But although the phenomenon may be catching on, some experts warn that companies making up the ETFs are rarely pure wind players. "In fact, many of the stocks have almost nothing to do with wind," says Rafael Coven of Cleantech Group, a pioneer in green technology investment. "If you're trying to track the growth and success -- or even downturns -- in wind power, those stocks certainly aren't going to do that."
Coven points to GE, one of 67 stocks in the First Trust ETF and one of 32 in the PowerShares ETF. GE wind turbines, the most frequently used machines in the US market, are responsible for less than 3% of the company's $180 billion 2007 revenue. But even if ETFs were to reflect only pure play wind companies, Coven urges caution when it comes to long term investment in the wind sector. "I'd want to invest only in the companies I thought were the leaders and best," he says. "In a high-growth industry like wind, most of the companies won't make it or earn a particularly strong return, but a few will do very, very well."
Coven does not expect to see a lot of wind-related ETFs flooding the market. "My thinking is you're more likely to see industry consolidation," he says. "When you see consolidation you see fewer companies and it's harder to build an index."