Investing in renewable energy projects is good for protecting the environment and better for revenue generating opportunities. Climate change is an issue that affects us all, and things need doing about it, and the investment required can only be drawn if there is a feasible return out there for those who do invest.
In order to address climate change, governments and individual households are pouring billions of dollars investing in renewable energies that are continually improving with time.
Anyone generating their own energy can be paid per unit of power, tax-free in certain countries, thanks to “feed-in tariff” (FITs) available to any household, business or community that generates electricity from solar panels, wind turbines or hydro power. A generation tariff is earned as a sum paid for each kWh of electricity generated by renewable means, an export tariff is a guaranteed sum paid per kWh for each kWh export to the grid.
Of course, for individual households, the biggest issue is generating the start-up funds to begin with. And you need a suitable plot or property, long term plans to stay there and a bank willing to support you with a wide range of products and services designed to meet your financial needs. Developers could help too, by ensuring house designs are configured to minimize energy consumption and maximize potential of generating renewable energy.
Solar panels – typically placed on house roofs, solar panels capture the sun’s energy using photovoltaic cells, which convert the sunlight into electricity, which can be used to run household appliances and lighting.
Wind turbines – these use the power of the wind to generate electricity, on a large scale and a small scale. For householders, a micro-wind turbine can produce electricity to help power the lights and electrical appliances. Some of the big wind-farms have been boondoggles, but I like the idea of this on a smaller scale.
Hydroelectricity – this is when running water is collected from streams and rivers, which contain potential energy as they travel downhill. Hydro power systems convert this potential energy in to kinetic energy in a turbine, which in turn drives a generator to produce electricity.
Heat pumps – there are a range of heat pumps available, ranging from ground source pumps which use pipes buried in the garden to extract heat from the ground, to air source heat pumps, which absorb heat from the outside air.
There are “start-up” capital costs to implementing renewable energy devices, but there are instant returns on the energy provided not only to the household, but back to the grid too. If the start-up capital is not available, you can always get exposure to this sector by investing through an alternative energy ETF.
The Best Diversified Clean Energy ETFs
WilderHill Clean Energy Portfolio (NYSE Arca: PBW)
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The PBW fund mirrors the WilderHill Clean Energy Index comprised of stocks of companies publicly traded in the United States and engaged in the business of advancement of cleaner energy and conservation. It is well diversified across several sectors with Information technology leading at ~43% followed by industrials and utilities.
The fund was first launched in March of 2015 and manages an asset base in excess of $140 million. The Fund and the Index are rebalanced and reconstituted quarterly.
PowerShares Global Clean Energy Portfolio (NYSE Arca: PBD)
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The PBD fund is based on the WilderHill New Energy Global Innovation Index. It is composed of more than 100 companies that focus on greener and generally renewable sources of energy and technologies facilitating cleaner energy. PBD is well diversified by sector and by geography (40% Americas, 30% Europe, Middle East & Africa and 30% Asia & Oceania) but it boasts the highest management fee among its peers. The fund was launched in 2007 and gets rebalanced and reconstituted quarterly.
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The QCLN fund aims to mirror the price and yield (before expense) of an equity index called the NASDAQ® Clean Edge® Green Energy Index. The index is composed of companies engaged in manufacturing ,development, distribution and installation of emerging clean-energy technologies. While the fund provides exposure to multiple sectors it lacks the geographic diversification as it is focused mainly on companies that are publicly traded in the Unites States. The index is reconstituted twice a year a rebalanced quarterly.
iShares Global Clean Energy ETF (NASDAQ:ICLN)
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This is easily the BEST ETF to gain exposure to global equities in the clean energy sector. ICLN provides investors with exposure to companies that produce energy from solar, wind, and other renewable sources across the world.
Live ONE YEAR Chart of the iShares Global Clean Energy ETF – Symbol ICLN
It comes with the highest yield among its peers and the lowest management fee at 0.47%. The fund was first launched in 2008. It is well diversified sector wise and geographically with exposure to the Chinese renewable energy sector on the top at 43% share.
In many parts across the world, the cost of generating power from renewable energy sources has reached parity or dropped below the cost of fossil fuels for many technologies in many parts of the world. This can be seen clearly if you look at the US solar industry. In 2014 it achieved another record year in 2014, growing by 34% over 2013 to install nearly 7,000 megawatts (MW) of solar electric capacity.
The adoption rate of renewable energy sources will continue to grow and one of the easiest ways to get be financially exposed to this sector is via a diversified clean energy ETF such as the iShares Global Clean Energy ETF – ICLN.