Leading up to the 2024 presidential election, there were concerns that renewable energy stocks and related ETFs — already struggling — would be even more vulnerable if then-former President Trump was victorious.
That was the outcome, and given that boosting domestic production of fossil fuels was a key component of his campaign, some market observers pondered the near-term fate of clean energy stocks and ETFs like the ALPS Clean Energy ETF (ACES ). There’s no sugar-coating it. ACES and comparable ETFs are struggling on a year-to-date basis.
However, investors might not want to take a myopic view of clean energy stocks, because there are green shoots emerging. Take the case of Brookfield Asset Management’s recently announced $1.74 billion of renewable energy assets from U.K.-based National Grid. Brookfield is the majority owner of Brookfield Renewable Partners L.P. (BEP), the fifth-largest holding in ACES.
Making ACES Great Again
The timing of a credible rebound by clean energy stocks, including ACES holdings, remains to be seen. But some industry observers are bullish on the fundamentals. That group includes Brookfield CEO Connor Teskey.
“While the renewable sector has traded down in the public markets on weaker sentiment stemming from the new U.S. administration’s announced executive orders and potential policy changes for renewables, the simple fact is that the fundamentals for energy have never been better,” he said on a Jan. 31 conference call.
Add to that, the recently released Sustainable Energy in America Factbook, published by the Business Council for Sustainable Energy and BloombergNEF, indicates 2024 deal-making in the space was robust.
“The report identified 183 deals for clean-power purchases last year, with most of them paid for by tech companies looking for low-carbon options to power the growth of AI data centers. Solar and energy storage projects last year made up more than two-thirds of the new power capacity seeking connection to the grid last year,” reported Jeff Young for Newsweek.
Solar and wind deal activity is potentially pertinent to ACES investors because the ALPS ETF allocates 38.6% of its roster to stocks from those industries.
What would help ACES would be clean energy stocks performing a rewind, say back to 2016 — oddly enough the year Trump won his first term — because that’s when many stocks in the space started generating impressive outperformance of fossil fuels rivals.
“According to the report, the Clean200 companies generated a total return of 190.9 percent, whereas an index of fossil fuel companies showed earnings of 76.7 percent,” according to Newsweek.
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