Clean Energy Momentum Continues, Thanks To Saudi Arabia

Sep. 19, 2019 7:34 PM ETBEP, CSIQ, FSLR, ICLN, NEE, QCLN, SEDG, TAN, TERP, UCO, BEP.UN:CA35 Comments


  • The recent attacks on Saudi’s oil infrastructure highlighted the vulnerability of the energy sector to supply shortages of non-renewable sources of energy.
  • The share of renewable energy sources in the electricity sector has been steadily rising, led by solar and wind energy.
  • The returns generated by clean energy ETFs over the past year have been impressive compared to crude oil ETFs.
  • Looking for a portfolio of ideas like this one? Members of The Lead-Lag Report get exclusive access to our model portfolio. Get started today »

Renewable energy is a clear winner when it comes to boosting the economy and creating jobs. – Tom Steyer

The recent attacks on Saudi Arabia’s oil industry caused oil prices to log one of their largest rallies ever. Brent crude futures posted a gain of 19.5% at the open on Monday, the largest jump on record for the international benchmark.

As the attacks forced the Kingdom to cut its output by almost 50%, translating into a loss of 5% of world crude oil output, there are growing concerns about the sustainability of oil supplies to meet global demand. Even though the Kingdom seeks to use reserves to minimize disruptions to supply, it can be challenging at a time when reserves are at their lowest point in a decade. American shale oil production is expected to make up for some shortfall, but that would take time. All this highlights that the dependence on non-renewable sources of energy can be expensive as their supply is limited. Innovation is underway in the energy sector, as supply shortages and pollution concerns are weighing heavily on the long-term sustainability of non-renewable energy sources.

As I’ve noted to subscribers of The Lead-Lag Report, the share of renewable sources of energy has been steadily rising, and it is expected that, by 2037, more than 50% of the global power supply would come from renewable sources, particularly wind and solar energy.

As per a study by the Department of Energy's National Renewable Energy Laboratory (NREL), it is expected that renewable sources can generate almost 80% of US electricity needs by 2050. The future lies in clean energy, and as such, long-term investors should focus on investing in companies that make bets in this technology such as NextEra Energy (NEE), TerraForm Power (TERP), and Brookfield Renewable Partners (BEP).

The performance of clean energy ETFs over the past year has also been impressive, in contrast to losses posted by crude oil ETFs. While the ProShares Ultra Bloomberg Crude Oil ETF (UCO) posted a loss of 40% over the past year, the iShares Global Clean Energy ETF (ICLN) posted net gains of 32%.

Investors who are looking to make clean energy investments can consider ETFs such as iShares Global Clean Energy ETF (ICLN) and First Trust NASDAQ Clean Edge Green Energy Index (QCLN). If you are seeking exposure to a particular source of renewable energy such as solar energy, you can look for focused ETFs or companies that are making investments in harnessing those specific forms of renewable sources.

For the past three years, solar energy has witnessed the most substantial growth, followed by wind energy. As such, Invesco Solar ETF (TAN) is an interesting bet for investors bullish on solar power. TAN is also one of the largest clean energy ETFs in the market. Some popular solar energy stocks are First Solar Inc. (FSLR), Canadian Solar, Inc. (CSIQ), and SolarEdge Technologies (SEDG). All worth considering if Middle East tensions continue to rise.


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This article was written by

Michael A. Gayed, CFA profile picture
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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