The global economy is rapidly working on switching power sources. Due to climate change concerns, the world is moving away from carbon-based fossil fuels to cleaner alternative energy sources. The decarbonization of the global economy will take an estimated investment of more than $100 trillion over the next three decades.
Renewable energy will play a crucial role in this energy transition. Many companies focus on renewable energy and hope to benefit from this investment megatrend. However, a few stand out above their peers as clean & renewable energy stocks to consider.
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Why Invest in Green Energy Stocks?
Green energy refers to any technology that can replace fossil fuels with renewable energy sources, such as solar, wind, or water (hydroelectric) power. It can also refer to auxiliary technologies that will also be important for a green energy transition. For example, improved battery technologies can help transportation networks transition to electric vehicles, and smart grids can help reduce overall consumption.
A new study by Bloomberg New Energy Finance found that global investment in transitional technologies reached $755 billion in 2021. To stay on track for reducing net carbon emissions to zero, investment in transitional energy will have to reach over $2 trillion between 2022 and 2025 and $4.1 trillion over 2026-2030.
Investment in renewable energy projects soared to new heights in 2021, thanks to new solar and wind power installations. To reach net-zero carbon emissions by 2050, Bloomberg NEF predicts that solar and wind plants will need an average of $1.5 trillion per year between 2026 and 2030.1
Emerging markets saw record increases in climate investments, led by the Asia-Pacific region with $368 billion. However, those investments will have to continue growing over the next decades. To reach net-zero carbon emissions by 2050, the worldwide investment will have to triple over the next few years.
While that rising tide should lift all boats and large companies focusing on renewable energy should benefit from its expansion, not all have strategies designed to increase value for their shareholders. These green energy companies have already proven to be value creators and have the financial strength to capture opportunities that should yield outsized total returns in the coming years.
Top 8 clean and renewable energy stocks
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 can be large players in the renewable energy sector for years to come. Here are the top 8 renewable energy stocks - ranked by the number of holdings in US-traded ETFs in September 2023:
1. NextEra Energy
NextEra Energy (NEE) is a company in the U.S. stock market and it is a holding in 225 U.S.-traded ETFs. NEE has around 191.3M shares in the U.S. ETF market. The largest ETF holder of NEE is the Utilities Select Sector SPDR Fund (XLU), with approximately 30.35M shares. *
NEE is the world's largest producer of wind and solar energy. It generates this power at its utilities in Florida and its energy resources segment, which sells power under PPAs to other utilities and end-users.
NextEra produced a 700% total return over the past decade. Powering the energy company's strong returns has been its above-average growth. NextEra has expanded its adjusted earnings per share at an 8.7% compound annual rate since 2005 while boosting its dividend at a 9.6% annual rate during that period. Overall, NextEra has increased its dividend for more than 26 consecutive years, earning it the Dividend Aristocrat distinction.
The company sees 6% to 8% annual earnings growth through at least 2023, powered by continued investments in renewable energy. That should enable it to deliver 10% dividend growth through at least 2022 while posting one of the best balance sheets in the utility sector.
2. Air Products & Chemicals
Air Products and Chemicals (APD) is a company in the U.S. stock market and it is a holding in 200 U.S.-traded ETFs. APD has around 21.6M shares in the U.S. ETF market. The largest ETF holder of APD is the SPDR S&P 500 ETF Trust (SPY), with approximately 2.34M shares.*
Founded in 1940 in Allentown (Pennsylvania), it provides atmospheric gases, process, and specialty gases, equipment, and services worldwide.
It also designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and liquid helium and liquid hydrogen transport and storage. Air Products and Chemicals, Inc. has a strategic collaboration with Baker Hughes Company to develop hydrogen compression systems.
The company announced in June 2022 the signing of a long-term supply agreement with Indian Oil Corporation Limited (IOCL), India's flagship national oil company. Air Products will build, own, and operate (BOO) a new industrial gases complex supplying hydrogen, nitrogen, and steam to IOCL's Barauni Refinery in Bihar, India.
3. First Solar
First Solar (FSLR) is a company in the U.S. stock market, and it is a holding in 140 U.S.-traded ETFs. FSLR has around 18.2M shares in the U.S. ETF market. The largest ETF holder of FSLR is the iShares Core S&P Mid-Cap ETF (IJH), with approximately 2.82M shares.*
FSLR develops and manufactures thin-film solar panels. This type of panel, which is larger than others, generates more usable energy than competing technologies. That makes it ideal for utility-scale solar energy projects.
The solar panel maker generated a 9.5% total annualized return since its initial public offering (IPO). As one of the world's leading solar panel makers, the company could create even more shareholder value as demand for solar panels accelerates. Capacity is on track to double by 2025 from 2020's level. First Solar complements that with one of the best balance sheets in the sector. It had about $1.5 billion in net cash in 2021, giving it ample financial flexibility to continue expanding.
4. Plug Power
Plug Power Inc. (PLUG) is a company in the U.S. stock market, and it is a holding in 122 U.S.-traded ETFs. PLUG has around 51.8M shares in the U.S. ETF market. The largest ETF holder of PLUG is the iShares Global Clean Energy ETF (ICLN), with approximately 13.23M shares. *
PLUG is an American company engaged in the development of hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity.
According to Yahoo Finance, PLUG should benefit from the infrastructure law’s Buy America requirement and become a global leader in selling green hydrogen and the electrolyzers used to make the fuel, Plug is poised to get a big lift from the $9.5 billion that Washington plans to spend on hydrogen.
But the prognosis gets even better for Plug. That’s because $8 billion of the funds allocated to hydrogen will be used to subsidize “hydrogen hubs.” Plug Power is already a member of a leading hydrogen hub.
Plug Power has won a $315 million, 30-year contract to develop a facility in Belgium's Port of Antwerp-Bruges, which will be able to produce 35 tons of green hydrogen a day. This is intended for the European market and forms part of an effort to tackle growing European energy costs while lowering carbon emissions.
5. Vestas Wind Systems
Vestas Wind Systems (VWS) is a company in the Copenhagen stock market and it is a holding in 108 U.S.-traded ETFs. VWS has around 43.3M shares in the U.S. ETF market. The largest ETF holder of VWS is the iShares Global Clean Energy ETF (ICLN), with approximately 14.4M shares.*
VWS designs, manufactures, installs, and services wind turbines worldwide. The company operates in two segments, Power Solutions, and Service. The Power Solutions segment sells wind power plants, wind turbines, development sites, etc. The Service segment engages in the sale of service contracts, spare parts, and related activities. The company was founded in 1898 and is headquartered in Aarhus, Denmark.
Vestas installed +154 GW of wind turbines in 87 countries. Vestas’ 29,000 employees use data to interpret, forecast, and exploit wind resources and deliver best-in-class wind power solutions.
Vestas does not just sell and install wind turbines; it generates some recurring income from servicing them after installation. The company has service contracts covering at least 124 GW of wind power for an average length of 10 years. These contracts help to offset some of the variability in wind turbine sales. Its focus on wind turbines makes Vestas one of the few large-scale pure plays on wind energy.
SunPower Corporation (SPWR) is a company in the U.S. stock market and it is a holding in 85 U.S.-traded ETFs. SPWR has around 20.3M shares in the U.S. ETF market. The largest ETF holder of SPWR is the Invesco Solar ETF (TAN), with approximately 2.51M shares.*
SPWR is a vertically integrated solar products and services company that designs manufactures and delivers high-performance solar electric systems worldwide for residential commercial and utility-scale power plant customers.
Founded in 1985 in San Jose, California, SunPower has seen its business model change over the years, but it's now focused on the residential solar power industry. It's a market with strong potential. Residential solar installations in the U.S. hit record highs in 2021 as costs came down and gave more homeowners an opportunity to replace or complement conventional fuels and electricity with solar solutions to save money on their utility bills.
7. Clearway Energy
Clearway Energy (CWEN) is a company in the U.S. stock market and it is a holding in 75 U.S.-traded ETFs. CWEN has around 10.6M shares in the U.S. ETF market. The largest ETF holder of CWEN is the iShares Russell 2000 ETF (IWM), with approximately 1.81M shares.*
CWEN is one of the largest owners of renewable energy in the U.S. It complements its wind and solar energy portfolio with highly efficient natural gas power facilities and district energy assets. Clearway also sells its power via PPAs that generate steady cash flow for the company.
According to Clearway investor relations, the company delivered annual total returns approaching 10% since its inception. Of note, its total annualized returns have more than doubled since private equity giant Global Infrastructure Partners took control of the company in 2018. That relationship provides it with a steady stream of investment opportunities.
Powering those accelerated returns has been Clearway's ability to expand its portfolio, cash flow, and dividend. The company expects all three to keep rising. It's targeting 5% to 8% annual dividend growth in the coming years while maintaining a solid financial profile.
8. Jinko solar
Jinko Solar (JKS) is a company in the U.S. stock market (ADR) and it is a holding in 45 U.S.-traded ETFs. JKS has around 4.8M shares in the U.S. ETF market. The largest ETF holder of JKS is the Invesco Solar ETF (TAN), with approximately 1.49M shares.
JKS is a Chinese holding company that produces solar cells, modules, and other materials related to solar energy. The company serves customers in China, the U.S., Europe, the Middle East, and South America. On May 27, Jinko Solar announced that its subsidiary Jinko Solar Co. Ltd. signed a distribution agreement with Aldo Solar, the largest solar energy distributor in Brazil. Under the agreement, Aldo Solar will distribute Jinko's N-type Tiger Neo photovoltaic modules, which are high-efficiency solar products.
Some of the bullishness is tied to the underlying company’s massive footprint, which serves customers in the U.S., Europe, and the Middle East, along with its home market.
But the biggest catalyst for JKS’ move is Jinko Solar’s outstanding 2022 performance, with revenues almost doubling compared to the same period in the year ago.
* Source: etf.com. Note that the number of Holdings could change in time.
How to Invest in Green Energy?
There are several ways to gain exposure to green energy. These include investing in individual stocks, ETFs that track the performance of several clean & renewable energy stocks, and green energy share baskets.
Please note that when trading stocks, ETFs, or share baskets with us, you will be trading using leverage. Leveraged or CFD trading allows you to put up an initial margin or deposit, but it's important to remember that your profits and losses are magnified based on the trade's full value.
Clean & renewable energy stocks
You can access renewable energy stocks such as Next Era, Clearway Energy, 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 of 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; you can choose from 6 account types.
Clean & Renewable energy ETFs
Clean and renewable energy exchange-traded funds (ETFs) such as the iShares Global Clean Energy ETF or 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.
Renewable Energy share basket
Share baskets are mini portfolios of stocks built around a specific theme. We offer, for example, a Green Power 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 capitalize on the growth projections of that trend. Please see below for the breakdown of our Green Power share basket, to give you an idea of who the big players are in the renewable energy sector. Our share baskets help provide exposure to all the below companies under a single instrument.
Summary of Green Investing
- Climate change represents an existential threat to human civilization, with many nations seeking to reach zero net carbon emissions by 2050.
- As the world transitions away from fossil fuels, there is a market opportunity for companies investing in clean or renewable energy sources.
- Global investment in transitional technologies reached $755 billion in 2021.
- Wind, solar, and hydropower represent promising technologies in the green energy market.
- Investments in renewables will need to triple in the coming years, to reach net-zero carbon emissions.
- A few energy companies stand out above their peers as one of the best clean & renewable energy stocks to invest in.
- With CAPEX.com you can get exposure to green energy through individual stocks, energy funds, and clean & renewable energy basket shares.
Free trading tools and resources
Remember, you should have some trading experience and knowledge before you decide to invest in green energy. You should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading and investing courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader.
Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.