Alternative energy includes any energy source that acts as a replacement to conventional and non-renewable fossil fuel. These energy sources are also called renewables as they are continuously replenished through natural processes. Going by an International Energy Agency (IEA) report, worldwide supplies of renewable electricity are expected to expand 50% over the next five years. Another IEA report reflects that U.S. annual renewable energy consumption surpassed coal consumption for the first time in 2019 since 1885.
Moreover, according to the IEA, renewable energy sources are expected to make up 30% of the world’s electricity by 2024, in comparison to the current 26%. Per Allied Market Research, the global renewable energy market is expected to reach a value of around $1.51 billion, at a CAGR of 6.1% between 2018 and 2025.
Factors Driving Alternative Energy
In today’s time, the ‘carbon neutral’ status is a coveted one for every country. In this regard, updates on sustainability initiatives undertaken by the government or corporates are rampant. Thus, according to U.S. Energy Information Administration’s (EIA) report, 42 gigawatts (GW) of new electric generation capacity is projected to start commercial operation in 2020. Of these capacity additions, wind power accounts for the largest share at 44%.
Moreover, technological advancements, increasing investments, growing government initiatives and rising awareness across the globe about adopting clean energy have been leading to a rise in demand for renewable energy. Notably, there was a 19.4% year-over-year surge in investments in renewable energy sources to $55.5 billion in 2019.
Notably, expiration of production tax credit (PTC) at the end of 2020 seems to be the primary driver of renewable energy sources in 2020. It has consistently provided huge support to wind and solar power development in the United States over the past few years. Also, declining costs of solar panels and wind turbines is supporting the high demand for solar and wind power from utilities and corporate buyers.
Alternative Energy ETFs That Can Shine
Notably, the EIA, in its latest Short Term Energy Outlook, has projected renewable energy to be the fastest-growing source of electricity generation for the nation in 2020. Against this backdrop let’s take a look at some alternative energy ETFs:
iShares Global Clean Energy ETF (ICLN - Free Report)
The fund seeks to track the investment results of an index composed of global equities in the clean energy sector. It has 30 holdings. The fund’s AUM is $714.2 million and the expense ratio is 0.46% (read: Sector ETFs to Win or Lose if Blue Wave Sweeps U.S. Election).
Invesco Solar ETF (TAN - Free Report)
The fund is based on the MAC Global Solar Energy Index which is comprised of companies in the solar energy industry. It has 28 holdings. The fund’s AUM is $631.4 million and the expense ratio is 0.71% (read: Solar ETF Shines on Mostly Upbeat Q1 Earnings).
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN - Free Report)
The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the NASDAQ Clean Edge Green Energy Index. It has 44 holdings. The fund’s AUM is $236.2 million and the expense ratio is 0.60% (read: 6 ETF Areas Beating S&P 500 in 2020).
ALPS Clean Energy ETF (ACES - Free Report)
The fund seeks to track the performance of an index comprised of U.S. and Canadian based companies that primarily operate in the Clean Energy sector. It comprises 32 holdings. The fund’s AUM is $193.4 million and expense ratio, 0.65%.
Invesco Global Clean Energy ETF (PBD - Free Report)
The fund is based on the WilderHill New Energy Global Innovation Index. It comprises 101 holdings. The fund’s AUM is $66 million and expense ratio, 0.75%.
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