Expect Long-Term Tailwinds for Clean Energy

While global equity markets pulled back last week from a Federal Reserve 50bps hike in interest rates and U.S. government 10-year yields spiking to over 3%, the ALPS Clean Energy ETF (ACES) jumped 2.26% last week as clean energy names reported strong earnings and improved supply capacity.

A large tailwind for the industry is corporate clean energy spending picking up momentum. According to ALPS, as consumer spending evolves to include everyday renewable products, corporate spending will also evolve to meet the same net-zero goals. 

Key corporate decarbonization activities, including the acquisition of clean energy companies, power purchase agreements (PPAs), voluntary carbon offsets, and science-based target commitments represent a major driving force to meet global emission standards.

“There were numerous positive decarbonization activities last month, highlighted by corporate PPAs, $25.9 billion in green bond issuances, and 195 companies committing to science-based emission targets. Global corporate PPAs, or long-term renewable energy contracts, soared to 6.2 gigawatts (GW) for the month, with tech giant Amazon leading the charge,” ALPS writes in an insight.

Last month, Amazon signed agreements to purchase 5GW of wind and solar power, which
is roughly equivalent to the installed renewable capacity of Ireland, according to BNEF.

“Solar Energy Capacity Installed growth will be 25% or greater for the full-year 2022. Climate change and geopolitical issues are now affecting the daily lives of so many consumers, accelerating what I have always seen as a looming consumer-led revolution to a cleaner, more decentralized energy future,” Sunrun CEO Mary Powell said last week during the firm’s first-quarter earnings call. 

Russia’s late February invasion of Ukraine brought to light the necessity of investments in clean energy initiatives and as energy prices remain volatile, corporations will continue to bolster their clean energy portfolios to take advantage of tax incentives and fixed energy costs through PPAs, according to ALPS.

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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.


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