Green ETF Review: Investing in the Future of Energy
Don Dion
Don's Investment Newsletter: Don's Asset Management Business:
Even before T. Boone Pickens stepped up to the podium, investors across America were well aware that energy alternatives would be important, perhaps necessary, to meet the country’s energy needs in the future. Although gas prices have backed off of recent highs, the future of U.S. energy still hangs in the balance.
While investors seem to agree that oil supply is the problem, there is more than one proposed way to deal with unflagging demand. As ideas develop into multinational corporations, investors are looking for a way to become involved in the growing field of alternative energy. ETF issuers have responded with a smattering of funds, designed to offer investors exposure to everything from the growth of energy alternatives to the reduction of fuel emissions. Together, these funds represent ways to invest in the future of energy.
Wind
While wind energy is not a new idea, it has recently experienced a flurry of publicity in the wake of T. Boone Pickens’ proposal, “Pickens’ Plan.” Part of Pickens’ Plan involves harnessing a “wind corridor” that spans from Canada to West Texas. Pickens believes that wind could supply 20% or more of the nation’s power.
The market for wind power, however, extends far beyond America’s borders. PowerShares Global Wind Energy ETF (PWND) seeks to give investors exposure to the NASDAQ OMX Clean Edge Global Wind Energy Index. PWND’s index is composed of manufacturers, developers, distributors, installers and users of energy derived from wind sources worldwide.
PWND’s largest country allocation is Spain, home to the index’s top component, Gamesa (GCTAF.PK). As one of the largest wind generator manufacturers in the world, Gamesa captured a 15% share of the wind generator market in 2007. Gamesa’s share price has more than doubled in the last two years, and the company capped off 2007 by signing several multi-annual contracts with European clients valued at more than 700 million euros.
PWND’s holdings are largely international, but a substantial boost to U.S. wind-produced energy could create a global effect. China, PWND’s eighth-largest country allocation through its investment in China High Speed Transmission, has been growing its wind industry at breakneck speed in recent years. As production continues to grow, China’s wind energy industry may provide solutions to increasingly expensive fuel costs.
The success of PWND will hinge on global awareness and continued wind initiatives. Whether it is the rhetoric of T. Boone Pickens, or the frightening price of gas, investors have grown more aware of energy alternatives in recent months. News events and oil prices could create a tremendous demand for wind, and PWND, in the future.
Solar
Solar energy has been popular for some time among individuals who are willing to invest in the technology required to draw solar power for their homes. As the U.S. becomes squeezed for energy, however, more people are predicting a large-scale use of solar power in the future.
The Claymore/Mac Global Solar Energy Index ETF (TAN) seeks to mirror the MAC Global Solar Energy Index, which is designed to track certain business segments of the solar industry. The index includes companies that produce solar power equipment and fabrication products or services related to solar production.
TAN’s largest holding, with a 9.84% allocation, is First Solar Inc. (FSLR). First Solar designs, manufactures and sells electric power modules, which convert sun power into energy. First Solar focuses on commercial solar projects in the U.S. Backed by the Walton family, heirs to the founder of Wal-Mart Stores Inc. (WMT), First Solar announced on July 24 that it would be building its second solar power plant for Sempra Generation in Nevada.
As the price of producing solar energy falls, solar power will be a viable alternative for a larger percentage of the population. As companies such as First Solar develop new technology and expand their business, TAN may have a glowing future.
Natural Gas
One topic that has recently made headlines is natural gas. Offshore drilling for natural gas has gained more support as the realities of supply and demand drive up the price for oil. Natural gas is about half as expensive as gasoline and 30% cleaner. While natural gas does not attack the environmental situation in the same way that wind and solar power do, it may provide a cleaner transition from our dependency on oil.
The First Trust ISE-Revere Natural Gas Index Fund (FCG) seeks investment results that correspond with the ISE- Revere Natural Gas Index. The index is composed of companies that derive a defined portion of their revenue from the exploration and production of natural gas. While the ETF has a paltry 30 components, each component receives an almost equal weighting, offering investors a little more diversity.
FCG’s largest holding is Dorchester Minerals LP (DMLP), a U.S.-based company that owns, acquires and provides administration to producing and non-producing natural gas and crude oil royalties, net profits and leasehold interests. These interests are located in 573 counties and parishes throughout 25 states. DMLP’s share price has increased more than 30% year to date through July 23. Scientists are now estimating that nearly a third of the world’s natural gas is lying untapped beneath the Arctic. With the U.S. Geological Survey predicting that more than 84% of untapped oil and natural gas is offshore, a move toward natural gas will be a move up for FCG.
Carbon
One of the greatest threats facing our environment is emissions that result from current energy production. As businesses throughout the world expand their use of oil and coal, greenhouse gas emissions are increasing. Emerging markets are expanding at astronomical rates, and with this growth comes new problems with carbon emissions.
The 1997 Kyoto Protocol called for a reduction in greenhouse emissions. In order to meet restrictions levied by the resulting treaties, some countries began to adopt a market-based policy approach to emissions trading. Through the open market trading of allowances and credits awarded to companies through this system, investors outside of the carbon emissions industries can now gain exposure to the emissions trading market.
The iPath Global Carbon ETN (GRN) represents a new way to access the carbon trading market. GRN seeks to track the Barclays Capital Global Carbon Index Total Return, which currently comprises two carbon trading vehicles. The “bet” is that as global warming awareness increases and as oil prices climb, carbon-related credit plans will become increasingly important.
It is important to note that GRN is an ETN, not an ETF. While ETNs currently have favorable tax treatment, they carry additional risks because they don’t “own” their underlying components.
While the methodology behind GRN may be difficult to grasp, it does represent a new approach to environment-friendly investing. While GRN’s index is currently made up of only two European carbon plans, other nations, such as the U.S., are developing similar plans for the future. As emissions trading becomes more global, investors in GRN may be the ones to benefit.
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This article has 3 comments:
- longtermstocks
- 91 Comments
My Website
Aug 11 06:24 PM- Erich J. Knight
- 10 Comments
My Website
Aug 11 08:54 PMBiochar, the modern version of an ancient Amazonian agricultural practice called Terra Preta (black earth), is gaining widespread credibility as a way to address world hunger, climate change, rural poverty, deforestation, and energy shortages… SIMULTANEOUSLY!
This technology represents the most comprehensive, low cost, and productive approach to long term stewardship and sustainability.Terra Preta Soils a process for Carbon Negative Bio fuels, massive Carbon sequestration, 10X Lower Methane & N2O soil emissions, and 3X Fertility Too. Every 1 ton of Biomass yields 1/3 ton Charcoal for soil Sequestration.
Indeed, Dr. James Hansen, NASA's top Atmospheric authority, is now placing it in the center stage of pro-active solutions for the climate crisis.
arxiv.org/ftp/arxiv/pa...
I hope you will come to share my passion in getting the word out on the wonderful solutions provided by TP soils.
I'm sort of the TP list (and data base at REPP-CREST) cub reporter, most all my list postings, under shengar@aol.com, are news items, collaborative work, lobbying efforts with government, writers and journals.
terrapreta.bioenergyli...
The new Yahoo Biochar discussion group;
tech.groups.yahoo.com/...
All the Biochar Companies and equipment manufactures I've found:
Carbon Diversion
www.carbondiversion.co.../
Eprida: Sustainable Solutions for Global Concerns
www.eprida.com/home/in...
BEST Pyrolysis, Inc. | Slow Pyrolysis - Biomass - Clean Energy - Renewable Ene
www.bestenergies.com/c...
A public company;
Dynamotive Energy Systems | The Evolution of Energy
www.dynamotive.com/
Ensyn - Environmentally Friendly Energy and Chemicals
www.ensyn.com/who/ensy...
Agri-Therm, developing bio oils from agricultural waste
www.agri-therm.com/
Advanced BioRefinery Inc.
www.advbiorefineryinc..../
Technology Review: Turning Slash into Cash
www.technologyreview.c.../
3R Environmental Technologies Ltd. (Edward Someus)
WEB: www.terrenum.net/
The company has Swedish origin and developing/designing medium and large scale carbonization units. The company is the licensor and technology provider to NviroClean Tech Ltd British American organization WEB: www.nvirocleantech.com and VERTUS Ltd.
www.vertustechnologies...
Genesis Industries, licensee of Eprida technology, provides carbon-negative EPRIDA energy machines at the same cost as going direct to Eprida. Our technical support staff also provide information to obtain the best use of biochar produced by the machine. Recent research has shown that EPRIDA charcoal (biochar) increases plant productivity as it sequesters carbon in soil, thus reducing atmospheric carbon dioxide.www.egenindustries.com/
Australian Bio Chars
0
Australian Biochars was incorporated by Paul Conyers and Jerome Matthews and has a number of associates within S.E. Asia many of whom were involved with the EU sponsored Cogen 3 project.
Paul is a long-time business consultant whose imagination has been captured by the prospect of soil carbon both increasing crop yields and capturing greenhouse gasses while Jerome, after many years as a lawyer, became concerned about the pollution caused by agriwaste, particularly rice husk, of which more than 150 million tonnes is generated annually.
www.biochars.com/
If pre-Columbian Kayopo Indians could produce these soils up to 6 feet deep over 15% of the Amazon basin using "Slash & CHAR" verses "Slash & Burn", it seems that our energy and agricultural industries could also product them at scale.
Harnessing the work of this vast number of microbes and fungi changes the whole equation of energy return over energy input (EROEI) for food and Bio fuels. I see this as the only sustainable agricultural strategy if we no longer have cheap fossil fuels for fertilizer.
We need this super community of wee beasties to work in concert with us by populating them into their proper Soil horizon Carbon Condos.
Erich J. Knight
Shenandoah Gardens
1047 Dave Berry Rd.
McGaheysville, VA. 22840
(540) 289-9750
- Richard Carlson
- 2 Comments
My Website
Aug 13 06:56 AMRichard Carlson
London Research International
London, UK