Solar and wind get most of the hype in the renewable energy investment conversation, but smart grid technology is vital, too, and that highlights opportunity with the First Trust/Clean Edge Smart Grid ETF (NasdaqGM: GRID).
GRID seeks to reflect the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index, which includes companies engaged in all components of the smart grid. Various data points confirm the long-term viability of GRID.
Smart grid technologies will play pivotal roles in the electric vehicle and energy storage equations, putting GRID investors at the epicenter of disruptive booms.
“As huge quantities of electric vehicle (EV) chargers and energy storage are installed worldwide in the coming years, there is the possibility for both technologies to be deployed together,” according to IHS Markit research.
GRID Poised for 2021 Upside
The technologies and companies GRID provides exposure to are cutting-edge in the energy space and are leaving traditional fossil fuel producers behind. This trend is going to be long-running, providing a long runway for GRID upside.
What makes GRID increasingly relevant at a time smart grid demand is booming is that it’s one of the purest plays among ETFs addressing this fast-growing industry.
“The case for energy storage has grown substantially in recent years, with investment being driven across the globe by profitable use cases,” according to IHS Markit. “Battery energy storage projects are accessing revenue streams by bidding into existing frequency response markets, providing other ancillary services, or increasingly trading wholesale energy as price volatility increases.”
Though it’s not a dedicated electric vehicle ETF, GRID offers investors leverage to that theme via its clean energy and smart grid exposures. Some of the companies in the fund could be players in the fight to address high grid costs and low revenues faced by EV charging and storage providers. GRID offers flexibility over time, which is crucial in the energy storage equation.
GRID “is made up of companies in the grid and electric energy infrastructure sector, including companies that are primarily engaged and involved in the electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector,” according to First Trust research.
For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.
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.