Big Hurdles
Despite the promise of solar energy, many hurdles remain.
The cost to install solar has dropped by more than 70% over the past 10 years, but that puts pressure on corporate profits. And the industry still lacks the economies of scale to offset rapidly falling prices. Today, solar power accounts for just 0.6% of net utility-scale electricity generated in the U.S., according to the Institute for Energy Research (IER). Moreover, solar power has the lowest penetration among renewable sources including hydroelectric, biomass, and wind. Lower prices for adopting solar energy will need to be offset by wider adoption for the industry to thrive.
With almost 50% of its equity exposure to U.S. companies, TAN is more domestically focused versus KWT, which has just 25% of its exposure to U.S. solar stocks. Although both funds were launched in 2008, TAN has $237 million in assets compared to just $12.7 million for KWT. TAN has a net expense ratio of 0.70 percent versus 0.65 percent for KWT.
For now, solar ETFs are a turnaround story. As the industry recovers from the financial shock of SunEdison’s implosion, new leaders will emerge giving patient contrarian investors new opportunities to profit.
Ron DeLegge’s is Founder and Chief Portfolio Strategist at ETFguide