The ALPS Clean Energy ETF (Cboe: ACES) is higher by almost 37% this year, underscoring the point that alternative energy equities and ETFs have been stellar performers. However, long-term trends also bode well for ACES.
The ALPS Clean Energy ETF tries to reflect the performance of the CIBC Atlas Clean Energy Index, which is comprised of U.S. and Canadian companies involved in the clean energy sector including renewables and clean technology.
ACES’ components provide the products and services that enable the evolution of a more sustainable energy sector. The green energy companies are engaged in renewable energy sources, including solar power, wind power, hydroelectricity, geothermal energy, biomass, biofuels, and tidal/wave energy; clean technologies, including electric vehicles, energy storage, lithium, fuel cell, LED, smart grid, and energy efficiency technologies; and other emerging clean energy activities and technologies.
Increased corporate adoption of alternative energy sources is a major catalyst for ACES going forward.
“US corporate renewable procurement is surging, with more than 6 GW of direct, indirect, and financial power purchase agreements announced in 2018, more than double that of the prior year,” said IHS Markit in a recent note. “This surge is being fueled by shareholder and consumer pressure, the opportunity to hedge power costs and corporate renewable targets, and is leading IHS Markit to increase its outlook for wind and solar deployment in the coming decade.”
Data confirm that domestic utilities are generating less power via coal and more with alternative energy sources, such as wind and solar, potentially representing a long-term boon for ACES and its components.
In terms of adoption by big American companies, wind and solar are two of the preferred avenues for clean energy use and that’s relevant to ACES because those themes combine for a significant percentage of the fund’s roster.
“IHS Markit expects large corporations’ renewable targets to drive about 60 GW of new capacity additions, through project-specific contracting, from 2019 to 2040,” said the research firm. “IHS Markit expects further growth of renewable capacity driven by large corporate procurements, with shifting trends between wind and solar and expansion of activity in to other markets in the future.”
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.