The ALPS Clean Energy ETF (Cboe: ACES) is on a torrid pace this year, joining several other alternative energy ETFs among 2019’s best-performing ETFs. Amid shifting trends in terms of energy consumption, ACES’ run could prove durable.

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.

In previous eras, coal and natural gas competed to be the top power sources, but that trend is shifting away from coal and has been for some time, to clean energy sources competing with natural gas.

“Coal and natural gas have been fighting for the top spot in the U.S. generation market for the last 20 years. In 2016, gas generation topped coal for the first time,” said Morningstar in a recent note. “Gas is the new king, with 35% market share. Now the battlefield is shifting, and in the next decade we expect natural gas and renewable energy, particularly solar and wind, to slug it out.”

Assessing ACES

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.

“Renewable energy has been growing at extraordinary rates but still has just 10% market share,” said Morningstar. “By 2030, we forecast renewable energy to produce 22% of U.S. electricity generation, surpassing coal, nuclear, and hydro as the second-largest source of power generation in the U.S. We think gas will also be a winner because of its flexibility to support intermittent wind and solar, extending its market share lead to 41% over the next decade.”

ACES is at the right place at the right time. 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.

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.