Renewable energy stocks to watch

Both clean and green energy 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 Producing power from fossil fuels is outdated and many nations plan to migrate from non-renewable energy sources to methods that are better for the environment, such as wind, water and solar generation.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 every year 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 capital raised for energy supply and infrastructure to be between $92tn and $173tn over the next 30 years.

Power generated from renewables has more than doubled since 2010 in the UK, with the Office for National Statics (ONS) noting that low carbon sources, such as hydrogen, wind and solar, accounted for 21.5% of the country’s energy generation in 2020. Outside of these, there is also an emphasis on uranium stocks​ as part of the move to cleaner energy production.

There are three main types of renewable energy: hydrogen, wind, and solar, which we explain in more detail below.

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. In 2020, 0.4% of the UK’s renewable energy was produced by hydropower. Learn about hydrogen stocks​.

Wind energy involves the use of turbines to provide the mechanical power to run electricity generators. Wind power accounted for 4% of the UK’s renewable energy output in 2020 and is expected to increase as the country aims to be carbon neutral by 2050.

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. Solar energy makes up just 0.7% of the UK’s renewable power output.

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 right now in terms of performance.

Please note that past performance is not a reliable indicator of future results.

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 as well as across Canada, says its financial targets are of equal importance to its “commitment to environmental stewardship”. The stock has enjoyed a three-fold increase in its share price since 2017 and although management uncertainty made this dip slightly at the beginning of 2022, the company looks set to be at the forefront of renewable energy over the next decade.

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 its electric cars through its subsidiary, Tesla Energy (formerly Solar City).

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, which is 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.

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. With US President Joe Biden’s Bipartisan Infrastructure Law set to be the largest capital raise for clean energy transmission, Enphase Energy could be looking at a very sunny future.

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 out 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.

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. The company is expected to benefit from a regulation change in California, which could increase geothermal generation in the state by a minimum of 1giggawatt (GW) of clean energy by 2026, with more eco-friendly legislation likely to follow.

Founded in 1945 as 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 market leader in sustainable energy solutions.

Although the majority of competition seems to come from the US and other countries worldwide, there are still some renewable energy stocks in the UK that deserve recognition.

British-based ITM Power was established in 2001 and is one of the market leaders in green hydrogen technology. It designs, manufactures, and installs electrolysers that pass an electrical current through water and produce green hydrogen, with its only by-products water vapour and oxygen. Based in Sheffield, ITM Power is a profitable company, but its future resilience could depend on how much of a role green hydrogen will play in governments’ strategies in achieving net-zero carbon emissions. Numerous other energy solutions are available – but with supportive government backing through finance and legislation, green hydrogen could be a significant part of the shift to renewable energy.

Established in 2012, Greencoat UK Wind was one of the first renewable infrastructure funds to list on the London Stock Exchange. The company raises capital to operate both onshore and offshore wind farms across the UK to provide shareholders with a sustainable and environmentally friendly income stream. The FTSE 250 stock, which is managed by Greencoat Capital, has so far delivered on its aim to provide shareholders with an annual dividend that increases in line with retail price index inflation.

Another FTSE 250-listed company, Renewables Infrastructure Group owns a broad portfolio of renewable energy companies, including wind and solar farms around the UK and Europe. It’s a large investment trust that aims to generate sustainable returns from businesses contributing towards a net-zero future. The company is profitable and owns a diversified portfolio of assets, helping it to pay consistent dividends since 2017.

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 share. Besides increasing asset diversity and helping to 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.

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.

Launched in 2014, this ETF has holdings in companies with lower carbon exposure than that of the broader market. The fund supports companies that are less dependent on fossil fuels, such as Apple, Tesla, Nvidia, and Alphabet.

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.

The ALPS Clean Energy ETF focuses on US and Canada-based companies focusing on seven segments: solar, wind, energy management and storage, bioenergy, hydropower/geothermal, electric vehicles, and fuel cell/hydrogen. Launched in 2018, its holdings include Northland Power, Tesla, Plug Power, and ChargePoint Holdings.

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Read more about our Renewable Energy share basket​ for a breakdown on holdings and weightings, margin rates, and trading hours. These come with zero commission fees (other fees & charges apply) and lower holding costs than individual stock CFDs.