Clean energy stocks are having a fantastic year in 2019.
The best-performing non-leveraged ETF in the United States is the Invesco Solar ETF (symbol TAN), up 54% on the year as of this writing. Other renewable plays, like the Invesco Clean Energy ETF (PBW), and the iShares Global Clean Energy ETF (ICLN), have also done quite well.
But this is only the beginning. Clean energy is poised to enter a bull market that could last for years.
Over the past decade or so, we have seen a battle royale between fossil fuels (like oil, natural gas, and coal) and clean energy (primarily solar and wind). The verdict is now clear. Fossil fuels lost, and clean energy won. The future will be powered by solar and wind energy (and to a lesser extent, other renewable sources like hydropower). It will not be powered by coal or gas.
This isn’t just a matter of opinion. The evidence is now overwhelming.
As recently as 2010, things looked different. Solar and wind were just 1% of the U.S. energy mix at that time. In their 2010 testimony to Congress on the topic of energy independence, fossil fuel executives were confident. “Coal is the future,” the CEO of Peabody Energy said.
Six years later, in April 2016, Peabody Energy was forced to declare bankruptcy, along with multiple other U.S. coal companies. Solar and wind, meanwhile, kept getting stronger.
In April 2019, for the first time ever, renewables supplied more energy to the U.S. national grid than coal, according to Bloomberg. Also as of this year, renewable energy has already become the cheapest form of power for two-thirds of the planet.
Again, the evidence of clean energy dominance — in terms of future trends — is overwhelming.
The fastest growing jobs in the United States today are “solar installer” and “wind technician.” The wind industry creates almost as many American jobs as the natural gas industry — but with wind on the way up, and gas on the way down. Natural gas lines into newly built homes and buildings are phasing out; the city of Berkeley, Calif., just banned natural gas hook-ups for new structures, and other cities may follow. By the year 2020 — right around the corner — wind energy output is projected to top coal energy output in Texas. And while coal and natural gas still have a sizable share of the U.S. energy mix, it is dropping by double-digit percentages.
In China, meanwhile, solar energy in 344 cities is cheaper than energy from the national grid. In at least 75 Chinese cities, solar is already cheaper than coal.
In India, the government hit its ambitious 20-gigawatt solar target four years early — so now they are going for a new target of 100 gigawatts by 2022. India’s energy mix is already 34.6% renewable, with four of the top seven largest solar parks in the world and they are building a new solar park that will take the crown.
Coal still plays a major role in the world’s total energy mix. But coal is losing market share worldwide, even in developing world countries where coal’s main virtue is cheapness. Rich-world countries are shunning coal because the citizenry is demanding it — and because renewable economics are competitive. Developing world countries are moving away from coal, too, shutting down plants and banning new installations to fight against toxic levels of pollution.
The key thing is that the rise of renewable energy isn’t just a matter of subsidies, environmental regulation, or moral sentiment. Fossil fuel sources are getting straight-up beaten on the economics. According to projections from Bloomberg New Energy Finance, solar and wind energy could power half the planet by 2050. They expect coal and nuclear sources to be negligible by then.
On the natural gas side, the economics favor renewable energy, too. The Rocky Mountain Institute estimates that, by 2035, 90% of newly proposed natural gas-fired power plants will be more expensive and less economical to run than solar or wind installations.
The Rocky Mountain Institute further estimates that, for many of the U.S. natural gas power plants on the drawing board today, the cost will become uneconomic — relative to cheaper clean energy alternatives — before the buyers even finish paying for them.
The fossil fuel industry has had a tough year in 2019 in terms of equity performance, and it isn’t just because of global growth fears or a lackluster oil price. The investment community looks at fossil fuels and they see the past. They look at clean energy and they see the future — and this is increasingly becoming a “hard-nosed capitalist” assessment more than “save the planet” assessment. It’s about the math, which comes down to tipping point economics powered by technology and scale.
When it comes to clean energy investing, there are multiple ETFs available such as:
- The Invesco Solar ETF (TAN)
- The Invesco Wilderhill Clean Energy ETF (PBW)
- The iShares Global Clean Energy ETF (ICLN)
- The SPDR S&P Kensho Clean Power ETF (CNRG)
- The First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN)
You can check out their Stock State Indicator status in the chart below.
If you have the ability, though, you may want to break out the individual components of these ETFs and look at the stock plays within them one by one.
That’s because, within each ETF basket, there will be some components that are strong and attractive, and others that are total duds.
With the help of TradeStops, you can track not just the clean energy ETFs mentioned above, but the individual stock components of each ETF that stand out. Using our algorithmic tools, you can then allocate capital to the best stock opportunities as filtered by measures like trend strength and volatility. You can also cross-check any of the stocks that catch your eye with our “billionaire’s club” database, to see if the smartest investors in the world share your sentiment on a particular pick.
Richard Smith, Ph.D.
CEO & Founder, TradeSmith