expiries have resulted in a connection rush. These markets are expected to continue driving global wind growth till 2021, in turn significantly benefiting turbine suppliers with a strong presence there.”

Gale-Force Potential

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.

Important to the wind thesis within ACES is that original equipment manufacturers (OEMs) are diversifying product offerings.

“Despite 2.X MW onshore turbines remaining the most popular in 2019, OEMs have grown the installation share of their medium and low wind speed turbine models with larger rotor diameters. Onshore product portfolios have broadened and become more customizable as suppliers try to minimize the levelized cost of electricity (LCOE) across vastly different wind regimes globally,” notes IHS 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.