Along with several other alternative energy ETFs, the Invesco Solar ETF (NYSEArca: TAN) was among last year’s best-performing ETFs and the solar fund can keep the good times going in 2020 thanks to an array of favorable fundamental factors.
TAN, which started back in 2008, seeks to track the investment results of the MAC Global Solar Energy Index, which is designed to provide exposure to companies listed on exchanges in developed markets that derive a significant amount of their revenues from the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products.
“According to the U.S. Energy Information Administration’s (EIA) latest inventory of electric generators, EIA expects 42 gigawatts (GW) of new capacity additions to start commercial operation in 2020. Solar and wind represent almost 32 GW, or 76%, of these additions,” said EIA in a recent note. “Wind accounts for the largest share of these additions at 44%, followed by solar and natural gas at 32% and 22%, respectively. The remaining 2% comes from hydroelectric generators and battery storage.”
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.
Time For TAN
Not only is clean energy consumption increasing, but costs are also decreasing, which in turn bolsters adoption. Additionally, coal production is slumping, adding to the virtuous cycle for alternative energy ETFs.
“Falling costs for renewables is driving up installations and will also boost the energy-storage business this year, according to Logan Goldie-Scot at BNEF in San Francisco. More than $5 billion of renewables-plus-storage deals will be announced this year, the researcher said,” reports Bloomberg.
When it comes to TAN, there’s more potentially good news.
“EIA expects 13.5 GW of solar capacity to come online in 2020, surpassing the previous annual record addition of 8 GW in 2016,” said the agency. “More than half of the utility-scale electric power sector solar photovoltaic (PV) capacity additions will be in four states: Texas (22%), California (15%), Florida (11%), and South Carolina (10%). The residential and commercial sectors will also experience record growth as a result of new distributed PV or rooftop systems. According to its Short-Term Energy Outlook, EIA expects an additional 5.1 GW of small-scale solar PV capacity to enter service by the end of 2020.”
For more information on the renewables space, visit our renewable energy category.
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.