The world is moving towards alternative energy solutions to curb global carbon emissions and enhance sustainable living. Even traditional energy companies are incorporating renewables into their offerings so as not to be left behind.

Solar energy and electric vehicles are becoming more affordable and thus more common. As a result, various aspects of the green energy sector are ripe for investing.

 

Why invest in clean energy stocks?

Climate change is a growing concern. So, individuals, companies, and investors are moving away from technologies that have a large carbon footprint, like using fossil fuel and low-mileage cars.

The need for technologies that are environmentally responsible while meeting consumer demand is growing. Some believe that this could be the next big area of economic growth.

There are a few reasons for clean energy growth in the stock market and why you should invest in this sector. First, it is becoming less and less expensive to generate renewable energy. There is a system of measurement used to compare how economically competitive a form of power generation is. In the ten years between 2010 and 2020, the global weighted average Levelized cost of electricity of new utility-scale solar projects fell by 85%. A kilowatt-hour cost $0.381 to produce in 2010. This same amount cost $0.057 in 2020. More than that, this cost fell by 7% between 2019 and 2020. Similar trends are seen in other clean energy sectors. For example, wind energy generation fell by 56% between 2010 and 2020.

Renewable energy is becoming more feasible with the development of more reliable energy storage systems. Batteries make it possible to harvest renewable energy in optimum conditions (when it is sunny or windy) and store it for use when power generation conditions are not ideal.

Even large energy companies that traditionally focused on oil and gas are moving into the renewable energy sector. For example, companies like BP and TotalEnergies are incorporating clean energies into their offering. These energy companies’ expertise and strong financial standing could encourage and accelerate the global movement to renewable energy.

Another reason to invest in renewable energy stocks is the increase in government support. The Biden administration has included various incentives in its $2.3 trillion infrastructure plan. This plan consists of an extension of investment tax credits for solar projects. It also includes funding for electric vehicles and electric vehicle infrastructure.

Solar energy stock prices are low at the moment. This is due to the rise in the price of polysilicon, a product used to manufacture solar panels. More than that, potential tariffs and trade restrictions imposed on goods from China could affect companies with large production plants in that country. Although these stock prices are low, a global push for renewable energy is predicted to see this turn around.

While trading in clean energy stocks could see a return on investment in the short to medium turn, these stocks could also deliver investors a robust income from dividends. For example, Algonquin Power & Utilities has increased its dividend at a compound annual rate of 10% in the past decade. The company’s stock currently trades at a dividend yield of 4.2%. Atlantic Sustainable Infrastructure trades at a yield of 4.5%, while Brookfield Renewable and NextEra Partners both offer yields above 3%.

 

Clean energy stocks to invest in.

As with all stock, one needs to do thorough research when considering an investment. Some alternative energy stocks could show a good return on investment with regular trading. Others could provide attractive dividends. When looking for green energy stocks to invest in, being thorough, taking some risk, and asking advice from your financial advisor could bring impressive growth to your investment portfolio. Here are a few companies and top stocks to watch when starting your search for the best stocks to invest in.

 

Algonquin Power & Utilities Corp.

Algonquin Power & Utilities Corp. was founded in 1988 when four business partners identified an opportunity in the Independent Power Producer industry. The company’s portfolio includes wind, hydro, solar, and thermal power generation facilities primarily located in and servicing North America.

 

SunPower Corp.

SunPower Corp mainly operates in the solar industry, offering solar systems, products, and services to a global customer base. The company’s primary focus is designing and manufacturing solar panels and solar systems.

 

NextEra Energy Inc.

NextEra Energy generates and distributes renewable energy. The Florida-based company owns Florida Power & Light Company, one of the largest rate-regulated electric utilities in the United States. NextEra Energy generates electricity by using solar, natural gas, and wind. In addition, some of NextEra Energy’s subsidiaries operate commercial nuclear power units.

Future plans include the construction of a 260-megawatt solar park with storage in Arizona. The park will be one of the largest in the United States.

 

NextEra Energy Partners LP.

NextEra Energy Partners LP was set up as a limited partnership offering by NextEra Energy Inc. The company owns and manages clean energy projects, including wind, solar, and natural gas.

 

TransAlta Renewables Inc.

TransAlta Renewables’ portfolio includes operational and renewable power generation facilities. This includes wind, hydro, and gas.

 

Daqo New Energy Corp.

Dago New Energy is based in China. The company manufactures polysilicon which is used in the manufacturing of solar cells and modules.

 

SunHydrogen Inc.

SunHydrogen converts sunlight and water into hydrogen. The company is in the process of developing processes of producing renewable hydrogen. This product imitates the process of photosynthesis. Hydrogen is usually made from natural gas, and this process emits carbon dioxide. The only by-product of SunHydrogen’s process is water. That means there are no harmful by-products in the manufacturing process.

 

RenaSola Ltd.

RenaSola is a Chinese company that focuses on solar power project development and operation. The company generates electricity in its solar plants and then sells this on. It also offers project financing and construction management services.

 

Plug Power Inc.

Plug Power designs, manufactures, and sells hydrogen and fuel cell products for use in various pieces of equipment, including electric lift trucks.

 

Clean Energy Fuels Corp.

Clean Energy Fuels aims to decrease carbon emissions produced by the transportation industry. The company develops and delivers clean fuel by using renewable natural gas. Clean Energy Fuels owns and operates fueling stations across North America.

 

General Motors Company.

General Motors designs and manufactures vehicles and vehicle parts. The company is growing its electric vehicle and autonomous vehicle offerings, having earmarked $25 billion into developing these products through 2025. General Motors plans on launching 30 new electric vehicles internationally by the end of this period.

 

Enphase Energy Inc.

Enphase Energy is one of the world’s largest suppliers of micro inverter-based solar-plus-storage systems. The company’s platform seamlessly combines energy generation, storage, and management.

 

Xpeng Inc.

Xpeng is a Chinese company that mainly focuses on developing and manufacturing electric vehicles.

 

Brookfield Renewable Partners LP.

Brookfield Renewable Partners is a green energy giant. The company’s portfolio includes wind, solar, hydroelectric generation, and storage facilities. It runs one of the largest publicly traded renewable energy platforms.

 

Canadian Solar Inc.

Canadian Solar is a leader in the international clean energy market. It manufactures photovoltaic (PV) modules used in solar energy systems. The company also produces battery storage systems. Its products are used in utility-scale solar projects around the world, with customers in over 150 countries.

 

The Clean Energy Victory Bond.

During WW II, Victory bonds were sold to support the United States’ war effort. These bonds, when held to maturity, delivered a 3% return on investment.

Green America is working on offering the same type of investment to support the United States in the battle against the current climate crisis, similar to the WWII Victory bonds. Investors will be a part of a ‘rapid deployment of renewable and energy efficiency projects.’ The Clean Energy Victory Bond project is backed by the U.S. government and has a fixed rate of return. Bonds are not available just yet, but Clean America is collaborating with staff in the administration to include them in the U.S.’s climate legislation.

 

Clean energy stock indexes and exchange-traded funds.

Stock indexes and exchange-traded funds (ETFs) are similar in the sense that the group a number of individual investments like stocks or bonds together into one investment.

Because of this, holding a small number of index funds or ETFs can diversify your portfolio. Investors can easily own stocks in several companies in the same sector instead of investing in a select few. ETFs and index funds are passively managed. This means you don’t need a broker to facilitate trading, lowering your expense ratio. In many cases, index funds and ETFs could show a more significant return on investment in the long run.

There are some differences between index funds and ETFs. Index funds can only be bought or sold for the price set at the end of each trading day, similar to a mutual fund. On the other hand, ETFs can be traded throughout the day like regular stocks. They also usually require a lower minimum investment than index funds. Investors only need to pay the price for a single share to start off. On top of that, some brokers offer the option to purchase fractional shares.

If an investor wants to cash out of an index fund, the fund manager will need to sell securities in order to pay them out. If this sale results in a gain, these gains influence the capital gains tax responsibility of each investor who holds shares in the fund. That means you may need to pay capital gains tax even if you did not participate in a trade that brought you more income. With an ETF, one investor essentially sells their shares to another investor. Thus capital gains tax is only payable by the seller and only if it is applicable.

Because ETF portfolios can be traded like other stocks, these portfolios are more diverse and are generally less risky than trading stocks in individual companies.

Whether you invest in ETFs and Stock indexes or want to invest in individual stocks, here are a few to help you start your search.

 

The WilderHill Clean Energy Index.

The WilderHill Clean Energy Index follows companies that are directly involved in clean energy. This includes companies that produce or harvest, convert, or store renewable energy. They also work in areas that focus on preventing pollution, improve efficiency, conserve energy, and monitor related information. The ETF Powershares WilderHill Clean Energy Portfolio is based on this index.

 

The WolderHill New Energy Global Innovation Index.

This index includes cleantech companies that primarily trade outside of the United States. The Powershares Global Clean Energy ETF is based on this index.

 

The NASDAQ Clean Edge Green Energy Index.

The NASDAQ Clean Edge Green Energy Index involves stocks in the clean energy industry. Companies in this index focus on clean energy generation, storage, and conversion. They also work with renewable fuels, energy intelligence, and advanced materials. The EFT that is based on this index is the First Trust NASDAQ Clean Edge Green Energy Index Fund.

 

The NASDAQ OMX Clean Edge Global Wind Energy Index.

The NASDAQ OMX Clean Edge Global Wind Energy Index tracks companies whose primary focus is wind energy. These companies provide the design, development, manufacturing, distribution, installation, and use of wind energy products. The PowerShare Global Wind Energy Portfolio ETF is based on this index.

 

The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index.

The NASDAQ OMX Clean Edge Smart Grid Infrastructure Index includes companies that are involved in the electric infrastructure and smart-grid industry. These companies provide products and services relating to electric meters, devices, and networks. They also offer energy storage and management services along with smart grid software.

 

Investing in clean energy stocks could bring you an attractive return on your investment. More than that, your green energy investments, along with others like yours, could accelerate the movement towards a better world with fewer carbon emissions and more sustainable energy generation, storage, and consumption.

 

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