Can Biden tariff relief spark rally for green energy ETFs after a tough start to 2022?

Jun. 06, 2022 11:53 AM ETInvesco Solar Portfolio ETF (TAN), FSLR, ENPH, ICLNXLE, IEO, QCLN, PBD, GCPEF, SEDG, XISHYBy: Jason Capul, SA News Editor28 Comments

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The announcement that President Joe Biden has issued tariff relief for solar panels prompted a rally in the solar sector -- strength that has spilled over into the general green energy group. The gains have allowed funds to cut losses seen earlier in the year, although many alternative energy ETFs remain sharply lower for 2022 as a whole.

The Invesco Solar Portfolio ETF (NYSEARCA:TAN) gained +6.3% to start off this week's trading. This advance led to a general upswing in green energy ETFs, including the iShares Global Clean Energy ETF (NASDAQ:ICLN) +2.9%, First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) +3.4%, and Invesco Global Clean Energy ETF (PBD) +1.9%.

The advance came on news that President Joe Biden has unveiled a 24-month tariff exemption for solar panels that come from Southeast Asian countries.

TAN, with its 51 holdings and $2.43B assets under management, has experienced above average trade volumes as a result of the tariff news. Typically, TAN experiences approximately 1.2M shares exchange hands on a given day, and as of 11 a.m. ET it had already surpassed 1.5M shares traded.

TAN has been led higher by its top three holdings which together represent 26% of the fund. Enphase Energy (NASDAQ:ENPH) is +8.6% and weighted at 11.34%, SolarEdge Technologies (SEDG) is +5.1% and weighted at 8.84%, and GCL Technology Holdings (OTCPK:GCPEF) is +1.8% and weighted at 6.63%.

However, even with the recent strength, green energy remains under pressure for 2022. TAN has come well off its lows of the year and is within sight of the levels it saw at the end of 2021, although it remains -1.4% for the year. However, some of the other green funds remain deep into the red: ICLN -2.4%, QCLN -16.9%, and PBD -17.6%.

This weakness has come in a year that has experienced significant rallies for more traditional energy plays. For instance, the Energy Select Sector SPDR ETF (XLE) has continually racked up new highs in 2022, rising about 56% year-to-date. Meanwhile, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) has advanced around 60%.

Taking a closer look at green energy ETFs, they generally saw a dip in April and early May but have recovered lately. See a visual chart of the funds 2022 performances below:

The Biden administration's solar tariff decision will especially focus on Asian countries such as Cambodia, Malaysia, Thailand and Vietnam.

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