Cost-benefit analysis very favorable to renewable energies


When it comes to deploying and investing in renewable energies, market players often hear about costs.

As in, the point at which installation costs of solar and wind systems will decrease to the point that adoption increases. Good news: it already is. However, there is still work to be done. Beyond this consideration, there are other forms of costs that investors in exchange traded funds like the ETF ALPS on clean energy (ACES) should consider.

One of those considerations is whether the costs of going green outweigh the benefits. Again, good news, because the answer is “no”. At least that’s the case with wind power.

“The health and climate benefits of installed wind power in the United States in 2020 were more than double the discounted cost of energy (LCOE) of installations, according to data released by the United States Department of Energy ( DOE) on August 30 ” notes IHS Markit.

This directly affects ACES investors, as wind equities represent 19.70% of the ETF’s weight. Only solar commands a larger allocation with its 24.18%.

“The DOE assessed the health and climate benefits of wind power installed in the United States in 2020 at $ 76 / MWh, while the nationwide LCOE – or lifetime cost divided by production – for wind was $ 33 / MWh, he said in a report on onshore wind. energy, one of three on the wind emitted simultaneously by the agency, ”adds IHS Markit.

An added benefit for ACES investors is the fact that as more customers realize that the cost-benefit ratio is in favor of wind, adoptions increase accordingly.

“A record 16.836 GW of US wind capacity was installed in 2020, bringing the cumulative total at the end of the year to 121.96 GW,” the DOE said. The momentum is not slowing, with projects totaling 34, 76 GW were under construction (17.3 GW) or in advanced development (17.46 GW) at the end of 2020 in the United States, the American Clean Power Association noted in February, ”notes IHS Markit.

In fact, new wind installations in 2020 overtook solar for the first time on record. As Markit notes, wind accounts for 10% of the electricity produced in 16 states and nearly a third or more in four states. This is another sign that ACES’s wind exposure is a potentially attractive trait for long-term investors.

Other alternative energy ETFs include the First Trust Global Wind Energy ETF (FAN) and the SPDR Kensho Clean Power ETF (CNRG).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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