While we often measure the value of advancing technologies in terms of consumer platform conveniences, modern innovations have made it possible to impart profound societal and global changes. This is perhaps no more evident than in the alternative energy sector. As we become more focused on sustainable solutions, renewable energy stocks have taken on greater significance.
On the surface, it’s easy to see why the green revolution has resonated so much over the past years. No longer limited to just powering pocket calculators, improvements in solar energy for instance have made it possible to reduce dependency on limited (and dirty) fossil fuels through an unlimited power source — the sun. Furthermore, renewable energy stocks cover the gamut, from solar to wind to the ocean’s currents.
Moreover, this industry isn’t just a fantastical or niche concept. According to the U.S. Department of Energy, “the solar energy resource in a 100-square-mile (259-square-kilometer) area of Nevada could supply” the country with all its electricity needs. And that estimate is derived using modestly efficient commercial solar panels. Essentially, with more investments into green solutions, renewable energy stocks could become mainstream like how we currently view big oil investments.
Of course, not everything about renewables should be viewed in a completely optimistic light. In the example above, it’s going to be difficult to find an area that large exclusively for renewable energy harvesting. Also, solar panels and wind power stations aren’t exactly cheap. And because the green industry is levered to an intermittent source, battery storage costs can eat into the economics.
Further, I’m reminded that the clean energy industry has a last-mile problem. Basically, each step of the process required to convert “raw” energy to usable practical electricity results in powerline losses. Also consider that highly population regions typically incur more such losses due to the many conversions required.
In other words, going green isn’t going to be easy. However, fossil fuels may not be around indefinitely. Just as importantly, the political winds dictate that we invest deeply in alternative fuels. Therefore, these renewable energy stocks are worth considering as we experience a governmental transition in power.
- NextEra Energy (NYSE:NEE)
- Brookfield Renewable Partners (NYSE:BEP)
- Bloom Energy (NYSE:BE)
- Enphase Energy (NASDAQ:ENPH)
- Canadian Solar (NASDAQ:CSIQ)
- Renewable Energy Group (NASDAQ:REGI)
- Ocean Power Technologies (NASDAQ:OPTT)
Before we dive into the details, it should be noted that despite the negative press, fossil fuels are still incredibly popular because of their high energy density. Right now, the complete transition to renewables is not practical because of major scientific hurdles. Thus, not all these renewable energy stocks are raging buying opportunities in the nearer term. However, from a longer-term perspective, they certainly carry much potential.
NextEra Energy (NEE)
One of the most popular renewable energy stocks, NextEra Energy is, according to its website, the world’s largest producer of wind and solar energy. This immediately puts NEE stock on fertile ground, given the social and political environment. Not surprisingly, NEE stock has bounced back strongly from the March doldrums, gaining nearly 27% year-to-date.
Still, there is something to be said about everyone betting on the same horse. As InvestorPlace.com contributor Vince Martin pointed out recently, NEE stock isn’t the cheapest bet in the renewables sector. However, he makes the argument that it shouldn’t be priced at a discount. With its dominant market position, NextEra Energy affords itself a relevant path forward. Specifically, Martin notes: “That scale positions NextEra to profit in however the renewable revolution plays out. Whether it’s long-awaited battery storage, or better solar farms, NextEra is going to have its hand in projects around the country.”
Barring an unusual event, such as the highly unlikely scenario of faithless electors overriding the will of the American people, NEE should enjoy steady upside in the years ahead.
Brookfield Renewable Partners (BEP)
As you can imagine, one of the most oft-cited reasons to consider renewable energy stocks like Brookfield Renewable Partners is the positive implications associated with the incoming administration of President-elect Joe Biden. According to his initiative for clean energy and what he terms “environmental justice,” his policies will allow the U.S. to reach net-zero emissions by 2050.
In all honesty, whether the Biden Plan will actually lift BEP stock significantly in the nearer term is open to debate. On one end, I can envision Democrats and progressives getting together to hammer out their internal conflicts to promote solutions they can agree on. But on the other hand, it’s difficult to imagine the U.S. reaching net-zero emissions by that timeframe, considering how expensive holistic clean energy solutions really are.
Still, BEP stock specifically should benefit from the Biden administration due to foreign policy implications. Brookfield has substantial energy infrastructures in North America and the Asia Pacific region. Therefore, a traditional approach to diplomacy should go a long way for BEP.
Bloom Energy (BE)
Although we are surrounded with remarkable digital solutions, this massive innovation also presents an irony. Now more than ever, society is dependent on the grid. Should it go down for whatever reason — like it did with this year’s rolling blackouts in California — it’s only then that we realize how vulnerable we are. Therefore, renewable energy stocks shouldn’t just be about clean energy production but also distribution.
That’s where Bloom Energy comes in. Thanks to its proprietary solid oxide fuel cell technology, Bloom can convert fuel into electricity through an electrochemical process without combustion. This enables the company to offer 24/7 electricity distribution, even when the main grid goes down to climate change, natural disasters or even incompetence. Because of its complementary role (instead of competitive), BE stock provides relevant exposure to renewables right now.
Also, the fuel-cell technology could be an effective stop gap until we can get to the point where we receive almost all of our energy from renewable sources. As these sources are intermittent, BE stock is levered to a much more practical business.
Enphase Energy (ENPH)
As mentioned above, renewable energy stocks can’t just focus exclusively on the conversion of wind and solar energy into usable electricity. In addition, companies must provide consumers with a way to store that energy. That’s the primary reason why Enphase Energy has become a popular choice among consumers. Its integrated solution gives clients holistic coverage for variable needs.
For example, the California blackouts and other disruptions to service will certainly cause many people to rethink energy independence. Here, Enphase is well positioned, offering not only solar panels but battery storage systems. Should a blackout occur, Enphase clients can potentially keep their homes up and running for hours until the grid comes back online.
This relevance should be pivotal for ENPH stock no matter what happens politically. After all, service disruptions will occur whether Republicans or Democrats are in control of the government.
As well, the challenges involved in the broader transition to renewable energy sources may ironically help ENPH stock. Like I mentioned earlier, these sources are intermittent and, therefore, unable to accommodate spike demand. Therefore, many parts of the U.S. could experience more blackouts, cynically bolstering the narrative for Enphase Energy.
Canadian Solar (CSIQ)
Although you’ll find much debate on the topic, at the moment, solar energy systems may still be too expensive for being practical for many consumers. However, encouraging technological advancements in battery storage capacities have made renewable energy stocks like Canadian Solar increasingly compelling. Clearly, Wall Street sees the potential, bidding CSIQ stock to a YTD performance of nearly 71%.
Because of the tremendous enthusiasm, there’s an inherent risk of holding the bag on CSIQ (as there is with other renewable energy stocks on this list). However, it’s possible that shares are merely in a consolidation pattern for the next leg up. That’s because as storage capacity increases for battery systems, the idea of true energy independence becomes less science fiction and more plain science.
Further, by improving capacity, you also enhance the value proposition of battery systems. Should future energy disruptions occur — and they most likely will — more homeowners will explore holistic solar energy systems, which is a net positive for CSIQ stock.
Renewable Energy Group (REGI)
One of the beautiful aspects of renewable energy stocks is that the sector isn’t exclusively focused on replacing one industry with another. That’s a misconception with the green revolution. Rather, companies like Renewable Energy Group have enjoyed tremendous success and relevance because of improving already established infrastructure. If we can extend the life of products or enhance their efficiency, this will ameliorate the massive waste problem in the U.S. and across the world.
For REGI stock specifically, the underlying business is tied to alternative fuels, such as biodiesel and renewable diesel. Rather than attempting to “force” trucking fleets to buy all-new transportation vehicles, retrofitting existing infrastructure to accept alternative fuels can be an effective transition. As well, these energy sources provide performance benefits, such as improved efficiency/mileage and cleaner combustion.
Like other renewable plays, REGI stock has skyrocketed in the past few months. Therefore, a risk of bag-holding exists. Nevertheless, the long-haul picture should be favorable for Renewable Energy Group as it provides a practical approach to clean energy.
Ocean Power Technologies (OPTT)
Finally, I saved the riskiest example of renewable energy stocks for last with Ocean Power Technologies. Specializing in wave energy infrastructure, OPTT stock is incredibly compelling provided the practical details work out. By harnessing the motion in the earth’s vast waters, this kinesis can be converted to usable energy, much in the same way that wind power works.
Of course, such lofty ambitions tend to be incredibly complicated. As InvestorPlace.com contributor Will Ashworth warned, Ocean Power’s financials leave much to be desired. And because of its poor financial status, OPTT stock could fall prey to dilution. Obviously, that wouldn’t be too helpful if you’re long the equity.
However, wave energy solutions have stuck around because of piecemeal investments. Therefore, it begs the question: if government agencies or major commercial backers saw the potential in this technology, it could skyrocket Ocean Power and similar organizations. And there are some good reasons for such entities to consider wave energy, particularly because the systems will be underwater and won’t represent an eyesore.
Still, the practicality issue remains the dark cloud for OPTT. But if you don’t mind speculating with “dumb money,” this renewable investment could be for you.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.