Powerful long-term structural drivers are reinforcing the sustained momentum toward clean and renewable energy, making the transition increasingly driven by energy security and rising power demand rather than solely by environmental considerations.
Investor interest in the space has continued to strengthen, as reflected in the performance of the S&P Global Clean Energy Transition Index, which has gained 30.39% year to date and 18.81% in the current quarter so far. These trends are further reinforcing the case for sustained and increasingly concentrated investment in renewable energy, positioning both wind and solar power as compelling long-term growth opportunities.
The STOXX Global Wind Energy Index has gained 19.51% year to date and 47.47% over the past year, highlighting strong momentum and growing investor interest in the wind energy market. Similarly, the STOXX Global Solar Energy Index has posted strong gains, underscoring continued momentum and rising investor confidence across the broader renewable energy sector, gaining 19.05% this year so far and 51.12% over the past year.
Wind & Solar Overtake Gas
Another key development strengthening the long-term investment case for wind and solar energy, as well as the broader clean energy sector, is the fact that wind and solar power combined generated more electricity globally than natural gas in April for the first time ever.
According to data analyzed by Ember, a U.K.-based think tank, as quoted on Reuters, the milestone reflects a broader structural shift in the global energy markets rather than a temporary reaction to elevated fossil fuel prices following the Iran conflict.
Per Ember, collectively, wind and solar accounted for 22% of global electricity generation in April, surpassing natural gas at 20%, with both wind and solar generation helping many countries reduce their dependence on gas imports amid ongoing energy market disruptions.
Kostantsa Rangelova, global electricity analyst at Ember, stated that the ongoing energy crisis has improved the economic competitiveness of renewable energy relative to imported natural gas, while also increasing political pressure to accelerate renewable energy deployment.
Wind and solar energy output worldwide is expected to have increased 13% year over year, with notable double-digit gains recorded across several major economies, including Britain, Chile, Australia, China and the EU, with gains of 35%, 24%, 17%, 14% and 13%, respectively, per the above-mentioned Reuters article.
ETFs to Consider
We have mentioned a few ETFs below, which are positioned to benefit from the rising momentum in wind and solar energy. Given the powerful structural drivers supporting the clean energy transition, particularly across wind and solar energy, investors may be better served by maintaining a long-term investment horizon to fully capture the sector’s growth potential.
First Trust Global Wind Energy ETF FAN
First Trust Global Wind Energy ETF tracks the performance of the ISE Clean Edge Global Wind Energy Index with a basket of 47 securities. The fund has gathered an asset base of $313 million and charges an annual fee of 0.60%.
The fund has gained 8.96% over the past month and 30.74% year to date. Over the past year, FAN has gained 73.30%.
First Trust Global Wind Energy ETF has major allocation to Vestas Wind Systems A/S (9.12%), Orsted A/S (8.24%) and Nordex SE (7.53%). FAN has double-digit geographical allocation to Denmark (17.43%), the United States (13.67%), Germany (12.82%) and Spain (10.49%).
Invesco Solar ETF TAN
Invesco Solar ETF seeks to track the performance of the MAC Global Solar Energy Index with a basket of 32 securities. The fund has gathered an asset base of $1.93 billion and charges an annual fee of 0.70%.
The fund has gained 5.20% over the past month and 18.02% year to date. Over the past year, FAN has gained 103.22%.
Invesco Solar ETF has major allocation to First Solar (8.81%), Nextpower Inc. (9.66%) and Enlight Renewable Energy Ltd (7.26%). FAN has double-digit geographical allocation to the United States (46.92%), Israel (18.18%), China (12.97%) and Spain (6.90%).
Diversified Exposure to Wind & Solar Energy
Investors can consider iShares Global Clean Energy ETF ICLN, State Street SPDR S&P Kensho Clean Power ETF CNRG and Invesco Global Clean Energy ETF PBD for a diversified exposure to wind energy.
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Invesco Solar ETF (TAN): ETF Research Reports
iShares Global Clean Energy ETF (ICLN): ETF Research Reports
First Trust Global Wind Energy ETF (FAN): ETF Research Reports
Invesco Global Clean Energy ETF (PBD): ETF Research Reports
State Street SPDR S&P Kensho Clean Power ETF (CNRG): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).