According to the U.S.-based Energy Information Administration's (EIA) Annual Energy Outlook for 2009, energy generation by fuel will be led by coal, natural gas and nuclear energy by 2030. Renewables are forecasted to remain in the fourth position, but the Obama administration's green initiatives and state mandates may be able to change the projected outcome. Let's look at ETFs that investors can take advantage of given the common upward trajectory of selected electricity fuel sources.

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Coal is expected to remain the most widely used energy source for electricity generation due to the use of existing plants coupled with the addition of new ones. Investors should note that Georgia and Michigan are taking steps to limit the development of new coal-fired plants in their states. Michigan's Governor Jennifer Granholm supports the initiative to suspend the development of new coal-fired plants in conjunction with plans to reduce the state's dependence on fossil fuels used to generate electricity. Georgia legislators are at odds over the future use of existing coal-fired plants and whether to suspend permits for new plants in the state submitted after July 2009. Coal enthusiasts can choose to follow the Market Vectors Coal ETF (NYSE:KOL). Top-performing holdings for the year include Peabody Energy (NYSE:BTU) and Consol Energy (NYSE:CNX).

Natural Gas
The forecasted use of natural gas increased 38% in the 2009 report over the previous year. Factors driving the increase include the less carbon-intensive nature of natural gas as opposed to coal, and the cost benefit of less-expensive natural gas-fired plants over renewable or nuclear alternatives. Natural gas ETFs to consider include United States Natural Gas (NYSE:UNG) and First Trust ISE-Natural Gas (NYSE:FCG). The FCG ETF invests in individual securities like Petroquest Energy (NYSE:PQ) and Mariner Energy (NYSE:ME), while the UNG ETF invests primarily in natural gas futures. New laws and emission requirements from individual states may yield positive returns for underlying natural gas providers and boost natural gas ETFs in the future.

Renewable energy usage is expected to rise due to minimum-use requirements by nearly half the states in the country. The EIA's forecasted use of energy generation from renewables doubled from 8.5% in 2007 to 14.1% in 2030. While investors can choose from several renewable energy ETFs, the PowerShares WilderHill Clean Energy ETF (NYSE:PBW) covers a wide array of alternative-energy options. Renewable energy providers like geothermal and recovered energy provider Ormat Technologies (NYSE:ORA) and semiconductor manufacturer Cree (Nasdaq:CREE) are a couple of its best performers since the beginning of the year.

Final Thoughts
The mix of generation sources may fluctuate, but the overall upward trend for these energy-focused ETFs creates a compelling story for investors to follow.

To learn more about ETFs in this sector, be sure to read ETFs Provide Easy Access To Energy Commodities.

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