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Renewable energy stocks investment guide

Clean and green energy is expected to be the future of energy investment. Producing energy from fossil fuels is outdated and many nations plan to migrate from fossil fuels to methods that are better for the environment, such as wind, water and solar energy.

Find out how this rapidly advancing industry can benefit your investment portfolio as we look at wind, water and solar energy investments. We cover the newest and also the largest renewable energy companies, to provide a holistic picture of the renewable energy investment marketplace. We then look at how you can invest in renewable energy stocks in the share market and provide an efficient method to do so on our online trading platform, Next Generation.

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The rise of renewable energy investment

Being environmentally aware has become mainstream, particularly following the Extinction Rebellion protests and Greta Thunberg's activism. This has led to the environment and climate change movement gaining worldwide traction. Events such as these have been the catalyst for transformation in the way the world stores, distributes and generates power.

By 2050, around 50% of global energy production is expected to come from wind and solar energy. As the public adopt new attitudes and behaviours for a more eco-friendly life, major energy and utility companies are investing heavily in new green initiatives. For example, Shell has spent around $2bn on investment in renewable energy since 2016.

With large companies investing in green initiatives and smaller companies developing new and innovative technologies to drive the industry forward, it's estimated that around $11.5tn will be invested into the renewable energy sector by 2050.

The UK generates around a third of its electricity with renewables, predominantly split between water energy, wind energy and solar energy.

Types of renewable energy

Water energy

Water energy is a means of producing energy from falling or streaming water. Also known as hydroelectric energy, it can be generated in the form of dams, or by ocean currents.

Wind energy

Wind energy involves the use of turbines to provide the mechanical power to run electricity generators.

Solar energy

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.

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The largest renewable energy companies

As the renewable energy stock sector continues to climb in worth, many mainstream energy providers are starting to invest in the sector. However, there are also several pure plays in the renewable energy sector that could evolve into market leaders. Given these companies’ size and reputations, it's projected they will be large players in the renewable energy sector for years to come. Some of the largest renewable energy stocks are shown below, in no particular order.

1. NextEra Energy

NextEra Energy (NYSE:NEE​​​) focuses on wind and solar energy. As of February 2021, NextEra is the world’s largest producer of wind and solar energy. NEE operates in the United States and Canada and is headquartered in Juno Beach, Florida. The company has around 14,000 employees.

Founded 1984
Share price $74.12
Market cap $144.97bn
P/E ratio 34.56
Revenue $19.2bn (2019)
Net income $5.78bn (2019)

2. Tesla

Tesla (NASDAQ:TSLA​) is an American electric car manufacturer and renewable energy company. Headquartered in Palo Alto, California, it has around 48,016 (2019) employees and specialises in electric vehicles, batteries and solar panels, and it is a popular lithium stock​ and electric car stock​. In terms of renewable energy, Tesla has a subsidiary known as Solar City.

Founded 2003
Share price $700.77
Market cap $671.12bn
P/E ratio 240.51
Revenue $24.578bn (2019)
Net income $-862m (2019)

3. First Solar

First Solar (NASDAQ:FSLR​​​) is an American manufacturer of solar panels. In 2009, First Solar became the first solar panel manufacturer to reduce the costs associated with producing a solar panel down to $1 per watt of energy production.

Founded 1999
Share price $83.95
Market cap $8.86bn
P/E ratio 127.23
Revenue $3.06bn (2019)
Net income $-114.93m (2019)

How to invest in renewable energy stocks

There are several ways to gain exposure to renewable stocks. These include investing in individual stocks, ETFs that track the performance of several renewable energy stocks, and renewable energy share baskets.

Renewable energy stocks

You can access renewable energy stocks such as Next Era, Tesla and First Solar via our trading platform. Here, you can choose to either go long and ‘buy’ or go short and ‘sell’. By playing both sides on the market, you increase the number of potential trading opportunities as you can trade on markets in both directions. Please note that a live account is needed to trade the share market; all other markets can be traded with a demo account.

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Renewable energy ETFs

Renewable energy ETFs such as the Invesco Solar ETF​ help to provide exposure to several assets, thus, increasing the diversity of your investment in comparison to trading a single share. Besides increasing asset diversity and helping to contribute to a balanced portfolio, ETFs can also bear lower costs when compared to investing in each asset individually.

Trade on renewable energy ETFs here >

Renewable Energy share basket

Share baskets are mini portfolios of stocks built around a specific theme. We offer, for example, a Renewable Energy share basket. Our traders and market analysts sift through data on popular themes and growing trends in the markets and handpick stocks to give you maximum exposure to those themes with a single position.

Our share baskets are designed by our in-house trading team who have selected shares based on their level of exposure to a particular theme, and their ability to capitalise on the growth projections of that trend. Please see below for the breakdown of our Renewable Energy share basket​​​. This table can help give you an idea of who the big players are in the renewable energy sector, and our share baskets help provide exposure to all of the below companies under a single instrument.

Company Weighting
Maxeon Solar Technologies 14.24%
Enphase Energy 12.04%
First Solar 10.32%
Plug Power 5.67%
SunPower Corp 5.51%
TPI Composites 5.15%
Renewable Energy Group 4.66%
NextEra Energy Partners 4.34%
Ormat Technologies 4.25%
MKS Instruments 4.22%
NorthWestern Corp 4.08%
Avista 3.88%
BWX Technologies 3.76%
Sunrun 3.68%
Hawaiian Electric Industries 3.65%
Hannon Armstrong Sustainable Infrastructure Capital 3.64%
IDACORP 3.48%
Clearway Energy 3.43%

Summary

When trading on or investing in renewable energy stocks, you're exposing yourself to risk. Most data points towards growth in the renewable energy market sector, but it's never known who the market leaders will be when the industry reaches the point of maturity. When investing into renewable energy stocks, it can be best to consider diversified products such as share baskets or ETFs.

FAQS

Are renewables a good investment?

The renewable energy market is growing quickly but competition is intense, and profitability remains a concern. For investors and traders, renewable energy stocks come with heightened risks. Still, costs are continuing to fall, and demand is on the rise, aided by both government policies across the world and community support. Learn three stocks to play the green boom.

How do I invest in renewables?

For investors looking to get into the renewables energy space, there are a wide range of opportunities in Australia, including investing in manufacturers, utilities and power producers, vehicles, eco-friendly ETFs, environmental commodities and more. To invest in these areas and more, visit CMC Markets

Is it a good time to invest in renewable energy?

Renewable energy is a big business with a long growth trajectory, and is expected to be worth $US1.5 trillion a year by 2025. Costs are continuing to fall, and demand is on the rise, aided by both government policies across the world and community support. However, competition is intense, and profitability remains a concern. For investors and traders, renewable energy stocks come with heightened risks. Learn share trading today with CMC Markets.