ETF Update: Alternative Energy and the Power Grid

by: Tom Lydon September 04, 2008 | about stocks: FAN / GEX / GII / GRN / IGF / KWT / PBW / PWND / QCLN / TAN / XLU    
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August Had Alternative Energy ETFs Seeing Green

Anyone on the fence about green and alternative energy exchange traded funds  might find themselves converted by gains in August.

Advances within the alternative energy sector symbolized major reversals from previous setbacks that were suffered before, reports Richard Widows of TheStreet.

These green investments are actually seeing green as of late, and they are becoming a mainstay of the investment lineup. What’s more, they gained traction in a month where both oil and gas continued their declines. Perhaps those high prices put enough fear into people that they’re looking for alternative sources of energy regardless of what happens with other fuels.

In August, the S&P 500 struggled to keep a gain of 1.2%, while most alternative energy ETFs had double the gains of that.

Among the alternative energy funds that gained in August and their performance for that month:

  • Claymore/Mac Global Solar Index (TAN), up 11.5%
  • First Trust NASDAQ Clean Edge U.S. Liquid (QCLN), up 6.7%
  • iPath Barclay Capital Global Carbon Total Return (GRN), up 18.5%
  • Market Vectors Global Alternate Energy Fund (GEX), up 6.2%
  • Market Vectors Solar Energy (KWT), up 9.2%
  • PowerShares Wilder Hill Clean Energy (PBW), up 3.9%

ETFs Full of Hot Air If Our Power Grid Doesn't Get an Upgrade

When it comes to making advances in alternative energy and giving some life to those ETFs, we could be ahead of our time. About 100 years too far ahead.

Our nation’s aging power grid seems ill-equipped to handle our renewable-energy dreams. While new ways to generate power from sources such as solar and wind are coming fast and furious, getting those technologies to the market has become a challenge, says Matthew L. Wald for the New York Times.

Our grid today was conceived 100 years ago to let utilities prop one another up in order to reduce blackouts and share power in smaller areas. While only 1% of our electricity comes from wind turbines, experts believe that it could soon be as much as 20%, and our grid as it stands can’t handle it.

Hitting the 20% mark could mean moving large amounts of power over long distances - from the sparsely populated plains to the more densely populated coastal areas. The problem is transmission lines and their connections, which are too small for the amount of power companies want to push through them.

Getting the system up to speed could cost $60 billion or more, but would require no new technology.

If we take the steps to bring our grid into the current century, ETFs that could receive a breath of fresh air include:

  • First Trust Global Wind Energy (FAN), down 12.6% since July 27 inception
  • PowerShares Global Wind Energy (PWND), down 10.3% since July 8 inception
  • Utilities Select Sector SPDR (XLU), down 10.9% year-to-date
  • iShares S&P Global Infrastructure Index (IGF), down 19.5% year-to-date
  • SPDR FTSE/Macquarie Global Infrastructure (GII), down 13.2% year-to-date

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This article has 11 comments:

  •  
    Sep 04 11:26 PM
    We need to elect a presidential team who will make the severe energy crisis in America a # 1 priority. We have the knowledge. We have the technology. What we lack is a government who seems capable of devising , supporting, and implementing a plan to free us from our dependence on foreign oil. American's also on the other hand seem to have a very short attention span. Our economy is going down the tubes and fast. This isn't the first time, we have been there before. Our memory seems to blot that all out when fuel prices drop we waste no time wasting, producing, buying and using cars that get low mpg etc. Only when it truly hurts us in the pocketbook do we suddenly switch into our conservation mode. We need to be in this for the long haul, permanently and totally. We need to elect a president who will commit to rapid deployment of a plan of energy independence. We need to use every resource available to us to reduce consumption of fossil fuels. We need to take full advantage of natural energy sources such as wind power and solar power. We need to use our technological knowledge of hybrid cars, v2g technologies etc. They all play a vital role in reducing our dependence on foreign oil and improving our environment not to mention relieving our suffering economy.

    themanhattanprojectof2...
    howmuchenergydoesmycar...

    Reply | Link to Comment
  •  
    Sep 05 09:12 AM
    The American consumer buys those gas guzzling cars, not the government. The American consumer buys all that bottled water, unnecessary gee gaws and plastic junk in our throwaway society. The government does provide subsidies for alternate energy and as our economy is crippled by higher fuel prices alternatives will become more viable and more efficient..
    In the meantime I am long not in an ETF but in BCON & SATC. as my choice for power grid and power conversion.
    Reply | Link to Comment
  •  
    Sep 05 09:13 AM
    "Hitting the 20% mark could mean moving large amounts of power over long distances - from the sparsely populated plains to the more densely populated coastal areas. The problem is transmission lines and their connections, which are too small for the amount of power companies want to push through them.

    Getting the system up to speed could cost $60 billion or more, but would require no new technology"

    Perhaps the real investment here is in the companies who will benefit most from such an upgrade. Any suggestions?
    Reply | Link to Comment
  •  
    Sep 05 09:40 AM
    pondee. Traditionally, the utiities invested in the power grid they need to disrtribute the power they produce. In this case, the power to be distributed is across States and the companies that will do this has yet to be formed. It is a formidable challenge considering the myriad of regulations that have to be overcome.

    The problem alone posed by environmentalist, naturalist, beautiful scenery specialists makes venture capitalist not even want to think about this area.

    Only a crisis - in the same magnitude as the oil embargo of the early 70's - will get us moving to solve this problem. Sad but true.

    If McCain gets elected, he could push this together with his oil drilling plan especially if he appoints Mitt Romney as his Energy Secretary.
    Reply | Link to Comment
  •  
    Sep 05 12:25 PM
    As lousy as our grid is, it connects hydro west to east to southwest (and with Canada hydro); it connects 100 - 1000 mwe plants scattered about the 48 states; as it also does for all the 100's of coal fired plants (50% of the generating capacity of 12 GW). High Voltage Transmission lines run "millions" of miles across the 48 states. Just beef it up and add to it for wind and solar - which in most cases won't be more than 50-100 miles from a transmission line.

    Again, beef it to 20 GW for wind and solar additions and also for electrifying the inter/intrastate hiways with electrified steel-wheel rail ferries carrying cargo, vehicles and people. No more diesel transportation. Including electrifying our existing diesel-electric railroads.

    And then, the biofuel injected burner encapsulated with solid state waste heat direct conversion to electric motor drive hybrids fed by the on board storage device called a GRASS TANK, refilled at 1/3 of the existing service stations because it captures 80-90% of the energy in the biofuel, and is of unlimited range just as our existing vehicles; and it has the power of the Tesla electric, doing 0-60 mph in 4 seconds.

    At that point, we don't need any more oil or coal or nat gas to BURN.

    THAT'S WHAT THEY'RE CALLING ENERGY INDEPENDENCE. I CALL IT THE ELECTRIC ECONOMY.
    Reply | Link to Comment
  •  
    Sep 05 01:15 PM
    Despite his rhetoric, McCain has done little to actually support alternative energy generation or transmission and appears to be totally in the bag of big oil. His solution sounds like drill, drill, drill plus "clean coal", which doesn't exist. McCain sided with the Republican fillibuster of the renewal of tax credits for alternative energy projects eight times - where's the pro-alternative maverick? That industry is grinding to a halt with the expiration of credits at year end.

    Obama has appropriately pointed out that increased offshore drilling is not a short term solution to high gas prices and with climate change the real problem, the real solution is getting off the oil addiction. Obama is also much more likely to be able to cut through environmental concerns that might hinder placement of new transmission lines, much as Nixon was the President that was able to go to Red China. We also need a federal solution to inwardly focused state utilities regulations, which will only come from a committed effort from the new president.
    Reply | Link to Comment
  •  
    Sep 05 02:05 PM
    Amen BEPOSITIVE - The republicans have it wrong, unfortunately!.

    They keep feeding the addiction by focusing on the SOURCE and supplying the oil, INSTEAD of getting us off the addiction of burning hydrocarbons by focusing on the USE (TRANSPORTATON AND POWER GENERATION).

    ABSOLUTELY STUPID!!!
    Reply | Link to Comment
  •  
    Sep 05 09:33 PM
    Nice article - good summary of alt energy and infrastructure ETFs.

    Thanks,

    wallemac
    Reply | Link to Comment
  •  
    Sep 06 05:12 AM
    Igorsky:
    My first 14 years was without electricity . What we need to do is cut the electric to enviroentalist,natural... ,tree huggers, snail darter preservers , and the like for 14 months or a full weather cycle ,and they will soon say; what's an owl , snail darter have to do with it. I venture they would capitulate in 2 months.
    Reply | Link to Comment
  •  
    Sep 06 05:23 AM
    Better yet, cut the electricity to all state houses and Washington D.C.
    That would get immediate action!
    Reply | Link to Comment
  •  
    Sep 06 12:22 PM
    Sarah Palin, McCain's running mate, has seen first-hand the use of various alternative energy use by being an Alaskan. They have learned to live with energy other than what comes through a wall socket, etc. Lets see what effect she will have on the Washington crowd.
    Reply | Link to Comment
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