Guess Who’s Killing ‘Ol King Coal

The White House has already rolled back regulations on the coal industry in an attempt to revive ol’ King Coal.

Back in June, the EPA issued the Affordable Clean Energy rule. The ACE rule allowed state regulators to determine how to improve efficiency. This was a change from being restricted by the previous, federally mandated emissions cuts.

This, in theory, should have prevented companies from being forced to switch from coal to lower-carbon alternatives.

Instead, coal stocks are cratering. Just take a look at this chart. You can see that ETFs holding renewables are mopping the floor with coal stocks.

 

The Invesco Solar ETF (NYSE: TAN) is up 57.2% so far this year. That includes a big pullback as the market melted down on Monday.

The iShares Global Clean Energy ETF (NYSE: ICLN), which holds a mixed bag of solar, wind and water stocks, is up 27.3%.

Meanwhile, the VanEck Vectors Coal ETF (NYSE: KOL) has lost 11.1% so far this year.

The reasons are manifold …

  • State regulations are pushing utilities to adopt more renewable wind and solar power.
  • Despite the federal rules change, 41 gigawatts of coal-fueled power are about to retire (not cost-efficient) and 105 gigawatts (GW) are at risk of closure.
  • Renewable energy is becoming increasingly popular and cost-efficient.

Renewable energy as a group — excluding hydropower — is expected to account for 28% of the overall growth of electricity generation from 2012 to 2040, according to the U.S. Energy Information Administration (EIA).

The EIA foresees 11 GW of new wind farms set to come online in 2019, and double-digit growth in both wind and solar in the next two years.

Speaking of solar, installations in the U.S. just hit a new record. In the first quarter of 2019, the U.S. installed 2.7 GW of solar, up 10% from a year ago. Utility-scale installations were 1.6 GW, while non-residential systems reached 438 megawatts (MW).

 

What’s more, for the full year, solar installations are projected to rise 25% to 13.3 gigawatts, according to the Solar Energy Industries Association and Wood Mackenzie. That’s up from a previous projection of 14% growth.

Over the next five years, the U.S. solar industry is expected to more than double total installed U.S. solar PV capacity, with annual installations of 16.4 GW by 2021.

Outside the U.S., other countries are doing better. For example, China is leading the charge into solar.

Source: Vox

The fact is, due to an oversupply of panels in China, global prices have fallen dramatically. Down about 30% in a year. This means solar projects are full speed ahead.

The Invesco Solar ETF (TAN) — based on the MAC Global Solar Energy Index — is a good way to get some exposure to this space.

And get this: While the broad-based Energy Select Sector SPDR Fund (XLE) is up a measly 3.6%, TAN is up a stunning 54% so far in 2019. That’s even after the recent stock sell-off.

And I believe the pullback is your “excuse” to grab shares.

The same goes for the “yield company” (yieldco) I recommended to my Wealth Supercycle subscribers on June 27 …

TerraForm Power (Nasdaq: TERP).

Yieldcos pay all available cash flow as dividends, creating good cash flow visibility for its investors.

TERP’s dividend yield is 5.79%. What’s more, that dividend is projected to grow 6% per year for the next three years.

TerraForm owns and operates solar and wind projects in the U.S. as well as in the U.K., Canada, Spain, Uruguay and Chile. Together, they offer total capacity of more than 3.7 GW.

Here’s the bottom line: Renewable energy has seen huge growth in the past 20 years. Yet renewables still contribute less than 10% to the global electricity supply.

This megatrend has a LONG way to go. We’d be smart to ride that trend, and TerraForm Power is a good way to do it.

My price target on the next breakout is $18.50. And you’ll be paid a fat dividend all the way.

All the best,
Sean

P.S. Wealth Supercycle subscribers who bought TERP at my recommendation are happy campers! They’re up 11% on this play in just over a month. For a limited time, you can join them for only $9.

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One comment on “Guess Who’s Killing ‘Ol King Coal

  1. Joe August 6, 2019

    What is the outlook for Lithium (LIT)?

    Reply