Solar ETFs Fade To New Lows

Includes: KWT, TAN
by: Tom Lydon

Solar cell producers and related exchange traded funds that track the sub-sector have been one of this year's worst performers as the lower energy prices and heavy Chinese subsidies weigh on the global solar industry.

Guggenheim Solar ETF (TAN) and Market Vectors Solar Energy ETF (KWT) are down more than 35% year to date.

Both funds fell to new all-time lows Monday while the larger KWT saw heavy trading volume.

Solar energy made sense before the recent financial shock when oil prices were knocking on $150 and natural gas was $13. However, with energy prices falling, especially natural gas, we are thinking less about alternative energy.

"Perhaps clean energy's biggest problem is this: because natural gas has gotten so cheap, there is no longer a financial incentive to go with renewables," Juliet Eilperin wrote for Wired.

Austin Hatley for StreetAuthority calculates that at today's prices, it costs about $0.04 to generate one kilowatt hour of energy from natural gas. On the other hand, it costs over $0.20 to generate a kWh from solar, $0.10 from biomass and $0.08 from wind.

Moreover, the solar industry has suffered as prices for solar cells plummeted 66% since the third quarter of 2010, reports Lou Kilzer for TribLIVE.

Solar companies contend that China instigated the global price drop after various Chinese government entities unfairly provided subsidies to strengthen their domestic companies.

"The Chinese big-footed the entire world," SolarWorld corporate spokesman Ben Santarris said in the article. "They're like the schoolyard bully."

Market Vectors Solar Energy ETF

Max Chen contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.