Solar and Wind Power Heating Up and Gusting

With lowered costs and tax incentives available through the Inflation Reduction Act, solar power and wind energy are on track for meteoric growth within the U.S. As a share of new electric-generating capacity each year, solar and wind power is seeing substantial growth, according to the U.S. Energy Information Administration. In 2023, these technologies account for the majority of the new, utility-scale generating capacity that developers plan to bring online in the U.S.

The capacity for solar energy in the U.S. has soared, thanks to the lowered cost of solar panels and tax incentives through the IRA. More than half of the new U.S. generating capacity expected to be solar power in 2023. And like solar power, the capacity for wind power has surged, due to lower turbine construction costs, tax incentives, and new renewable energy targets.

PBW normally invests at least 90% of its total assets in the WilderHill Clean Energy Index, which is composed of publicly traded stocks of companies engaged in the business of advancement of cleaner energy and conservation. PBW had 74 holdings as of Dec. 31. Top holdings as of March 7 include Wallbox NV, Archer Aviation, and TPI Composites. PBW carries an expense ratio of 0.62%.

TAN, meanwhile, invests at least 90% of its total assets in the securities that comprise the MAC Global Solar Energy Index, which is comprised of companies in the solar energy industry. The fund had 44 holdings as of Dec. 31. Top holdings for TAN as of March 7 were First Solar (whose stock has been soaring), SolarEdge Technologies, and Enphase Energy. TAN has an expense ratio of 0.69%.

The Invesco S&P 500 GARP ETF (SPGP) was among Invesco’s most popular ETFs in February, as measured by net flows.

SPGP has seen a jump in research and flows in recent months as investors look for a fund offering both growth and value characteristics. While many funds prioritizing quality and value have underperformed over a longer period, SPGP has maintained notable outperformance over the S&P 500 in various market environments.

SPGP saw $443 million in flows in February, bringing year to date flows to $689 million. The $2.7 billion fund saw $1.2 billion in net flows last year, a pivot from 2021 when the fund saw $442 million in inflows, and 2020 when the fund saw $173 million in outflows.

“Advisors have sought stable growth companies given the market volatility and uncertain earnings environment,” Todd Rosenbluth, head of research at VettaFi, said.

Nick Kalivas, head of factor and core equity product strategy for Invesco, said he thinks allocating to a GARP ETF will be a secular trend. Going into 2022 and the rising rate economic environment, many investors were buying growth at any price as there was a reward for taking on a lot of risks and growthy names.

“A lot of investors are going to be thinking more about GARP-like strategies when they’re looking for growth but they want to have some guardrails on it, and so I think that this is something we’re probably going to see continue,” Kalivas added.

The fund has a track record of outperforming the S&P 500. SPGP stands out for its ability to generate solid performance in both growth- and value-oriented environments, as it tilts toward both the growth and value factors — something highly unusual to see in one ETF.

SPGP also has some quality characteristics, as well as tilts toward the small size factor because it weights securities by growth instead of market cap, it tends to be smaller down the market spectrum in terms of where performance is generated.

SPGP has increased 5.3% year to date as of February 28, while the S&P 500 has climbed 3.7%, each on a total return basis. In 2022, SPGP fell -13.83% while the S&P 500 declined -18.11%.