Certain renewable energy stocks have shown resilience in the face of cost increases in 2023. Between solar and wind energies, the former outshined the latter by large in January-August 2023 as it saw substantial growth. Utility-scale solar increased by 36% and small-scale by 20%, adding 9GW of solar capacity. In comparison, wind-generated a mere 2.8GW, trimming 57% off in the same period.
Solar’s growth was driven by federal investments in clean energy and the increasing demand for decarbonization from public and private entities. The Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) resulted in increased funding in specific areas. So, the clean hydrogen and storage sectors could also grow in 2024.
The Acts have created funding and tax incentives that could drive third-party-owned solar projects and make green hydrogen more cost-competitive. However, it presumes the Treasury Department will provide favorable guidance to unlock more investments and stimulate the hourly Renewable Energy Credit (REC) market. For context, clean hydrogen funding increased by 222% and storage by 51% since the IIJA/IRA’s inception.
Even the Energy Information Administration (EIA) forecasts that the future might belong to other facets of the energy sector. According to the agency, utility-scale, which includes storage and clean hydrogen, will continue to prosper at a projected growth of 17% next year. This means renewables could constitute nearly a quarter of all electricity generated in the US. Some of the top renewable energy stocks may benefit from the shift.
As federal, state, and corporate funding becomes available in the coming year, the continuous push may set the stage for growth among clean hydrogen and storage giants. Despite a turbulent year for many renewable energy stocks, Enersys, Bloom Energy, and Cummins have emerged as top renewable energy stocks due to their strategic positioning and robust growth.
Enersys (ENS)
Enersys (NYSE:ENS), a long-standing player in the energy storage business, has pivoted focus. It went from lead-acid batteries to lithium-ion and other high-power-density batteries and rigs.
The shift comes at a time when there is a growing demand for solutions in energy storage. The company has a well-established track record in energy storage, a steady income and customer base, and expertise in the storage field. It may be well-positioned to capitalize on the new trend.
In the last fiscal year, the company reported an impressive 86% growth in EPS and record sales. Despite the strong financials, ENS trades at a price-to-earnings (PE) ratio of 16, almost half the industry’s 35. This suggests that the price of the renewable energy stock may be undervalued, considering its growth potential.
Bloom Energy (BE)
Next up is Bloom Energy (NYSE:BE). BE produces hydrogen fuel cells, a technology that is seeing increased interest as an energy storage mechanism. With an established client base and years of experience building fuel cells, Bloom Energy could be well-positioned to capture a growing market share.
They reported a 37% growth in Q3 revenue over the prior year, turning their bottom line positive. Although it doesn’t have a formal PE ratio due to its negative trailing twelve months, its consistent growth and positive adjusted EPS point to a promising future.
Year-to-date (YTD), the price of the renewable energy stock remains nearly 30% down, offering a bargain price.
Cummins (CMI)
Cummins (NYSE:CMI) is last on the list of top renewable energy stocks. CMI is traditionally known for its diesel engines. However, it is now pivoting in the energy storage and hydrogen sectors. This adaptation to the energy transition puts Cummins in a prime position to take advantage of both renewable sectors.
The company reported a 15% increase in revenue in its latest report, with a significant 106% annual growth in its Accelera segment. Accelera supplies battery electric systems and electrolyzer installations. Despite the impressive numbers, Cummins trades at a PE of 11.8x, lower than the 17x average in the power technology sector, making it an attractive buy.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
