Five recent events driving clean energy into the rest of 2023

 

We think the outlook for the clean energy sector remains strong. There have been some key developments during the first half of 2023 which we think will drive returns going forward.

VanEck’s Global Clean Energy ETF experienced a negative return during the first half of 2023, despite equities experiencing strong returns, but we think there were several events that have occurred in the first half of the year that bode well for CLNE into the rest of 2023 and into 2024.

There were five key developments during the first half of 2023 that we think may create tailwinds into the rest of the year and beyond:

  1. The US government announced two new programs supporting clean and affordable energy as part of the Inflation Reduction Act.  These two programs, with a combined amount of almost US$11 billion in grants and loan opportunities, will bring clean energy to rural energy and utility providers.  According to the White House’s press release, “Together, these two programs represent the single largest investment in rural electrification since President Franklin Delano Roosevelt signed the Rural Electrification Act into law in 1936.”
  2. The International Energy Agency released its latest World Energy Investment report, which showed that global investment in clean energy continues to rise and is projected to reach US$1.7 trillion in 2023. The report also highlighted the difference between the investment in clean energy and fossil fuels has continued to increase, meaning we continue to see more capital invested in the clean energy space than ever before.

Chart 1: Global energy investment in clean energy and in fossil fuels, 2015-2023

CLNE-five-events.webp
Source: IEA

3. In March, the US Energy Information Administration (EIA) released data for the period ending 31 December 2022 which showed that renewable sources, including solar, wind, hydro, biomass and geothermal energy, generated over 20% of the electric power in the US, surpassing coal for the first time in history. Among the renewables, wind and solar continue to be the two major drivers of growth.

4. The G7, at its meeting in Japan in May, agreed to increase the offshore wind capacity of 150GW and increase solar photovoltaics to more than 1TW by 2030, in a concerted effort to expand renewable energy globally and bring down costs by strengthening capacity.

5. Most recently, Bloomberg forecast, renewable energy will enjoy the highest sales and EPS growth in the next two years among 20 sectors globally.

Chart 2: Bloomberg 24-month sector forecasts
CLNE-five-events-2.webp

Source: Bloomberg as at 1 August 2023

The VanEck Global Clean Energy ETF (ASX: CLNE), we think, is well positioned to take advantage of these long-term tailwinds.

CLNE includes companies at the forefront of renewables technology, allowing investors to participate in this structural, long-term trend in one easy trade.

It has diversified exposure that includes companies involved in:

  1. biofuel & biomass energy production, technology & equipment;
  2. ethanol & fuel alcohol production;
  3. fuel cells technology & equipment;
  4. geothermal energy production;
  5. hydro electricity production, turbines & other equipment;
  6. solar energy production, photo voltaic cells & equipment; and
  7. wind energy production, turbines & other equipment.

Further information about CLNE and the screening criteria employed by its index can be found on our website.

Key Risks

An investment in CLNE carries risks associated with ASX trading time differences, financial markets generally, individual company management, industry sectors, foreign currency, emerging markets, country or sector concentration, political, regulatory and tax risks, fund operations, liquidity and tracking an index. See the PDS for details. 

Published: 03 August 2023

Any views expressed are opinions of the author at the time of writing and is not a recommendation to act.

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