Posted on 27 July 2011.
Environmentalists and savvy investors alike can find solace in high oil prices and for the latter group, it doesn’t always mean turning to the same old oil stocks and exchange traded funds: It can also mean turning to renewable energy ETFs. As it relates to stocks, nearly every investor under the sun expects the likes of Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) to rise in synchrony with oil prices, but renewable energy ETFs also provide an overlooked alternative in this era of surging oil prices.
If one is to look for the silver lining under the clouds of high oil prices, it’s actually quite easy to find with renewable energy ETFs. Rising oil prices have a way of calling attention to alternative energy sources, be it bio-fuels, solar or wind.
That’s the good news. The bad news is renewable energy ETFs face hurdles of their own, particularly those funds that track the solar power industry. To this point, the companies that make solar modules, panels and wafers have been dependent on government subsidies, especially in the European and North American markets, making them vulnerable to the newly found restrained spending practices of developed market governments. Even with that, there are opportunities with renewable energy ETFs.
The Guggenheim Solar ETF (NYSE: TAN) is one of the marquee ETF names in not just the solar ETF universe, but the renewable energy ETF realm at large. Home to major solar players such as First Solar (Nasdaq: FSLR), Suntech Power (NYSE: STP) and Trina Solar (NYSE: TSL), the darkest clouds may be behind TAN as the government subsidy issue appears to be baked into this ETF. From here, downside is contained to $6 while a move above $7 would represent a breakout.
TAN’s big rival, the Market Vectors Solar Energy ETF (NYSE: KWT), is the other big name on the solar ETF block. Like TAN, downside risk is relatively contained with KWT, but probably needs to move above $10 to generate fresh upside pressure.
For those looking for less solar exposure within the confines of the renewable energy ETF s world, the PowerShares Global Clean Energy Portfolio (NYSE: PBD) provides access to wind power providers and other clean energy plays. The PowerShares WilderHill Clean Energy Portfolio (NYSE: PBW) is one of the other interesting renewable energy ETFs to consider as this fund offers exposure to lithium and rare earths producers.
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