Scalper1 News
Thanks to the oil price collapse and global slowdown concerns, the renewable energy space has performed appallingly this year. But positive trends have started building up in the space lately, especially after the historic Paris climate deal and the U.S. tax credit extension. This has started pushing the stocks and the ETFs higher, reflecting strong momentum and bullish sentiments going into the New Year. Paris Climate Deal About 195 countries agreed to a landmark treaty in Paris to curb global warming to a maximum limit of two degrees Celsius with a goal of lowering it further to about 1.5 degrees as soon as possible. Per the pact, the rich countries like the U.S. and those in Europe pledge to provide $100 billion per year to poorer nations to help them to eliminate greenhouse gasses by 2020. This is expected to bring an end to the fossil fuel era and alleviate global climatic conditions. The Paris deal will invariably motivate renewable energy companies to step up their investments in new technologies, boosting the industry’s future growth prospects. Tax Credit Extension Last week, the U.S. government surprisingly approved a five-year extension to the Investment Tax Credit (ITC) and Production Tax Credit (PTC) for solar and wind companies. It also approved a one-year extension for a range of other renewable energy technologies. Under the new plan, the 30% solar tax credit (ITC), which was due to expire on January 1, 2017, has been extended for another three years. But after that ITC will decline steadily to 10% in 2022. Subsequently, the credit for residential solar installations will be abolished, while commercial installers would continue claiming the credits at 10%. Additionally, the wind credit (PTC) of 2.3%, which had already expired at the end of 2014, has been extended for another year for the new projects that came online this year. However, PTC will start declining 20% each year until it expires in 2020. Further, other renewable energy sources like geothermal, landfill gas, marine energy, and incremental hydro also receive a one-year PTC extension. The extension has been a huge boon to the entire renewable energy space, as it will reduce project financing costs and increase profit margins in the sector. As per GTM Research, the extension of the ITC would result in a 54% jump in U.S. solar installations through 2020 and add 25 gigawatts of additional solar capacity over the next five years. On the other hand, the American Wind Energy Association expects the PTC extension to drive tens of gigawatts of new wind projects through 2020. Sound Industry Fundamentals Depletion of fossil fuel reserves, global warming and high fuel emission issues, new and advanced technologies, and more efficient applications are making clean power more feasible. Rising demand for renewable sources for electricity generation across the globe has added to the sector’s strength. According to the International Energy Agency (IEA), green energy will be the largest source of electricity growth over the next five years buoyed by declining technology cost and aggressive expansion in the emerging economies. Notably, global power generation through clean energy would rise to more than 26% by 2020 from 22% in 2013. Most of the growth will especially come from higher demand in China, India and Brazil. Given the bright outlook, the recent bullish run in the space is likely to continue into 2016. As such, investors seeking to ride out this booming trend want to tap the space in the ETF form. For those investors, we have highlighted five ETFs that could be worth a look given increasing green energy efficiency. Guggenheim Solar ETF (NYSEARCA: TAN ) This ETF targets the solar corner of the broad clean energy space by tracking the MAC Global Solar Energy Index. Holding 31 stocks in the basket, the fund is concentrated in the top two firms – First Solar (NASDAQ: FSLR ) and SolarCity (NASDAQ: SCTY ) – with 10% and 7.8% shares, respectively. Other firms hold no more than 6.02% of assets. American firms dominate the fund’s portfolio with nearly 50.9% share, followed by Hong Kong (19.8%) and China (17.5%). The product has amassed $299.5 million in its asset base and trades in solid volume of around 221,000 shares a day. It charges investors 70 bps in fees per year. The fund gained 19% in the past week. PowerShares WilderHill Clean Energy Portfolio Fund (NYSEARCA: PBW ) This product provides exposure to companies engaged in the business of advancement of cleaner energy and conservation. It follows the WilderHill Clean Energy Index and holds about 45 stocks in its basket, which are pretty well spread out across various securities as each makes up for less than 6.9% of total assets. Information technology takes the top spot at 50%, while industrials takes a quarter share. The fund has amassed $113.5 million in its asset base and sees moderate volume of nearly 90,000 shares a day. Expense ratio came in at 0.70%. PBW was up 11.9% last week. Market Vectors Global Alternative Energy ETF (NYSEARCA: GEX ) This ETF provides global exposure to about 31 stocks that are primarily engaged in the business of alternative energy by tracking the Ardour Global Index. The fund holds about 31 stocks in its basket with AUM of $89.6 million, while charging 62 bps in fees per year. Average daily volume is paltry for this fund. The product is highly concentrated in the top two firms – Vestas Wind Systems ( OTCPK:VWDRY ) and Eaton Corp (NYSE: ETN ) – with 12.1% and 10.4% of assets, respectively, while other firms make up for single-digit allocation. From a sector perspective, industrials takes the largest share at 47%, while information technology (28.1%) and utilities (13.5%) round off the next two spots. In terms of country exposure, the fund is skewed toward the U.S. with 49.2% share, followed by Denmark and China. The ETF has gained 8.6% in the same period. 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 $65.5 million. It charges 60 bps in fees per year, while volume is light at nearly 23,000 shares. In total, the product holds 46 securities with none holding more than 8% share in its basket. From a sector look, technology firms dominate this ETF, accounting for nearly 30% of the assets while oil and gas companies take another one-fourth share. QCLN added 8.6% over the past week. Original post Scalper1 News
Scalper1 News