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3 Clean Energy ETFs for a Green Portfolio - ETF News And Commentary

After being badly hit by the momentum meltdown early in the year, the green energy space has regained strength over the past one month buoyed by improving green energy trends and company-specific fundamentals.

Robust performances from some of the green stocks such as Tesla Motors ( TSLA ), SunPower ( SPWR ), First Solar ( FSLR ), Yingli Green Energy ( YGE ), Trina Solar ( TSL ) and Canadian Solar ( CSIQ ) are injecting optimism into the broad sector. In fact, most of these surged double digits over the trailing one-month period.

Additionally, the depletion of fossil fuel reserves, global warming and high fuel emission issues, higher oil and gas prices, new and advanced technologies as well as more efficient applications are making clean power more feasible. Further, demand for renewable sources is growing rapidly for electricity generation across the globe (read: Top Performing Sector ETFs of August ).

As per the International Energy Agency (IEA), global power generation through clean energy would rise 45% to reach 26% of global electricity generation by the end of this decade from 22% in 2013. In particular, solar energy is the fastest growing sector within the global clean tech industry. This corner of the broad space will likely benefit from a decline in technology cost and increased deployment in non-OECD markets, which is expected to have 70% new power capacity from 2013 to 2020.

However, after a decade of rapid clean energy expansion, the agency expects renewable generation capacity growth in OECD economies to slow after 2015 for five years on uncertain policy and grid integration risks. This does not seem to be a major concern at present.

Developments in Major Countries

The alternative energy space is seeing a global boom and might outpace the rising shale oil and gas business in the coming years. China leads the world in total electricity generation from renewable sources, helped by its increased allegiance in recent times to the alternative path (read: 3 China ETFs Surging Higher ).

According to the GlobalData, total electricity generation from renewable energy sources in China is expected to reach 20% by 2020. The country is adopting new financing schemes and initiatives to improve energy efficiency standards and expedite solar power installation over the coming years.

After China, the U.S. sees more electricity generation from the clean sources. This is especially true as renewable sources accounted for 14.3% of the total U.S. electric generation in the first half of 2014. Electricity production from solar power more than doubled while wind power rose 9%.

The U.S. aims to generate 20% of the power from renewable energy sources by 2020. As per Lux Research , annual installations of new photovoltaic solar capacity in the U.S. saw a fivefold increase over 2010-13 and are expected to increase another 38% this year.

Since an insatiable energy demand continues to outweigh rising energy installations, investors could easily ride on this trend in the ETF form. For those investors, we have highlighted three ETFs that could be worth a look on the surging renewable space. These products have a decent Zacks ETF Rank of 3 or 'Hold' rating.

First Trust NASDAQ Clean Edge Green Energy Index Fund ( QCLN )

This fund provides exposure to the U.S. clean energy companies across a wide range of industries, including solar power, biofuels, advanced batteries, as well as the installation of new technological systems. It tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $137.3 million. It charges 60 bps in fees per year while volume is good at nearly 117,000 shares (see: all the Alternative Energy ETFs here ).

In total, the product holds 50 securities in its basket with largest allocations to TSLA with 9.6% share while FSLR and Linear Technology ( LLTC ) round off the top three with 7% share each. Other firms hold less than 6.3% of assets. From a sector look, technology and oil & gas dominate this ETF, accounting for two-thirds of the assets. QCLN added 6.7% in the trailing one-month period.

PowerShares Global Clean Energy Portfolio ( PBD )

This product provides global exposure to stocks that focus on greener and generally renewable sources of energy as well as technologies that facilitate cleaner energy. This can be done by tracking the WilderHill New Energy Global Innovation Index. Holding 104 stocks in its basket, the fund is widely spread out with no single security holding more than 2.35% of PBD.

The product is skewed toward information technology and industrials with 35% and 32.7% share, respectively, while utilities also receive a double-digit allocation. In terms of countries, the U.S. makes up about one-third of the portfolio, followed by China (15.7%) and Germany (5.5%). The product is quite unpopular with AUM of $93.3 million and less liquid with average daily volume of 69,000 shares per day. Expense ratio came in at 0.81%. The ETF was up 5% in the trailing one-month period.

Guggenheim Solar ETF ( TAN )

As solar energy drives maximum growth in the renewable energy space, this ETF looks like an intriguing pick. This fund follows the MAC Global Solar Energy Index, holding 30 stocks in the basket. It is highly concentrated on the top 10 firms accounting for 57.3% of total assets (read: Solar ETFs Hot Again; Brighter Days Ahead? ).

American firms dominate the fund's portfolio with nearly 42.3%, followed by China (28.3%) and Hong Kong (14.2%). The product has amassed $445.2 million in its asset base and trades in solid volume of nearly 423,000 shares a day. It charges investors 70 bps in fees per year. The fund gained over 10% in the past one month.

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NASDAQ-CL EDG G (QCLN): ETF Research Reports

PWRSH-GLB CL-EY (PBD): ETF Research Reports

GUGG-SOLAR (TAN): ETF Research Reports

TESLA MOTORS (TSLA): Free Stock Analysis Report

YINGLI GREEN EN (YGE): Free Stock Analysis Report

TRINA SOLAR LTD (TSL): Free Stock Analysis Report

CANADIAN SOLAR (CSIQ): Free Stock Analysis Report

SUNPOWER CORP-A (SPWR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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