What Is Renewable Energy Stocks

Do you wish to know what is renewable energy stocks? Yes, these stocks are related to green energy sources such as wind, solar, hydro, biomass, geothermal, and ocean energy.

I distinctly remember the moment renewable energy grabbed my attention – the year was 2012 and my neighbor just had solar panels installed on his roof. I wondered – can you actually invest in the solar industry?

This led me down a rabbit hole learning all about public clean energy companies and wind turbine manufacturers to hydroelectric producers and biofuel makers. I was amazed by innovations enabling sustainable energy scaling.

But risks existed too like subsidy changes and project delays. Through deeper research, I uncovered what makes certain renewable stocks shine…which I’ll cover ahead to help you profit in this high-growth arena.

As concerns over climate change intensify, renewables are expected to gain increasing market share for power generation and benefit from favorable regulatory policies. Let’s explore what renewable energy stocks are all about.

What Is Renewable Energy Stocks?

Renewable energy stocks are stocks of companies that are involved in the production, distribution, or development of renewable energy. These stocks are related to green energy sources such as wind, solar, hydro, biomass, geothermal, and ocean energy.

Investing in renewable energy stocks is considered a good opportunity for investors, as the clean energy sector represents a massive potential for growth and has outperformed fossil fuel stocks over the past decade.

Types of Renewable Energy Companies and Offerings

There is a diverse mix of public companies in the renewable energy sector offering unique value propositions and risk/reward profiles. Here are some of the key sub-segments to consider:

Solar Power Companies

Solar stocks have been strong market performers recently as solar becomes the fastest growing renewable energy source. Leading players include both integrated manufacturers of solar components as well as developers of solar energy projects and installations:

  • Solar panel manufacturers
  • Inverter and tracking system producers
  • Rooftop / residential solar installers
  • Utility-scale solar power generators

Major solar stocks include SunrunFirst Solar, and SolarEdge.

Wind Energy Stocks

Wind energy companies stand to benefit as wind power steadily increases its contribution to global electricity generation. You’ll find wind turbine manufacturerswind farm developers, and wind power system operators trading publicly:

  • Vestas Wind Systems
  • Siemens Gamesa Renewable Energy
  • NextEra Energy Partners

Hydroelectric Power and Other Renewables

You’ll also find stocks focusing on other renewable sources like:

  • Hydroelectric power producers
  • Leading geothermal energy drillers/generators like Ormat
  • Biomass and biofuel manufacturers

In many markets, hydro and geothermal account for the majority of renewable generation outside of wind and solar.

Getting Started With Renewable Energy Stocks

Interested in adding some renewable stocks but not sure where to begin? Here are some tips:

Assess Company Financials and Positioning

As with any stocks, take a close look at company financials and market positioning. Important metrics to evaluate include:

  • Revenue growth
  • Profitability
  • Margins
  • Debt profile
  • Market share stats

Also research factors like technology advantages, project pipelines, management, and exposure to supportive policies.

Consider Funds Focused on Renewables

An alternative is buying a renewable energy ETF or mutual fund that provides diversified exposure:

  • Invesco Solar ETF (TAN)
  • iShares Global Clean Energy ETF (ICLN)
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While mitigating risks, funds do have overlapping holdings and come with fee drag.

Fund NameAssets Under ManagementTop Holdings
c$3.3 billionEnphase Energy, SolarEdge, Sunrun
iShares Global Clean Energy ETF$5.9 billionEnphase, Vestas Wind, Plug Power

Research Renewable Energy Market Outlook

Keeping tabs on market outlooks, policy shifts, and renewable energy trends in major countries can generate valuable investing ideas. Useful resources include:

  • International Energy Agency (IEA)
  • U.S. Energy Information Administration
  • BloombergNEF
  • Industry associations

Pay attention to projected capacity growth by energy source, changing cost dynamics, climate legislation, and global investment flows.

Opportunities Driving Renewable Energy Stocks

Let’s explore some of the key opportunities underpinning rosy outlooks for renewable energy stocks and companies:

Government Policy Support

  • Many governments have implemented renewable portfolio standards requiring minimum thresholds for the share of power generated from renewable sources.
  • Production tax credits, capital cost subsidies, and other financial incentives provide a favorable regulatory climate.
  • As parties to the Paris Climate Agreement, most countries worldwide have set ambitious carbon emissions reduction targets, supporting further renewable buildouts.

Key Policy OpportunitiesU.S. clean electricity tax creditsEU climate and energy frameworkChina carbon neutrality goal by 2060

Infrastructure Investment Upside

Substantial investment outlays on renewable energy infrastructure also serve as catalysts:

  • According to BloombergNEF, achieving net zero emissions globally by 2050 would require over $150 trillion in total energy transition investments, including significant sums for renewable power assets.
  • Government infrastructure bills earmark funding for transmission system upgrades, smart grids, and other grid modernization supporting increased renewable penetration.

Technology Improvements

Innovations and manufacturing scale have sharply reduced renewable energy generation costs:

  • Levelized costs for new wind and solar projects are now routinely below the operating costs of existing fossil fuel plants in most major markets.
  • Emerging technologies like floating offshore wind farms, solar trackers, and smart inverters promise to further improve capacity factors and system economics.

Cost declines paired with reliability enhancements serves to accelerate renewable adoption among cost-conscious utilities and consumers.

Risk Factors With Renewable Energy Stocks

While the long-term bull case appears strong, investors should also consider the inherent risks facing the sector:

Policy and Regulatory Uncertainty

In many countries, renewable upside relies heavily on government environmental policies, incentives, and power market structures which are subject to change:

  • Retroactive incentive reductions or premature expirations can disrupt developer revenue models and planned projects.
  • Permitting delays on new renewable projects also remains an acute challenge in North America and parts of Europe.

Key Policy Risks
U.S. clean electricity incentives expiring UK energy profits tax Ontario cancelling 758 renewable contracts

High Capital Costs and Competition

While ongoing cost improvements help, developing renewable power projects requires major upfront capital commitments:

  • New utility-scale wind and solar plants can cost several hundred million dollars to over $1 billion.
  • Many developers take on heavy debt burdens or issue equity to finance projects.

Intensifying competition places further pressure on bid prices and operating margins. Participants need to achieve economies of scale and continue reducing expenses.

Future Outlook for Renewable Energy

Despite risks inherent with this emerging industry, the long-term growth trajectory for renewable energy appears extremely compelling:

Global Energy Transition Underway

With the effects of climate change intensifying, the transition towards low-carbon energy is accelerating:

  • The IEA forecasts renewable electricity generation increasing over 60% by 2026 under its stated policies scenario, led by solar and wind.
  • Several major economies have committed to 100% clean electricity standards over the next few decades, including California, New York, Japan, South Korea, and the UK.

And this trend is projected to continue for decades to come. Under the IEA’s Net Zero pathway, renewables would supply 70% of global electricity by 2050.

While renewables growth will occur worldwide, some markets are particularly interesting:

  • China remains the epicenter of solar energy demand and new installed capacity. There are major wind markets here too.
  • The United States enjoys abundant solar, onshore wind, and geothermal resources coupled with state-level incentives. Offshore wind ramping up on East Coast.
  • India needs to nearly triple power generation over next decade to meet economic growth projections, with solar and wind likely filling gap.
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Market Consolidation

Industry consolidation through mergers, takeovers, and bankruptcies also appears probable considering market fragmentation and cost curve competition. Survivors able to achieve scale economies and greater vertical integration may deliver exceptional shareholder returns.

Notable Renewable Energy Stocks

Here is a spotlight on some of the most prominent and highest performing public renewable companies as of early 2024 based on market capitalization:

SolarEdge Technologies

SolarEdge pioneered DC optimized inverter systems for solar arrays and has expanded into modules, energy storage, EV chargers, and grid services:

  • Trades on Nasdaq under ticker SEDG
  • $20 billion market capitalization
  • Possesses dominant 27% global market share for MLPE (module level power electronics)

With smart home energy ecosystem ambitions, SolarEdge stands poised to be a long-term winner.

Enphase Energy

A pure play microinverter specialist reaching both residential and commercial solar markets worldwide:

  • Trades on Nasdaq under ticker ENPH
  • $32 billion market cap
  • Shipped over 7 million

Sunrun

Sunrun is the leading residential solar, battery storage, and energy services company in the United States:

  • Trades on Nasdaq under ticker RUN
  • $7 billion market cap
  • Over 600,000 customers across 22 states
  • Largest solar rooftop fleet nationwide

Positioning itself as a one-stop clean energy provider for homes, Sunrun’s addressable market remains massive.

Ørsted

The global leader in offshore wind development and operations:

  • Trades on Nasdaq Copenhagen under ticker ORSTED
  • $75 billion market cap
  • Over 35% global offshore wind market share
  • Strong project pipeline across Europe, North America, and Asia

With unmatched industry expertise and an early mover advantage, Ørsted is set to benefit enormously from projected offshore wind growth.

Brookfield Renewable

A leading renewable power platform owning an extensive portfolio of hydroelectric, wind, solar, distributed generation, and storage assets:

  • Trades on NYSE under ticker BEPC
  • $14 billion market cap
  • 21 GW capacity spanning North + South America, Europe, India
  • Backed by leading alternative asset manager Brookfield

Brookfield Renewable’s globally diversified and high quality clean energy portfolio makes it a secure long-term investment.

FAQs

What Are The Best Renewable Energy Stocks To Buy?

When evaluating the top renewable energy stocks, focus on factors like strong growth potential, competitive advantages, quality management teams, robust project pipelines, and solid financial health.

Many analysts tout Enphase Energy, SolarEdge Technologies, and Sunrun as best-in-class solar stocks. Vestas Wind Systems leads among wind energy plays. 

Brookfield Renewable and Atlantica Sustainable Infrastructure stand out as diversified clean energy utilities. Conduct thorough due diligence before investing to determine which renewable companies align with your risk tolerance, investment timeframe, and financial objectives.

What Is A Renewable Energy Company?

A renewable energy company generates power from continually replenished natural sources like sunlight, wind, water, plants and oceans.

Renewable energy companies often focus on technologies like solar panels, wind turbines, hydroelectric generators, geothermal pumps, and biofuel production facilities.

Many own clean power generation assets while others manufacture components or develop new renewable projects.

Developers becoming more vertically integrated with portfolios spanning manufacturing, IP, project development and O&M services. With abundant renewable resources worldwide, companies enable the transition away from finite fossil fuels towards sustainable energy.

Does Renewable Energy Make Money?

Yes, renewable energy can be extremely profitable given sufficient scale and low-cost project development. Sources like solar and wind power can reliably generate electricity at lower levelized costs than conventional energy in most global markets.

Renewable energy companies earn revenues from power purchase agreements and feed-in-tariffs for the clean electricity they distribute via long-term contracts spanning 15-25 years.

Top-tier wind and solar projects deliver internal rates of return exceeding 10%, even without subsidies in an environment of higher power prices. Renewables also benefit from policy support and growing cost advantages as deployment intensifies worldwide.

How To Invest In Renewable Energy Stocks?

Investors gain exposure to renewable energy stocks via individual company shares, ETFs tracking clean energy indexes, renewable energy yieldcos, and cleantech funds. When analyzing individual stocks, evaluate market positioning, growth outlook, profitability, debt profile and leadership quality among other factors that influence share price performance.

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For diversified exposure, invest in ETFs like the Invesco Solar ETF or SPDR S&P Kensho Clean Power ETF which bundle various renewable stocks.

Renewable energy yieldcos like Brookfield Renewable Company pay dependable dividends from underlying project cash flows. Numerous mutual funds also focus on promising smaller renewable startups.

Which Country Is The Largest Investor In Renewable Energy?

China stands as the world’s foremost investor in renewable energy infrastructure given sizable government commitments supporting domestic project builds.

According to BloombergNEF, China invested over $380 billion in renewable capacity expansions between 2010-2021, more than triple that of the second place United States at $130 billion over this period.

China accounted for over 40% of global renewable energy investment in 2021. The country owns 30% of the world’s installed wind power and 35% of solar photovoltaic capacity.

Under its latest five year plan, China targets installing another 565 GW of renewables by 2025 and committing 25% of annual infrastructure budgets to support transmission upgrades and renewable integration.

How Do You Trade Energy Stocks?

Investors can trade energy stocks much like other market sectors. Consider establishing long-term positions in quality companies with durable clean energy tailwinds supporting steady share appreciation over time.

Some traders attempt timing entries around positive catalysts like earnings results, project funding announcements and M&A speculation while reducing exposure ahead of policy shifts.

Options offer additional means to speculate on renewable stock movements. For broad coverage, invest in ETFs tracking clean energy benchmarks that bundle various industry players.

Maintain awareness of macro energy trends influencing fossil fuels and renewable power demand/pricing when trading individual energy stocks.

How To Make Money From Renewable Energy?

Participating in renewable energy markets can produce attractive returns through multiple avenues. Top options include investing in public companies supporting clean power infrastructure growth, direct project investments and funds focused on earlier stage ventures.

As renewable adoption accelerates globally, companies enabling wider deployment earn revenues tied to long-term power purchase and net metering agreements.

Seeking exposure to portfolios of underlying operating assets can generate stable cash flow even at the individual project level.

For higher risk/reward profiles, fund managers offer VC funding to promising startups commercializing next-gen renewable technologies like floating offshore wind turbines which possesses vast addressable markets.

Are Renewable Energy Stocks A Good Investment?

Renewable energy stocks appear positioned as a premium long-term investment given durable fundamentals driving electricity’s transition from fossil fuels to sustainable sources like solar, wind and hydroelectric.

Renewables adoption will proliferate over coming decades as nations worldwide enact increasingly aggressive carbon emissions reductions policies making clean energy targets more binding.

Continued cost declines only further support project buildouts. While pockets of policy uncertainty and subsidy support risk introduce some volatility, renewable energy equities should deliver market-beating returns to patient investors over extended timeframes.

Leading clean electricity beneficiaries possess discernible competitive advantages within structurally growing global industries.

How Do I Start A Renewable Energy Company?

Launching a renewable energy venture requires assessing the competitive landscape, establishing a clear value proposition, preparing financial models/projections, raising sufficient capital and building an expert team.

Consider focusing on a specific technology, service or delivery mechanism supporting wider renewable energy adoption tailored to your local grid needs and resources.

Potential models include distributed solar financing for residences, community wind farm development, biofuel generation, energy storage systems integration or renewable energy software.

Create detailed business plans mapping achievable expansion phases supported by contracts from creditworthy counterparties.

Renewable energy companies live and die by modeling realistic profitability scenarios across 20-30 year project lifespans. patient investors over extended timeframes. Leading clean electricity beneficiaries possess discernible competitive advantages within structurally growing global industries.

Conclusion

In closing, renewable energy stocks offer investors significant growth potential coupled with positive social impact. As the critical energy transition unfolds through 2050 and beyond, Renewable power capacity builds globally to displace fossil fuel generation.

Companies enabling this transformation stand to deliver market-beating investment returns. Just remember to assess company fundamentals carefully and maintain a long-term perspective.

Thanks for reading and let me know your thoughts on renewable stocks in the comments.

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