The Top 5 Energy Storage ETFs To Buy In 2022
Although renewables like wind and solar emit no carbon, they are intermittent. What happens if the wind doesn’t blow and the sun doesn’t shine? The transition to renewables requires energy storage solutions to match. Learn how you can invest in the energy storage theme through ETFs.
David Dierking Updated May 22nd, 2022
Some of our posts may contain links from our affiliate partners. However, this does not influence our opinions or ratings. Please read our Terms and Conditions for more information.
Should you invest in energy storage ETFs?
The energy storage market is expected to exceed $435 billion by 2030, growing 8.4% annually this decade. This growth is driven by the shift to renewables and the electrification of transport. Intermittent sources of clean energy like wind and solar represent more and more of global electricity production, but the energy they generate needs to be stored for the times when wind or solar are not abundant. Likewise, electric cars need to be powered by energy stored in lithium-ion batteries.
Lithium-ion batteries are the dominant energy storage technology today, but alternatives, including solid-state batteries, sodium-ion and zinc-ion are also being investigated.
The growth opportunities are endless.
What are the best energy storage ETFs?
The best options to invest in this theme are ETFs that target the entire battery development cycle, from mining to the final battery production. The funds that target the broader electric vehicle industry or the companies that produce so-called battery or “green metals” like lithium and cobalt are other options. However, they won’t provide the concentrated exposure that a battery tech ETF would.
Energy storage ETF list
- WisdomTree Battery Value Chain & Innovation ETF (WBAT)
- Global X Lithium & Battery Tech ETF (LIT)
- KraneShares Electric Vehicles & Future Mobility Index ETF (KARS)
- Amplify Lithium & Battery Technology ETF (BATT)
- Global X Disruptive Materials ETF (DMAT)
Read more about each option.
1. WisdomTree Battery Value Chain & Innovation ETF (WBAT)
- Assets: $2 million
- Expense ratio: 0.45%
WBAT invests in companies developing battery and energy storage solutions but does so in a strategic way. The fund’s index first splits potential components into four categories: raw materials, manufacturing, enablers, and emerging technology.
Companies within each subsector are assigned a score based on three factors: size (10%), exposure (50%), and growth (40%). Each company also receives a composite risk score based on quality and momentum factors. Companies are ranked; those falling in the bottom 20% get eliminated. Categories and companies with higher scores receive greater weighting in the portfolio.
This fund achieves three important goals. It’s diversified across several steps in the battery value chain, it tilts towards higher growth opportunities and it considers balance sheet health.
WBAT’s top five holdings are all non-U.S. companies. Mineral Resources Limited, TDK Corporation, Simplo Technology, PT Vale Indonesia, and Umicore account for 21% of the fund and represent a good cross-section of the value chain. The United States is the top country with 22% of its assets, followed by China (21%) and Japan (12%). The fund is capped at 75 holdings, with individual stocks capped at 3.5% apiece.
WBAT is a new ETF. It launched in February 2022 and has $2 million in assets. It has a reasonable expense ratio of 0.45%.
2. Global X Lithium & Battery Tech ETF (LIT)
- Assets: $4.4 billion
- Expense ratio: 0.75%
With $4.3 billion in assets, LIT is easily the largest ETF in this space. This ETF invests in companies throughout the lithium cycle, including mining, refinement, and battery production. After ticking some liquidity boxes, LIT targets companies involved in lithium mining or the production of lithium batteries, assuming material revenues come from these activities.
The index provider selects 20-40 stocks, weighing them according to market cap. Individual holdings are capped at 20% for mining companies and 4.75% for battery companies.
LIT’s selection and weighting criteria are generic, but it does well at offering concentrated exposure to this industry. Because it’s cap-weighted, it skews heavily towards large-caps, including miners Albemarle and SQM and battery maker BYD. Lithium miner Albemarle accounts for 12% of the fund.
LIT is also geographically diverse. China is the top country at 37% of its assets, followed by the U.S. at 21%. South Korea and Japan both account for 11% of the fund. It has a 0.75% expense ratio but is very tradable due to its size.
Like WBAT, LIT does well at investing in companies all along the energy storage spectrum, even though it takes a much simpler approach to portfolio construction.
3. Amplify Lithium & Battery Technology ETF (BATT)
- Assets: $190 million
- Expense ratio: 0.59%
BATT is another ETF targeting the entire battery tech chain. It invests in companies developing lithium battery technology. They can include battery storage solutions, battery metals and materials, and electric vehicles.
This ETF also targets battery manufacturers and the miners of lithium and other “green metals.” BATT is unique in that it casts a wider net to include companies that develop and produce electric vehicles. Battery manufacturers and miners can qualify for the fund if they derive at least 50% of their revenue from these activities. Companies can also make the cut if they derive 90% of their revenues from electric vehicles.
The fund is a little top-heavy. Even though BATT holds nearly 100 stocks, the top five holdings comprise almost 30% of the portfolio. Within the battery ecosystem, the fund is much more diverse. Electric vehicles are the largest component, including the top ten holdings of Tesla and Rivian. Battery technology companies and lithium and nickel miners account for more than 12% each.
With $190 million in assets, BATT is large enough to trade efficiently. The expense ratio of 0.59% is about average for ETFs in this space.
Make an impact with your money
Best robo-advisor for green investing
Get a green credit card
Build custom portfolios for free
$125 for M1 Plus
Save and invest spare change
$3-$5 / month
Work with human advisors
4. KraneShares Electric Vehicles & Future Mobility Index ETF (KARS)
- Assets: $246 million
- Expense ratio: 0.70%
KARS is a broader take on the entire electric vehicle industry, so it doesn’t offer pure exposure to the battery tech space. It can invest in lithium-ion battery makers, hydrogen fuel cell manufacturers, and lithium miners, but only as part of a broader strategy.
The index makers review company filings and other documentation to determine which companies to include. A Bloomberg Intelligence committee makes the final call regarding whether or not a company is included. Qualifying components are market-cap weighted.
Because KARS focuses on EV companies, it includes many major automakers. Mercedes-Benz, Tesla, General Motors, and Ford are all in the top ten holdings. Semiconductor manufacturers are also well-represented. Analog Devices, NXP Semiconductors, and Infineon Technologies are three of the top four holdings. KARS has an expense ratio of 0.70%.
If you’re looking for pure battery tech sector exposure, this probably isn’t the best fund. It does, however, have one of the highest overlaps with the three main battery ETFs.
5. Global X Disruptive Materials ETF (DMAT)
- Assets: $5 million
- Expense ratio: 0.59%
DMAT focuses entirely on the companies that produce the metals and raw materials that go into disruptive climate innovation, such as renewables and battery technology. These materials can include rare earth metals, zinc, palladium, platinum, nickel, manganese, lithium, copper, and cobalt.
Companies that derive at least 50% of their revenues from the mining or production of these materials qualify for inclusion. Lithium stocks only need 25% of revenue to make the cut. The final portfolio of around 50 names is market-cap-weighted.
China accounts for roughly a quarter of DMAT’s portfolio, while the United States comes in next with 18%. South Africa (15%), Australia (12%), and Canada (10%) are the only other nations receiving double-digit allocations.
DMAT is a newer fund, having launched earlier in 2022. It has $5 million in total assets and comes with an expense ratio of 0.59%.
If you’re looking for pure energy storage and battery technology exposure for your portfolio, BATT, LIT or WBAT will do the job. BATT veers a little further into electric vehicles and WBAT is still a little too small. Of the three, LIT might be the best option.
🔔 Looking to invest in individual stocks? Check out this list of energy storage stocks.
Author: David Dierking, CFA
David Dierking has been writing about investment strategies using ETFs and mutual funds since 2007. He has extensively contributed to The Street, Investopedia, Seeking Alpha, ETFdb.com, ETF Trends, and ETF Daily News. David received his BA in finance from Michigan State University. He has also been a CFA Charterholder since 2004.
NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.