President Obama's latest attempt to crack down on carbon
emissions will likely prove to be beneficial for renewable energy
stocks. The proposed climate-change plan is undoubtedly the boldest
attempt to address global warming in U.S. history. A proposed new
Environmental Protection Agency rule would reduce carbon emission
from power plants by 30% by 2030, compared to the levels in 2005.
Just as pro-environment regulations have given a boost to the
alternative energy sector, trade conflicts between some of the
major solar product manufacturing countries have complicated the
landscape. Specially, solar trade relations have heated up lately
with China, India and the U.S. trying their level best to protect
homegrown interests. Washington has once again slapped new import
duties on solar panels and other related products from China. While
the new duties would further escalate tensions between the two
countries, the U.S. believes that the Chinese manufacturers have
hitherto benefited from unfair subsidies offered by their
Will Clean Energy ETFs Bounce Back?
After a listless 2011, the solar industry rallied in 2013. The U.S.
Energy Information Administration (EIA) estimates that U.S solar
demand increased more than 32% in 2013. It is likely that for the
first time in more than 15 years the U.S. installed more solar
capacity than world leader Germany. For 2014, U.S. solar energy
consumption, as projected by EIA, will rise by roughly 35%.
Residential, commercial, and utility scale solar is indeed booming
in the U.S. The expected increase in demand is likely to fuel
top-line growth at the solar manufacturers (read:
Solar ETFs Shine on Trina Solar Earnings Beat
While U.S. and China have been playing a big role in recent years
in driving the industry, other nations are also pushing hard to
have a home-grown solar generation capacity as a remedial measure
to solve their electricity crisis. The latest to join this list is
Asia's third largest economy, India. Again, companies like
First Solar Inc.
(FSLR) are investing substantially in Japan to install
emission-free renewable set-ups. The country is expected to become
the second largest market for solar products after China. This
comes on the heels of Japan deactivating all its nuclear reactors
after the Fukushima nuclear disaster.
Among the other renewable resources, the U.S. wind industry is now
gradually picking up. The American Wind Energy Association (AWEA)
reported that the wind industry grew radically during the first
quarter of 2014. The U.S. industry installed 214 megawatt (MW)
during the first quarter, up significantly from the year-ago
installed capacity of 1.6 MW. EIA expects wind capacity to expand
9.0% in 2014 and 15.5% at the end of 2015. Electricity generation
from wind is expected to contribute 4.5% to the total electricity
generation basket by the end of 2015 (read:
Alternative Energy Stock Outlook - May 2014
Hydropower is considered to be the leading renewable energy source
in the U.S. With the emergence of new technologies, like marine and
hydrokinetics, this industry is likely to continue to generate vast
amounts of sustainable energy throughout the country.
ETFs to Tap the Sector
For investors seeking to play this trend in ETF form, the following
series of alternative energy ETFs could make for interesting picks.
See all Alternative Energy ETFs
WilderHill Clean Energy Portfolio
Launched in March 2005, PBW tracks the WilderHill Clean Energy
Index and manages an asset base of $193.6 million which it invests
in a portfolio of 56 stocks.
It is well diversified across various sectors. Information
Technology takes the top spot with a 42.39% allocation followed by
Industrials (22.49%) and Utilities (10.42%).
The fund's top 10 holdings jointly contribute 27.91% to the fund.
The product invests almost 90% in companies that are involved in
the generation of cleaner energy. It charges a hefty 70 basis
points in fees.
PBW has rewarded investors with returns of 22.95% over the past one
Market Vectors Global Alternative Energy ETF
Launched in May 2007, GEX tracks the Ardour Global Index, focusing
on companies that are primarily engaged in the business of
alternative energy comprising solar power, bio energy, wind power,
hydro power and geothermal energy.
The fund holds about 31 stocks in its pocket, has assets under
management of $108.0 million and charges an expense ratio of 62
basis points annually. The fund is liquid with 13,460 shares
changing hands every day on average.
Apart from robust holdings in the U.S., the product offers solid
exposure to Europe and some Asian countries. Again, Industrials,
Information Technology and Utilities take the top three spots,
adding 87.7% in sector holdings. Further, the fund's top 10
holdings jointly contribute 66.72% to the fund.
Vestas Wind Systems A/S
Tesla Motors Inc.
(TSLA) are the top three holdings, with 32.96% of asset allocation
Global Clean Energy Portfolio
This ETF follows the WilderHill New Energy Global Innovation Index,
giving investors exposure to about 106 companies that are engaged
in renewable sources of energy and technologies facilitating
Assets under management came in at just over $103.6 million and
this ETF charges investors 75 basis points a year in fees. In terms
of performance, PBD has rewarded investors with returns of 35.08%
in a one-year span. The fund's top 10 holdings contribute 17.96% to
PBD is heavy in Industrials, as this represents 32.56% of the fund.
This is followed by Information Technology (31.89%) and Utilities
(21.10%). In terms of countries, the U.S. dominates with 31.44%
followed by China having 14.28%.
First Trust Nasdaq Clean Energy Green Energy Index
This ETF tracks the NASDAQ Clean Edge Green Energy Index and
follows a benchmark of clean energy companies, giving exposure to
50 such companies in total with an asset base of $121.2 million.
The fund charges investors 60 basis points a year in fees for the
exposure. The top 10 holdings comprise 57.59% of the total fund.
Importantly, this product has rewarded investors with a solid
one-year return of 34.14%.
Technology firms dominate this ETF, accounting for 37.18% of the
assets. Beyond technology though, Oil and Gas stocks make up about
28.85%, while Industrials, Consumer Goods and Consumer Services
hold 15.80%, 7.48% and 5.49%, respectively. In terms of
geographical diversification, the fund is almost entirely focused
on the U.S. market.
iShares Global Clean Energy ETF
This ETF tracks the S&P Global Clean Energy Index with 31
holdings and an asset base of $57.9 million. ICLN has given an
impressive one-year return of 31.91% and charges investors 47 basis
points a year in fees for the exposure.
In terms of geographical breakdown, U.S. leads the list with
23.62%, while China holds the second spot with 16.59%. Hong Kong
comes third occupying 15.21% of the holdings. ICLN is more inclined
toward Semiconductors & Semiconductor equipment, representing
31.10% of the fund, though Electrical Equipment (21.07%),
Independent Power and Renewable Electric (20.96%), and Electric
Utilities (13.38%) all receive big chunks as well. The fund appears
to be highly concentrated in the top 10 holdings with a share of
PowerShares Cleantech Portfolio
This fund tracks the Ceantech Index, which focuses on firms that
are primarily engaged and involved in electric grid, electric
meters and devices, networks, energy storage and management, and
enabling software used by the smart grid infrastructure sector.
PZD holds 62 securities in total, putting a heavy weight in
Industrials (57.67%) and Information Technology (22.22%) companies.
The top three holdings are
Vestas Wind Systems A/S
(BWA). It charges 0.67% in expense ratio.
The demand for renewable energy, in particular solar and wind, is
rapidly growing for electricity generation in the U.S. As per EIA,
renewable electricity generation in the U.S. would grow by an
average of 1.9% per year until 2040 and 69% over 28 years (from
The depletion of fossil fuel reserves, higher oil and gas prices,
new and advanced technologies, accompanied with more competent
alternative energy applications have made green power more
feasible, injecting optimism into the sector.
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PWRSH-W CL EGY (PBW): ETF Research Reports
MKT VEC-GLBL AE (GEX): ETF Research Reports
PWRSH-GLB CL-EY (PBD): ETF Research Reports
NASDAQ-CL EDG G (QCLN): ETF Research Reports
ISHARS-GL CL EN (ICLN): ETF Research Reports
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