5 Best Energy ETFs: Top Oil, Gas and Renewable Energy Funds

In this article, we discuss 5 best energy ETFs to invest in. If you want to read our discussion on the energy industry, head directly to 12 Best Energy ETFs: Top Oil, Gas and Renewable Energy Funds. 

5. ALPS Clean Energy ETF (NYSE:ACES)

5-Year Performance as of July 28: 83.70%

ALPS Clean Energy ETF (NYSE:ACES) seeks to replicate the performance of the CIBC Atlas Clean Energy Index. The ETF provides investors with access to US and Canadian companies operating in the clean energy industry, encompassing renewables and clean technology. ALPS Clean Energy ETF (NYSE:ACES) was launched on June 28, 2018, and as of July 27, 2023, it holds net assets totaling $499.5 million, with a total expense ratio of 0.55%. ALPS Clean Energy ETF (NYSE:ACES) is one of the best energy ETFs to monitor. 

Tesla, Inc. (NASDAQ:TSLA) is a significant holding of ALPS Clean Energy ETF (NYSE:ACES). On July 19, Tesla, Inc. (NASDAQ:TSLA) reported a Q2 non-GAAP EPS of $0.91 and a revenue of $24.93 billion, outperforming Wall Street estimates by $0.09 and $200 million, respectively. Tesla also announced a new record for deliveries during the second quarter of 2023, achieving a total of 466,140 vehicles, surpassing expectations.

Baron Opportunity Fund made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells EVs, related software and components, and solar and energy storage products. Following a sharp decline at the end of 2022, Tesla’s stock rebounded in the first quarter of 2023 on investor expectations that Tesla will continue to grow vehicle deliveries and maintain solid gross and operating margins despite a potential recession, competition in China, and vehicle price reductions. We wrote a long piece on Tesla last quarter and refer readers back to it, because for long-term investors not much has changed over the last three months. Tesla did hold its first Investor Day in March, and several Baron analysts and portfolio managers attended. We toured the Austin Gigafactory, drove in a Cybertruck, boarded a Semi truck, and spoke with a wide swath of Tesla senior managers. During the formal presentation, Tesla highlighted, among other things: (1) its broad and deep bench of executive talent supporting CEO Elon Musk; (2) its “Master Plan 3–Sustainable Energy for All of Earth,” which featured EVs, renewable power from solar and wind, and stationary electric storage; (3) its vehicle assembly innovations, including massive casted parts (building Model Y bodies with single front and rear castings, replacing a substantial number of parts and fastening steps), a stainless steel exoskeleton (for Cybertruck), and its next-generation highly efficient “unboxed process” for its next-gen $25,000 vehicle; (4) a future permanent[1]magnet electric motor that will not require any rare earths; and (5) the massive untapped market opportunity for commercial stationary electric storage, branded Megapack, as the world steadily shifts to renewable energy. As long-term shareholders, we have witnessed Tesla exploit its innovative Model 3/Y now-global mass-market platform to increase vehicle deliveries from barely a standing start to over 1.3 million units, while achieving industry-leading margins and reinforcing its iron-clad balance sheet to almost $23 billion in cash (and effectively no recourse debt). We expect Tesla’s next-generation EV and Megapack products to have a similar impact on company results.”

4. iShares Global Clean Energy ETF (NASDAQ:ICLN)

5-Year Performance as of July 28: 101.34%

iShares Global Clean Energy ETF (NASDAQ:ICLN) aims to replicate the performance of the S&P Global Clean Energy Index, which consists of stocks from the clean energy industry. This fund was established on June 24, 2008, and holds net assets worth $4 billion as of July 28, 2023. With an expense ratio of 0.40%, iShares Global Clean Energy ETF (NASDAQ:ICLN)’s portfolio comprises 101 stocks. It is one of the best energy ETFs to consider. 

First Solar, Inc. (NASDAQ:FSLR) is the largest position in iShares Global Clean Energy ETF (NASDAQ:ICLN)’s portfolio. First Solar, Inc. (NASDAQ:FSLR) offers photovoltaic solar energy solutions across several countries. The company specializes in designing, manufacturing, and selling cadmium telluride solar modules that convert sunlight into electricity. On July 27, First Solar, Inc. (NASDAQ:FSLR) reported a Q2 GAAP EPS of $1.59 and a revenue of $811 million, exceeding Wall Street estimates by $0.65 and $91.59 million, respectively. 

3. First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN)

5-Year Performance as of July 28: 164.20%

First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN) aims to achieve results that align with the Nasdaq Clean Edge Green Energy Index, which includes common stocks and depositary receipts of small, mid, and large-cap companies listed on U.S. securities exchanges. The ETF was created on February 8, 2007, holds a portfolio of 63 stocks, and comes with an expense ratio of 0.58%. First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN) is one of the best energy ETFs to invest in. 

Albemarle Corporation (NYSE:ALB) is a prominent holding of First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN). Albemarle Corporation (NYSE:ALB) specializes in the development, manufacturing, and marketing of engineered specialty chemicals. It operates across three main segments – Lithium, Bromine, and Catalysts. On July 18, Albemarle Corporation (NYSE:ALB) declared a quarterly dividend of $0.40 per share, in line with previous. The dividend is payable on October 2, to shareholders of record on September 15. 

Carillon Tower Advisors had this to say about Albemarle Corporation (NYSE:ALB) in its investor letter from the last quarter of 2022:

“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The stock gave back some of its recent gains amid investor concerns about how the future price of lithium could be affected by a potential decelerating rate of growth in overall electric vehicle (EV) production and demand, primarily in China. Despite these potential near-term headwinds, longer-term the global lithium market remains tight, and Albemarle plays a critical role in the battery value chain and remains well-positioned for the overall continued global adoption of EVs.”

2. SPDR Kensho Clean Power ETF (NYSE:CNRG)

5-Year Performance as of July 28: 195.15%

Next on our list of the best energy ETFs is SPDR Kensho Clean Power ETF (NYSE:CNRG). SPDR Kensho Clean Power ETF (NYSE:CNRG)’s objective is to replicate, before fees and expenses, the overall performance of the S&P Kensho Clean Power Index. This index employs artificial intelligence and a quantitative weighting approach to identify companies contributing to innovation in the clean energy sector, encompassing solar, wind, geothermal, and hydroelectric power. SPDR Kensho Clean Power ETF (NYSE:CNRG) was introduced on October 22, 2018, and currently holds a portfolio of 51 stocks with a total expense ratio of 0.45%.

Generac Holdings Inc. (NYSE:GNRC) is the biggest holding of the SPDR Kensho Clean Power ETF (NYSE:CNRG). Generac Holdings Inc. (NYSE:GNRC) specializes in the design, manufacturing, and sale of power generation equipment, energy storage systems, energy management devices and solutions, and other power products. They cater to residential, light commercial, and industrial markets worldwide. On May 3, Generac Holdings Inc. (NYSE:GNRC) reported a Q1 non-GAAP EPS of $0.63 and a revenue of $887.9 million, topping Wall Street estimates by $0.13 and $37.83 million, respectively. 

Alger Mid Cap Focus Fund made the following comment about Generac Holdings Inc. (NYSE:GNRC) in its Q4 2022 investor letter:

“Generac Holdings Inc. (NYSE:GNRC) is a leading global designer of energy technology solutions, which provides power generation equipment, energy storage systems and other power products serving the residential, light commercial and industrial markets. Notably, the company created the home standby (HSB) generator market and remains the market leader. They also introduced a clean energy storage system solution to the domestic market that was launched in December of 2019. Shares underperformed during the quarter as the company negatively preannounced fiscal third quarter results. citing residential underperformance due to installation capacity constraints for HSB generators, which caused a lag in production. In addition to the HSB weakness, the clean energy business took a hit as their largest storage customer declared bankruptcy. Consequently. These results were well below expectations and caused management to reduce their fiscal 2023 outlook.”

1. Invesco Solar ETF (NYSE:TAN)

5-Year Performance as of July 28: 206.32%

Invesco Solar ETF (NYSE:TAN) tracks the MAC Global Solar Energy Index, which consists of companies operating in the solar energy industry. Established on April 15, 2008, Invesco Solar ETF (NYSE:TAN) holds 49 stocks in its portfolio. It comes with an expense ratio of 0.69% and, as of July 28, the 30-day SEC yield is 0.10%. Invesco Solar ETF (NYSE:TAN) is one of the best energy ETFs to monitor. 

A prominent holding of Invesco Solar ETF (NYSE:TAN) is Enphase Energy, Inc. (NASDAQ:ENPH), which is involved in the design, development, manufacturing, and sale of home energy solutions for the solar photovoltaic industry. On July 27, Enphase Energy, Inc. (NASDAQ:ENPH) reported a Q2 non-GAAP EPS of $1.47, beating market estimates by $0.20. The revenue increased 34.1% year-over-year to $711.12 million. However, it fell short of Wall Street forecasts by $14.86 million. 

Here is what Aristotle Atlantic Large Cap Growth Strategy had to say about Enphase Energy, Inc. (NASDAQ:ENPH) in its investor letter for the first quarter of 2023:

“Enphase Energy, Inc. (NASDAQ:ENPH) designs, develops, manufactures and sells home energy solutions in the U.S. and internationally for the solar industry. The company is the world’s leading manufacturer of microinverters that convert solar-generated D.C. energy to A.C. energy usable in homes and buildings. Enphase introduced the world’s first microinverter system in 2008 and has expanded its offerings to include battery storage systems and proprietary technologies that provide energy monitoring and control services for solar energy systems. It sells its products and solutions directly to solar system distributors, large installers and strategic partners.

We see Enphase having a substantial market share that is gained through a premium product offering, superior customer service and the development of a large and diverse network of solar installers and distributors. The company’s products and services address a growing residential solar market. Coupling battery backup systems with existing and newly installed residential solar systems could accelerate the company’s revenue and earnings growth over the next several years, in our view. Additionally, commercial and international expansion offer additional revenue and earnings upside. Enphase also plans to expand manufacturing capacity in the U.S. during 2023 to benefit from tax incentives related to domestic production included in the Inflation Reduction Act (IRA).”

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