The global transition to clean energy is accelerating, with wind energy taking the lead. The First Trust Global Wind Energy ETF (FAN), which tracks the wind energy industry, has gained 4% since January and 6.6% over the past year. Meanwhile, the coal industry continues to face headwinds. Investor concerns about climate change and the environmental impact of fossil fuels have led many to divest from coal-related holdings.
However, the coal industry isn’t going down without a fight. Demand for coal remains strong in countries like China and India, providing a lifeline for coal companies. The U.S. government also recognizes the importance of energy security and continues to support coal as a reliable energy source, particularly for bridging the gap between the growth of renewable energy and the demand for electricity.
While the long-term outlook for coal remains uncertain, some investors are betting on its continued relevance. Range ETFs launched the Range Global Coal Index ETF (COAL) in January 2024, providing investors with exposure to companies involved in the coal industry. Since its launch, the ETF’s price has oscillated between $21 and $26, with year-to-date gains of 0.86%. Range argues that there is still an investment case for coal, citing the continued global demand for the fuel.
However, the performance of individual coal companies has been mixed. Peabody Energy Corp (BTU), the largest coal producer in the U.S., has seen its share price decline by 7.7% since January, but is up 2.3% over the past year. Arch Resources Inc (ARCH), the second largest producer, has performed worse, with shares down over 24% since January.
Meanwhile, the wind energy sector continues to outperform. The iShares Global Clean Energy ETF (ICLN), which includes companies involved in solar and wind energy, is down 8% since January but up 12% over the past year. However, the solar energy sector has faced more significant challenges, with the Invesco Solar ETF (TAN) down 22% since January and 30% in the past year.
The contrast between the performance of wind and solar energy reflects the complexities of the clean energy transition. While the overall trend is towards clean energy, the specific path and timing of this shift remain uncertain, with different sectors experiencing varying levels of success.
Ultimately, the future of the coal industry will depend on several factors, including the pace of the clean energy transition, government policies, and global demand. The debate over coal’s future is likely to continue as investors, policymakers, and energy companies grapple with the challenges and opportunities of a changing energy landscape.
