2013 was a banner year for Solar ETFs thanks to the favorable green energy trends and Obama’s ‘Climate Change Action Plan’. Basically, the demand for renewable energy trends is growing rapidly for electricity generation across the globe. Additionally, global warming and high fuel emission issues have resulted in the growing popularity of this clean energy source.
Solar ETFs continue to soar this year as well, and have so far been the top performing funds in the alternative energy space. There are two funds in the solar space, the Guggenheim Solar ETF (NYSEARCA:TAN) and Market Vectors Solar Energy ETF (NYSEARCA:KWT) and both of these generated impressive returns of about 18% and 14%, respectively, in the first 15 days of this year on top of rock-solid returns of 126% and 93% in 2013.
What’s Behind This Latest Surge?
While the U.S. and China have been playing a great role in recent years in driving the industry, other nations are pushing hard to have a home-grown solar plant as a remedial measure to their electricity crisis. The latest to join this list is Asia’s third largest economy – India.
India recently planned for a $4.4 billion solar plant which could arguably be the world’s largest. The tumbling cost structure helped India to take on such a gigantic project. As per Sources, ‘power from imported coal and domestically produced natural gas costs around 4.5 rupees a kilowatt-hour while solar energy costs are seven rupees – down sharply from 18 rupees in 2010’.
Better economies of scale, increasingly cheaper panels and modules, as well as faster Chinese expansion leading to an oversupply of equipment have pushed the prices down of panels.
The project will involve low-cost foreign technology – mainly Chinese – to generate 4,000MW of solar energy. Apart from China, India will import equipment from the U.S. and Taiwan.
Thus, it is quite easy to understand that India’s colossal solar power project will end up benefiting the same industry in China, the U.S. and Taiwan. And here lies the trick as to why TAN and KWT are exhibiting an uptrend.