As many pundits from across the political spectrum have stated, elections have consequences. Regarding the new administration, this didn’t just represent a changing of the guard from a rather strange time in U.S. history, to put it diplomatically. Rather, President Joe Biden consistently talked about the need to address climate change, which has serious implications for energy stocks.
Recently, U.S. Treasury Secretary Janet Yellen released details regarding a proposed tax hike. A contentious component of the proposal includes replacing subsidies for the fossil fuel industry with programs designed to incentivize the green energy sector, an initiative that falls under the president’s $2.3 trillion infrastructure plan. This would be welcome news for clean energy stocks, but big oil? Not so much.
Though subject to vigorous debate, the issue here is that the rest of the world is moving toward alternative energy infrastructures. For one thing, government agencies have produced ample data regarding climate change and the need to get on top of the problem. Second, the U.S. has an incentive to be the global leader in green solutions, not the laggard. Again, this bodes well for clean energy stocks.
Nevertheless, you want to tread carefully. Though I’m no friend of the petroleum industry, fossil fuels feature high energy density: this is simply a scientific reality. Calls to replace combustion power with electric within a matter of years is too optimistic in my opinion. Whatever you do, though, don’t buy clean energy stocks thinking that we’ll go green overnight. We won’t.
At the same time, thanks in large part to electric vehicles (EVs), consumers are rethinking their fuel source. So it might not happen right away but at some point in the future, we will likely see a cleaner, greener world. And to that end, you may want to consider these clean energy stocks for the long haul.
- NextEra Energy (NYSE:NEE)
- Brookfield Renewable Partners (NYSE:BEP)
- Enphase Energy (NASDAQ:ENPH)
- Bloom Energy (NYSE:BE)
- Ormat Technologies (NYSE:ORA)
- Covanta (NYSE:CVA)
- Oersted (OTCMKTS:DOGEF)
Before we dive in, please note that the alternative energy sector — like most sectors — are subject to the whims of politics and public opinion. Therefore, clean energy stocks may not have the cleanest ride to profitability. But if you’re a patient investor, the present discount in this space is well worth looking into.
Clean Energy Stocks: NextEra Energy (NEE)
I might not make too many friends for saying this, but popular media voices like Tucker Carlson from Fox News may have contributed to the decline in NextEra Energy earlier this year. As you know, NEE stock began printing red ink around the time of the Texas winter storm. Tragically, many lost their lives as a combination of factors, including mismanagement, saw the power grid unable to cope with the unprecedented conditions.
Quickly, the finger pointing began and many critics like Carlson found a convenient target: frozen wind turbines. Certainly, frozen turbines don’t help as they represent a key component of Texas’ power source. But it’s a bit disingenuous to heap so much blame there when myriad negative catalysts combined for a perfect storm. However, the public latched onto the story, hurting NextEra and many other clean energy stocks.
Still, if you’re bullish on the rollout of alternative energy infrastructure, you should give NEE stock another look. At time of writing, shares are down more than 9% from their closing high of this year.
Brookfield Renewable Partners (BEP)
As one of the leading global renewable power platforms, Brookfield Renewable Partners has a formidable footprint with over 5,300 generating facilities in North America, South America, Europe and Asia. But that alone wasn’t enough to spare BEP and other clean energy stocks from the fallout earlier this year.
One of the main reasons why the otherwise misguided criticism of frozen wind turbines stuck in the minds of many is that it has a ring of truth to it. No, their going offline due to inclement weather wasn’t the cause of the disastrous winter storm aftermath. But it didn’t help. Moreover, clean energy stocks — love ‘em or hate ‘em — have an intermittency problem.
The sun isn’t always up and the wind doesn’t always blow. In the interim, fossil fuels and other energy sources plug the gap. That doesn’t mean that BEP stock is wholly irrelevant. First, cold snaps like what we’ve experienced are once-in-a-blue-moon occurrences. Second, energy diversity is the key here.
Overall, fossil fuel probably will never go away, and I don’t think it should ever be completely replaced. And when one power source fails, another should be available to pick up the slack.
Clean Energy Stocks: Enphase Energy (ENPH)
Specializing in solar energy solutions, Enphase Energy was flying high since the March doldrums of last year. But the winter storm also took a bite out of ENPH stock, as it did so many other clean energy stocks. While arguably less victimized by political memes, the solar energy industry also came under misguided criticism for the cold snap tragedy.
I suppose it’s the American way — if something doesn’t go your way, blame someone else. Still, the criticisms do have a nugget of truth. As I mentioned above, clean energy stocks face headwinds due to their underlying intermittency. Furthermore, many people have the misconception that solar panels store energy. Fortunately, Enphase is helping to educate the public through their solar energy and battery storage solutions.
The latter is particularly important because for the U.S. to achieve true energy independence, it needs a way to harvest energy from renewable sources. And at both the residential and commercial front, Enphase offers a series of products that enable clients to do just that.
Bloom Energy (BE)
Known for its advanced distributed energy generation platform, Bloom Energy speaks to the core of the renewable versus fossil fuel debate. Sentiment wise, we would all love to transition to clean renewable power structures. Not only would the system as a whole be less environmentally intrusive, but we will also be less dependent on foreign-sourced energy.
Indeed, the U.S. could just stay out of highly contentious international issues that are really none of our business. This is something most people can agree on, irrespective of political loyalties. But the reality today is that these notions are fantasy: we need fossil fuels and other power sources.
I don’t want to put words into others’ mouths, but it seems to me that Bloom understands this. Particularly, its grid stabilization system — underlined by fuel-cell technology — is promising and accretive to our current needs.
For instance, if the grid goes down, Bloom’s “AlwaysON” platform can plug the gap — providing continuity in power through harvested energy. It’s an interesting concept, and with BE stock heavily discounted from this year’s peak, it’s worth consideration.
Clean Energy Stocks: Ormat Technologies (ORA)
While wind and solar dominate the discussion regarding clean energy stocks, we must also realize that we’re already sitting atop a massive energy source. According to the U.S. Energy Information Administration (EIA), “the temperature of the earth’s inner core is about 10,800 degrees Fahrenheit (°F), which is as hot as the surface of the sun.”
Moreover, EIA explains that “Geothermal energy is a renewable energy source because heat is continuously produced inside the earth. People use geothermal heat for bathing, to heat buildings, and to generate electricity.” This is the investment thesis of Ormat Technologies in a nutshell.
As one of the top players in this exciting space, Ormat Technologies built more than 150 geothermal power plants worldwide. Additionally, it currently operates key geothermal power projects in the U.S., New Zealand and Kenya.
While this power source alone may not be the entire answer, when in combination with other platforms, geothermal energy can contribute to a cleaner planet. Better yet, ORA stock is priced at a heavy discount relative to its peak.
Another name that doesn’t quite get as much coverage among clean energy stocks is Covanta. Specializing in what it terms waste-to-energy, this innovative process involves taking “non-hazardous waste — otherwise destined for landfill — and combusts it, generating steam for electricity production.” This solves a number of problems.
Second, we’re not going to grow more land and therefore, landfills will reach critical mass at some point. Doing something productive with the waste will represent a two-front solution. And third, the power produced can contribute to our overall energy independence goals.
True, combustion does have an environmental impact. But methane emissions from landfills is a growing problem and Covanta can help, invariably bolstering the case for CVA stock.
Clean Energy Stocks: Ørsted (DOGEF)
Hailing from Denmark, Ørsted — please don’t ask me how to pronounce this — may not be a household name in the U.S. but it’s quickly making its voice known internationally. As one of the leaders in wind power solutions, Ørsted made headlines last year when it fully commissioned the “Borssele 1 & 2” offshore wind farm in the Netherlands.
According to reports, the Borssele — again, no pronunciation requests please — is the largest offshore wind farm in the Netherlands and second-largest operating windfarm in the world. This alone makes DOGEF stock worth a look for the green side of your portfolio.
As well, Ørsted demonstrates that the movement supporting clean energy stocks is not a nation-specific catalyst. Rather, the international community needs to pull its weight in order to save our planet. With the U.S. as the lone superpower, we should lead from the front — and that’s what the Biden administration intends to do.
If it’s successful, we could see greater opportunities in clean energy stocks globally. Thus, keep an eye on Ørsted.
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.