Why Clean Energy ETFs Are a Stealth Opportunity Amid Trade Policy Uncertainty

The U.S. clean energy sector faces headwinds from temporary tax credit cuts and shifting trade policies, but beneath the noise lies a compelling investment opportunity. Market mispricing has created undervalued opportunities in wind and solar ETFs, driven by underestimated regulatory durability, oil's oversupply crisis, and the weak dollar's boost to global renewable assets. Here's why now is the time to position for clean energy's structural rise.

The Regulatory Safety Net: Temporary Cuts, Permanent Momentum

Recent changes to the Investment Tax Credit (ITC) and Production Tax Credit (PTC) under the “One Big Beautiful Bill Act” (OBBBA) have sparked fears of a clean energy slowdown. Critics highlight stricter deadlines—projects must begin construction by December 31, 2025, to qualify—and reduced subsidies for wind and solar after 2027. Yet this framework is less a death knell than a phase-out designed to push developers to accelerate construction timelines.

Crucially, utility-scale projects remain eligible for subsidies through 2033 for non-wind/solar technologies like nuclear and energy storage. Even for wind and solar, projects starting construction by mid-2026 can secure credits if placed in service by December 31, 2027. This creates a “race to build” dynamic, favoring developers with access to capital and supply chains.

The market has overreacted to short-term policy shifts while underestimating long-term demand. The IRA's original $369 billion clean energy investment and global net-zero targets ensure sustained momentum. Even under OBBBA, the U.S. retains tax credits for advanced nuclear, carbon capture, and energy storage—sectors critical to energy security.

Oil's Oversupply Crisis Weakens Fossil Fuel Competitiveness

Global oil markets face a supply-demand imbalance where production is outpacing demand growth by a factor of four. Non-OPEC+ producers like the U.S. and Brazil are flooding markets, while OPEC+ struggles to enforce output cuts. A weak U.S. dollar has artificially buoyed oil prices, but this won't last.

As oil's oversupply persists, fossil fuel investments face structural headwinds. Renewables, by contrast, benefit from declining costs: solar and wind are now cheaper than new gas plants in most regions. The $2.2 trillion poured into renewables, nuclear, and grid infrastructure in 2025—double fossil fuels—underscores this shift.

The Weak Dollar: A Tailwind for Global Renewable Assets

The U.S. dollar's decline has two countervailing effects on clean energy investing. For U.S. investors in non-domestic renewables, a weaker dollar amplifies returns when foreign currency gains are converted back to USD. For example, unhedged international equities in solar or wind firms in Europe or Asia see boosted returns, as the Morningstar Global Markets ex-US Index rose 14% year-to-date through May 2025.

However, U.S. investors funding foreign projects face higher real costs in stronger currencies. This creates a balancing act: while dollar weakness improves returns on existing holdings, it complicates capital allocation for new projects. Yet the de-dollarization trend—where central banks reduce USD reserves—could open doors to alternative financing channels for renewables in emerging markets.

The Investment Thesis: Buy the Dip in Wind/Solar ETFs

The confluence of temporary credit cuts, oil's decline, and currency dynamics creates a buying opportunity in wind and solar ETFs. Here's why:

1. Mispriced Regulatory Risk: Markets have priced in the worst-case scenario of credit eliminations, but the phase-out timelines and carve-outs for critical technologies ensure a soft landing.
2. Structural Demand: Electrification trends, EV adoption, and grid modernization are irreversible. Even under OBBBA, the U.S. retains a framework to meet climate goals.
3. Global Diversification: Weak dollar exposure to non-U.S. renewables (via ETFs like ICLN or TAN) offers both yield and inflation protection.

Risks and Due Diligence

• Policy Volatility: U.S. trade policies could introduce tariffs on Chinese-made solar panels or batteries, though domestic content rules already incentivize local production.
• Supply Chain Constraints: Accelerated project timelines may strain material availability.
• Geopolitical Shifts: De-dollarization could disrupt traditional financing channels, but it also opens opportunities for regional partnerships.

Conclusion: Position for the Transition, Not the Turbulence

Clean energy ETFs like the Invesco Solar ETF (TAN) and iShares Global Clean Energy ETF (ICLN) are undervalued due to short-term policy fears. Their long-term trajectory is underpinned by oil's oversupply, the weak dollar's currency tailwinds, and the structural inevitability of energy transition. Investors who buy now—while utilities and fossil fuels remain in focus—can capitalize on a mispricing that won't last.

The clean energy sector isn't just surviving—it's evolving. For long-term portfolios, now is the time to anchor in wind and solar exposure.