Renewable energy ETFs are standing out this year and the SPDR Kensho Clean Power ETF (CNRG) is one of the leaders of that pack.
CNRG seeks to provide exposure to the clean power industry both in terms of generation and the underlying technology driving it. Alternative energy sources are an increasingly important part of the power generation conversation.
Traditional sources of energy like oil are constantly being challenged by alternative sources as more green initiatives become paramount, which makes alternative energy ETFs an option when investors want exposure to the energy sector.
“The production of solar and wind energy was estimated to grow at a significant pace this year, but as economies reopen, a spike in industrial activity and energy demand will likely accelerate the trend of seeking cheaper and more renewable sources of energy,” said Matthew Bartolini, head of SPDR Americas Research, in a recent note. “In fact, as of June, the US is on track to produce more electricity this year from renewable power than from coal for the first time on record.”
A Clean Energy Call
Currently, coal and renewables account for roughly the same percentage of power consumption in the U.S., but the latter is poised to overtake the former, particularly as renewable costs decline. In fact, it’s likely that by 2030, new solar and wind farms will cost less than coal-fired plants. Photovoltaic costs plunged 82% over the prior decade, indicating it’s reasonable to expect solar will eventually be more cost-efficient than coal.
“As the world turns to cleaner sources of energy, there may be no turning back,” writes Bartolini. “As the great transition to greener forms of energy supply has occurred, firms focused on more sustainable forms of power generation have outperformed the broader market year-to-date (+10%), since the market’s bottom on March 23rd (+14%), and over the past year (+26%) Plus, they have outperformed traditional energy firms by even much wider margins.”
Political change in the U.S. could also bolster the case for CNRG as 2020 moves along.
“With early polls indicating a change in leadership in the US, greener forms of power generation may also be pushed to the forefront of any US legislative agenda – providing the economic growth that could spur new employment opportunities as the nation seeks to rebuild,” according to Bartolini.
For more on thematic ETFs, please visit our Thematic Investing 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.