In this article, we explain how you can get involved in this rapidly advancing industry as we look at renewable energy stocks like wind, water and solar. We compile a list of some of the biggest renewable energy companies to invest in to provide a holistic picture of the clean and green energy marketplace.
The rise of renewable energy trading
Both clean energy stocks and green energy stocks are expected to be the future of energy trading. Producing power from fossil fuels is outdated, and many nations plan to migrate from non-renewable energy sources to methods that are better for the environment, such as wind, water and solar generation.
Environmentally conscious trading has gone mainstream, particularly following international movements such as the Extinction Rebellion protests and Greta Thunberg's climate change activism. Environmental and climate change movements have gained worldwide traction amid the shift. Events such as these have been the catalyst for transforming the way the world stores, distributes and generates power.
By 2050, around 90% of global energy production is expected to come from renewable sources, according to the International Energy Agency (IEA). As the public adopts new attitudes and behaviours for an eco-friendlier life, major energy and utility companies are heavily backing green initiatives. For example, Shell has committed to spending up to $3bn annually on renewables and energy solutions.
With large companies generating capital for green initiatives and smaller companies developing innovative technologies to drive the industry forward, BloombergNEF’s New Energy Outlook 2021 forecasts a greater use of electricity and renewable power. The report estimated that the capital raised for energy supply and infrastructure will be between $92tn and $173tn over the next 30 years.
What are the different types of energy?
There are three main types of renewable energy: hydrogen, wind, and solar, which we explain in more detail below.
Hydropower: hydropower is a way of producing energy from falling or streaming water. Also known as hydroelectric energy, it can be generated from dams or ocean currents.
Wind power: wind energy involves the use of turbines to provide the mechanical power to run electricity generators.
Solar power: solar energy harnesses the light and heat from the sun. A number of complex technologies can produce solar energy, such as artificial photosynthesis and molten salt power plants, but perhaps the most recognisable is the solar panel.
7 renewable energy companies to watch
As the sustainable industry continues to climb in worth, many mainstream energy providers are starting to trade the sector. However, there are also several pure-play companies that could evolve into market leaders. Given these companies’ size and reputations, each firm could be part of the largest players in the market for years to come. Here are some of the largest and best renewable energy stocks to watch in terms of performance.
Please note that past performance is not a reliable indicator of future results.
Nextera Energy [NEE]
US-based NextEra Energy is one of the world’s largest producers of wind and solar energy. The Florida firm, which operates projects and provides energy storage facilities in 26 US states and across Canada, says its financial targets are of equal importance to its “commitment to environmental stewardship”.
Tesla [TSLA]
The electric car manufacturer, led by founder Elon Musk, has become a byword for clean motoring. Seen by many as the stand-out innovator in an increasingly crowded field, the company’s share of the automotive sector has been rapidly expanding as gas-powered cars begin to phase out over the next 15 years. Headquartered in Palo Alto, California, Tesla is also a leader in manufacturing batteries and solar panels that power homes and industrial plants, as well as electric cars, through its subsidiary, Tesla Energy (formerly Solar City).
First Solar [FSLR]
First Solar became one of the first in its field to reduce its manufacturing costs for solar modules to below $1 per watt in 2009. The company’s innovative energy solutions include PlantPredict, a solar energy modelling tool designed to estimate energy usage in utility-scale solar panel installations. It’s one of the leading manufacturers of solar panels and utility-scale photovoltaic (PV) power production, supervision, and maintenance in the US, thanks not least to its industry-leading film-thin panels that generate electricity in low sunlight and warm weather.
Enphase Energy [ENPH]
California-based Enphase Energy is on a mission to let “people make, use, save, sell and own their power”. Since its founding in 2006, it has shipped around 30 million solar microinverters, which, unlike other systems, convert sunlight into energy per individual solar panel rather than several at once – making them a cheaper option for homeowners.
Bloom Energy [BE]
Bloom Energy aims to “make clean, reliable energy affordable for everyone in the world”. Founded in 2001, its power generators convert natural gas, biogas, and/or hydrogen into electricity without combustion, with a by-product of reduced water usage and less air pollution. The company’s founder and CEO, KR Sridhar, has set a roadmap to reach $15bn in annual revenue over the next decade after posting record revenue of close to $1bn in 2021. Its commercial contracts include a partnership with T-Mobile to help it meet its own goal of using 100% renewable energy and working with the South Korean government to set up solid oxide fuel cell power stations.
Ormat Technologies [ORA]
Geothermal energy expert Ormat Technologies uses heat from the earth to produce clean power. Headquartered in Nevada, in the US, it is one of the world’s largest geothermal companies. The company designs, builds, and supplies power-generating equipment and energy storage solutions for customers in areas such as Guatemala, Guadeloupe, Honduras, Indonesia and Kenya.
Vestas Wind Systems [VWS]
Founded in 1945 by a blacksmith making household appliances and later farm equipment, Vestas Wind Systems moved into manufacturing wind turbines in 1979. Since then, the Danish firm has grown to become one of the largest wind turbine manufacturers in the world, alongside rivals General Electric and Goldwind. With more than 145 GW of wind turbines installed across 85 countries, including Germany, the Netherlands, Australia, and the US, the company is a market leader in sustainable energy solutions.
How can ETFs provide greater exposure to the industry?
Renewable energy ETFs provide exposure to several securities using one single position, which can help to diversify risk in comparison to trading on a single renewable energy share. Besides increasing asset diversity and helping contribute to a balanced portfolio, ETFs can also bear lower costs when compared to trading each asset individually. Here are some related ETFs to watch.
Invesco Solar ETF [TAN]
When it comes to solar power, the Invesco Solar ETF is a popular choice among many traders. Launched in 2008, the fund is made up of companies associated with solar energy production and storage. Top-weighted holdings include Enphase, Solar Edge Technologies, Sunrun, and First Solar.
First Trust Global Wind Energy ETF [FAN]
Created in 2008, this fund holds companies that are actively engaged in the wind energy industry, whether this be management of a wind farm, production of electricity generated by wind power, or manufacture of relevant machinery or materials. Top-weighted holdings include Orsted, Duke Energy, and Nordex.
How to invest on renewable energy
Research the energy market. Read up to find out which companies have historically been ahead of the curve. What are the innovations or accelerating trends? Look out for existing and upcoming legislation or government spending announcements that might impact wind, solar, and hydroelectricity.
Compile a watchlist. Follow each company by keeping an eye on its stock performance, earnings reports and any media stories or announcements that might impact its business. Look into potential headwinds and assess your choices objectively and analytically.
Decide on a trading strategy. Do you want to actively trade on individual companies or spread your risk with a thematic exchange-traded fund that offers exposure to the market as a whole?
Practise your strategies. A simulated market environment will give you a feel for how these stocks perform before you take the plunge.
Regularly review performance. Shifts in factors, such as oil and gas prices, can make renewables more or less attractive. This doesn’t mean making impulsive decisions but rather keeping an eye on trends that could quickly affect returns.
Open a demo account to trade risk-free with virtual funds.
FAQs about renewable energy stocks
Who are the biggest investors in renewable energy?
China is reportedly the biggest investor in clean energy production, according to the OECD, as the world’s largest producer of wind and solar energy, as well as the largest domestic and outbound investor. Some Chinese renewable energy shares to watch include Daqo New Energy, JinkoSolar, and Goldwind.
Is renewable energy the future?
The International Energy Agency (IEA) predicts that 90% of all energy generation will be produced from renewable sources by 2050. Therefore, this type of energy looks towards the future and related stocks may increase wildly in value as the years progress. Read more about ethical stock trading.
What are some other clean energy sources?
An example of a non-renewable energy source that is used in the development of clean energy is lithium.This mineral is vital for the production of lithium-ion batteries often used in electronic products, solar power storage and electric vehicles. Read about some of the most popular lithium stocks and ETFs.