5 ETFs to Play the Coming Wind Energy Revolution

by: World Market Pulse

There has been so much discussion about the older energy sources such as coal, oil and natural gas that have been moving our economy for decades. Climate change discussions as well as rising commodity prices have helped bring alternative or renewable energy discussions to the front table.

As an investment perspective its been not much of a surprise that coal-related stocks and ETFs have continued to be one of the best performing sectors this year. However there is no denying the fact that eventually there will be some big winners in the alternative energy field and if the recent report released by Global Wind Energy Council (GWEC) and environmental group Greenpeace is to be believed, Wind energy is likely to emerge as the leading force in Alternate energy sources and will increase to generate between 5 and 22 percent of world power by 2030.

The study said wind would rise to 5 percent of world electricity demand by 2030, or 1,400 terawatt hours (TWh). That's assuming 2009 reference scenarios by the International Energy Agency, which foresees a slowdown in wind growth in coming years. Wind turbines currently accounted for about 2.3 percent of world electricity demand in 2010 but growth in China is said to have outpaced previous projections by GWEC and Greenpeace. However, the United States has been found wanting partly because of the economic downturn. Still, the report has warned that countries need to do more to expand electricity grids to cope with the rising demand and supply. If the grid constraints could be managed, Wind energy could beat most other forms of alternative energy and emerge as the one in the driver’s seat of the world's energy requirements.

Wind ETFs Investment Options

First Trust Global Wind Energy (NYSEARCA:FAN): FAN offers investors global exposure to the wind industry, allocating 26.2% of its assets to Spanish equities, 16.3% to the U.S. and 14.9% to Germany.

FAN Top Ten Holdings

  1. Vestas Wind Systems A/S (OTCPK:VWSYF): 7.76%

  2. Iberdrola Energias Renovables SA (OTC:IRVSF): 6.70%

  3. EDP Renovaveis SA (EDPR): 6.53%

  4. REpower Systems AG (RPW): 6.52%

  5. Hansen Transmissions International NV (HSN): 6.18%

  6. Gamesa Corporacion Tecnologica, S.A. (OTCPK:GCTAF): 4.55%

  7. Nordex AG (OTCPK:NRDXF): 3.69%

  8. Infigen Energy (IFN): 3.69%

  9. Japan Wind Development Co Ltd: 3.21%

  10. PNE Wind AG (PNE3): 2.31%

Expense Ratio: 0.60%

PowerShares Global Wind Energy PortfoETF (NASDAQ:PWND): This ETF also offers investors global exposure, and is diversified across market capitalization levels with nearly equal allocations to large, mid, and small cap securities.

PWND Top Ten Holdings

  1. Vestas Wind Systems A/S: 11.81%

  2. Iberdrola Energias Renovables SA: 8.95%

  3. EDP Renovaveis SA: 8.68%

  4. Edf Energies Nouvelles (OTC:EDFEY): 8.57%

  5. China High Speed Transmission Equipment Group Co., Ltd. (00658): 5.88%

  6. American Superconductor Corporation (NASDAQ:AMSC): 5.33%

  7. Hansen Transmissions International NV: 4.35%

  8. China WindPower Group Ltd. (00182): 4.17%

  9. REpower Systems AG: 3.97%

  10. China Longyuan Power Group Corp Ltd (CLPXF): 3.83%

Expense Ratio: 0.75%

Clean Energy ETFs

PowerShares WilderHill Clean Energy (NYSEARCA:PBW): PBW tracks the WilderHill Clean Energy Index, a benchmark that tracks companies that focus on greener and generally renewable sources of energy and technologies that facilitate cleaner energy. It holds 53 securities and is heavily exposed to companies in the electrical equipment sector.

PBW Top Ten Holdings

  1. Rubicon Technology, Inc. (NASDAQ:RBCN): 3.53%

  2. Universal Display Corporation (NASDAQ:PANL): 3.46%

  3. ReneSola Ltd (NYSE:SOL): 2.84%

  4. Ormat Technologies, Inc. (NYSE:ORA): 2.83%

  5. Quanta Services, Inc. (NYSE:PWR): 2.76%

  6. JA Solar Holdings Co., ADR ADR (NASDAQ:JASO): 2.67%

  7. Zoltek Companies, Inc. (NASDAQ:ZOLT): 2.67%

  8. First Solar, Inc. (NASDAQ:FSLR): 2.65%

  9. GT Solar International, Inc. (SOLR): 2.63%

  10. STR Holdings, Inc. (NYSE:STRI): 2.53%

Expense Ratio: 0.60%

PowerShares Glbl Clean Enrgy Port (NYSEARCA:PBD): PBD consists of 88 securities and has nearly one-third of its exposure to U.S. firms, the largest single country allocation. Additionally, the fund is heavy on mid and small cap securities; just 14% of the assets are classified as large cap firms.

PBD Top Ten Holdings

  1. American Superconductor Corporation: 2.64%

  2. China High Speed Transmission Equipment Group Co., Ltd. (00658): 2.54%

  3. Hansen Transmissions International NV: 2.27%

  4. Vestas Wind Systems A/S: 2.12%

  5. Novozymes (OTCPK:NVZMF): 2.02%

  6. Ormat Technologies, Inc.: 2.00%

  7. Energy Development (EDC) Corporation: 1.95%

  8. Covanta Holding Corporation (NYSE:CVA): 1.92%

  9. Cosan S.A. Industria e Comercio (CSAN3): 1.92%

  10. China WindPower Group Ltd. (00182): 1.92%

Expense Ratio: 0.75%

WilderHill Clean Energy Index (ECO): The WilderHill Clean Energy Index is an index that defines and tracks the Clean Energy sector: Specifically, businesses that stand to benefit substantially from a societal transition toward use of cleaner energy and conservation. Stocks and sector weightings within the ECO Index are based on their significance for clean energy, technological influence and relevance to preventing pollution in the first place. The WilderHill Clean Energy Index is a index that tracks the clean energy sector and the PowerShares Clean Energy Portfolio (PBW) is the investment vehicle that replicates it.

Future Outlook:

The alternative energy sector is undergoing a recovery after having absorbed the global recession and falling waterfall in the world price of crude. Although these alternative energy companies have recovered from their lows, their valuations are still well below the 52-week high. The growth of alternative energy companies is closely tied to the fortunes of the economy.

A World Bank report has suggested that six major East Asian economies will together need roughly $80 billion in investment in alternative energy sources per year in order to stabilize their greenhouse gas emissions by 2025. Since 2005, investment in clean energy increased by 230% to $162 billion in 2009.

Disclosure: No positions