Clean Energy ETFs Rebound on China, U.S. Windfalls

Clean energy ETFs led gains in May after major developments in China and the United States boosted the sector.

China’s move to address problems in its solar industry and the U.S. government’s recent $1.7 billion loan guarantee to hydrogen developer Plug Power have boosted the sector in recent weeks.

This comes as the theme has struggled in recent years, while issues surrounding oversupply and interest rate sensitivity have amplified the problem. The sector was one of the least efficient in 2023.

Among the best performers was the Fidelity Clean Energy UCITS ETF (FNRG), generating returns of 15.6% over the last month, contrasting returns of -21.7% in 2023.

FNRG’s top three holdings are Vestas Wind Systems A/S (4.4%), First Solar 4.4% and Verbund AG (3.7%).

THE Global X Hydrogen UCITS ETF (HYGG) also made a comeback, returning 28.9% over the past month, up from -40% in 2023.

The largest weighting includes US hydrogen producer Bloom Energy (15%), followed by Nel ASA (12.2%) and Plug Power (11%).

Following HYGG, the VanEck Hydrogen Economy UCITS ETF (HDGB) has returned 18.4% over the past month.

Sentiment surrounding clean energy ETFs could also pick up as interest rates begin to soften after aggressive hikes in 2023 and financing of clean energy projects further accelerates in the United States.

For example, Orsted last month received a $680 million investment from JP Morgan for solar and solar storage assets, made possible as part of Biden’s Inflation Reduction Act launching in 2022.

Optimism surrounding AI also helped returns, given the technology’s high electricity consumption.

For example, a recent Goldman Sachs study found that a ChatGPT query requires nearly 10 times more electricity to process than a Google search, with the same report estimating that data center energy demand will increase by 160 % by 2030.

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