Storage Wars: Solar ETF Is Credible Avenue to Battery Storage Boom

Battery storage is a vital component in the renewable energy evolution, and thanks to exchange traded funds, investors have multiple avenues for tapping into the battery boom.

One of the more compelling options is the Invesco Solar ETF (TAN) because some solar companies, including several TAN components, are already making substantial inroads in the battery storage market. That could prove advantageous for the fund’s long-term growth prospects.

“Battery storage is a key piece of the energy transition, and we believe a combination of improving economics, renewables growth and decarbonization policy initiatives across the globe are poised to drive a significant inflection in adoption in the coming decade,” writes Goldman Sachs in a recent note.

TAN, which tracks the MAC Global Solar Energy Index, arguably offers more leverage to the battery storage market than rival single-industry renewable energy ETFs, and that’s a significant characteristic for investors to consider because the outlook for battery storage is compelling, to say the least.

“Goldman believes the market will post a compound annual growth rate of 30% over the next decade, expanding to a total addressable market above $200 billion. This translates to a revenue opportunity of $33 billion by 2030, up from $5 billion in 2020,” reports Pippa Stevens for CNBC.

In the aforementioned report, Goldman Sachs highlights several stocks as battery storage beneficiaries. That group includes Enphase Energy (NASDAQ:ENPH) and SolarEdge Technologies (NASDAQ:SDGE).

“Goldman has a buy rating on both Enphase and SolarEdge, which make inverters for solar systems and also have battery offerings. For Enphase, analyst Brian Lee noted that storage shipments are accelerating and are a ‘key driver of growth’ for the company. Lee estimates that revenue from storage will grow from 7% in 2020 to 26% by 2023,” according to CNBC.

Regarding SolarEdge, that company, like Tesla (NASDAQ:TSLA), is becoming more vertically integrated and battery storage is a big part of that integration. Goldman estimates that by 2023, battery storage will account for $1 of every $5 in sales generated by the company.

Should those optimistic forecasts prove accurate, TAN investors stand to benefit because Enphase and SolarEdge are the solar ETF’s top two components, combining for about 26.5% of its weight. No other holding exceeds a weight of 6.71%. Overall, TAN is home to 53 stocks.

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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.