With the recent debt problems in Europe and austerity plans beginning to take shape, many investors believe that alternative forms of energy are dead in the water. Renewables are heavily subsidized in order to help them compete with traditional fossil fuels on price. Spain, one of the leaders in solar energy, has seen new projects nose-dive over the past two years with only 100 MW of generating capacity being installed through 2009 and 2010 compared to nearly 2,700 MW added in 2008. Across the rest of the developed world, similar stories are occurring with new wind generation capacity stalling and solar projects put on hold. With developed markets turning their attentions to budget deficits, the renewable energy trend keeps growing in other parts of the world.

IN PICTURES: World's Greatest Investors

Going Off the Beaten Path
By 2030, non-OECD economies will account for 59% of global energy consumption. The expansion of electricity-generating capacity in these emerging markets will need to be supplied by wind, solar, geothermal and hydropower. While the rest of the world grapples with austerity, emerging markets are ready to transition themselves towards a renewable future. The usual suspects have made their intentions well known, but growth is coming from other sources as well. Kenya, which relies on hydro-electric generation for 60% of its energy, has strained during severe droughts that have caused supply problems, plans to add 1,700 MW of renewable energy sources by 2013. The nation's Lake Turkana Wind project is predicted to be the continent's largest and Africa will be part of a 50% increase in new infrastructure dedicated to power generation and transmission on the continent.

Asia is seeing similar growth prospects for alternative energy projects. Pakistan has recently partnered with AES (NYSE:AES) to build a new 150 MW wind facility that costs $375 million. BRIC superstar India has announced plans to create an additional 35 GW of renewable power generation by 2015 through wind, solar and nuclear means. Technologically advanced emerging markets are also getting into the sector at a rapid pace. Taiwan, which currently relies on imports to meet almost all of its energy needs, has set forth plans to add 20,000 MW of renewable power over the next 20 years and South Korea has recently purchased 3 million meters worth of high voltage superconducting cable from American Superconductor (Nasdaq:AMSC) in order to build out its own smart grid.

Tapping This Growth
With the developed world's growth in renewables taking a pause, emerging markets are picking up the slack. Many have begun taking the steps towards making significant progress and investments in the sector. In the short term, the panic from European austerity has given longer-term investors a chance to participate in the renewable sector.

Investors wanting to add a broad swath of the various renewable energy sectors can do so with the PowerShares WilderHill Clean Energy (NYSE:PBW). The exchange traded fund tracks over 50 different firms engaged across all sectors of renewables market, including solar, energy efficiency and the smart grid. The ETF trades at a surprisingly cheap P/E of 16 and charges 0.6% in expenses.

Shares of individual solar companies have plummeted in the wake of Spain's recent decision to cut feed-in tariffs and subsidies. However, many Chinese solar firms such as JA Solar (Nasdaq:JASO) and China Sunergy (Nasdaq:CSUN) have reported that business will be better in the months ahead. With the bulk of its holdings in China and Germany, Claymore/MAC Global Solar Energy (NYSE:TAN) will be a beneficiary of the growing emerging market interest in solar. The same can be said for PowerShares Global Wind Energy (Nasdaq:PWND) and the wind industry.

The Middle East has been quietly turning petro-dollars into green investment. The United Arab Emirates has committed $22 billion to developing renewable energy, and Saudi Arabia has been tapping into their immense solar and geothermal resources to power new cities. This private investment in the green sector has benefited many of the financial institutions in the region. With a third of its assets in financial firms, the WisdomTree Middle East Dividend (Nasdaq:GULF) can be used as a stealth play on this growth.

Bottom Line
While many of the developed world's alternative and renewable energy plans have stalled due to massive budget deficits, the emerging world is chugging right along. Various projects across a spectrum of renewable sectors are getting their start in these fast growing nations. The short term price drop in shares of renewable stocks such as A-Power Energy (NASDAQ:APWR) has given long term investors another chance to play on this growth.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Savings

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Investing Basics

    6 Reasons Hedge Funds Underperform

    Understand the hedge fund industry and why it has grown exponentially since 1995. Learn about the top six reasons why the industry underperforms.
  6. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  7. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  8. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  9. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  10. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!