Alternative Energy exchange traded funds are investment funds traded on stock exchanges. Their share price derives from the net value of their assets which must be stakes in companies comprising the renewable energy industry. The securities underlying the fund's assets must come from companies involved in the production and research of clean energy and/or those that develop the technology required to produce it. Some Alternative Energy ETFs are even stricter in their approach, requiring not only that their underlying assets be involved in alternative energy but that they be focused on a single energy sector, for example Market Vectors Solar Energy ETF invests only in solar energy.
The industry sector is in its early stages of growth so these types of investments can be considered riskier than other types of energy investments on (many processes that show promise get derailed by high unexpected costs later on in development while others have a hard time getting approved due to regulations). However where there is risk there can be high reward, when there is a large scale shift in consumer behaviour away from nonrenewable energy sources the industry could realize huge gains.