The global renewable energy industry is projected to reach $1.1 trillion annually by 2027, according to Yahoo! Finance. Not only is the market massive, it’s going through a rapid evolution. As a result of climate change, some expect fossil fuels to be phased out and an entirely new industry built around clean energy solutions like wind, solar, and hydroelectric power to take its place.
That means several opportunities being born in the stock market.
Sure, the clean energy industry may be relatively new, but it is a large market in which money is being made hand over fist. Moreover, as technological innovation continues at warp speed in the space, clear winners are beginning to emerge.
Best Clean Energy Stocks to Buy
President Biden and his Democratic colleagues in Washington have vowed to make the transition to clean energy a top priority. Changing regulations are likely to result in increased funding and more incentives for the companies that are making the most promising leaps forward in the clean energy market.
With the clean energy industry bustling, it only makes sense that investors are eager to dive in.
However, as with any budding market, there are countless companies that claim to have the next big alternative energy source, a way to store energy created through environmentally friendly means more effectively, or an electric vehicle that’s going to take the market by storm.
With so many stocks to choose from, how do you go about finding the top renewable energy stocks? Start by diving into the stocks listed below.
1. NextEra Energy (NYSE: NEE)
Even if you don’t recognize the name, there’s a good chance you or your friends or family members work with one of NextEra Energy’s many subsidiaries. The company is one of the largest providers of metered electricity in the United States. Through subsidiaries like Florida Power & Light and Gulf Power, NextEra serves millions of customers.
What exactly is an electric utility company doing on a list of clean-energy companies worth investing in?
The company has been undergoing a transition to clean energy for years. It produces enough emission-free electricity to power more than 5 million homes and continues to build out one of the world’s largest renewable infrastructures.
That makes NextEra a unique opportunity. The company has grown to become a metered utility behemoth over the past several decades, offering investors the opportunity to buy into a stable company that knows the ropes. At the same time, it is transitioning into one of the largest renewable players on the market, offering an entrance in this fast-growing segment of the energy space.
Most companies that are innovating in the clean and green movement are spending the vast majority of their profits on continued research and development. As a result, they’re not likely to kick any of their cash flow back to investors by way of dividends or stock repurchase plans.
By contrast, NextEra is a dividend stock, offering meaningful income with dividend yields that average well above 2%.
All told, there are few opportunities in the clean and green movement that are anywhere near as stable as NextEra. Add in the company’s rapid buildout of renewable infrastructure and its likelihood of being a pivotal player in the future of U.S. energy production and consumption, and you’ve got a stock that’s hard to ignore.
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2. First Solar (NASDAQ: FSLR)
As its name suggests, First Solar is a solar technology company, offering state of the art solar panels to large-scale projects. The company has been an integral part of some of the world’s largest solar energy power plants.
First Solar develops state-of-the-art solar modules, but its panels aren’t the only way it’s driving the revenue. The company takes care of nearly every aspect of solar power plants, including:
- Finance. First Solar is active in financing for large solar projects, meaning that it drives revenues from the cost of financing to the end customer.
- Engineering. The company helps to engineer the entire solar system for utility-scale projects, helping to ensure that the owner of a green power plant makes the smallest investment necessary for the maximum power generation possible.
- Development. First Solar also helps with every aspect of the development process, including the provision of panels and customized systems that act as the vital organs of the power system.
- Construction. The company handles every aspect of the construction process, earning further revenue on the buildout of the project.
- Operation. First Solar is actively involved in the operation of the renewable power plants it develops. This active role also means the company generates ongoing revenues from maintenance.
One of the most important pieces of infrastructure for any developed nation is the ability to provide electricity to consumers on a reliable basis. First Solar is working to ensure that the electricity being provided to homes and businesses is generated through renewable means and creating a compelling investment opportunity in the process.
3. Brookfield Renewable Partners L.P. (NYSE: BEP)
Brookfield Renewable Partners is one of the largest publicly traded clean power providers in the world, offering green energy solutions through a variety of renewable resources.
Instead of focusing on simply solar, wind, or hydroelectric power, the company invests in a diversified portfolio of clean power plants. It owns enough green power plants to produce 20,000 megawatts of electricity, enough to power more than 18 million homes.
Not only is the company diversified in terms of the types of clean power it produces, but it has also taken part in international diversification, with power plants in the United States, Asia, South America, Europe, and the Middle East.
Brookfield has more than $625 billion in assets under management around the globe, suggesting a stark undervaluation considering the company’s market cap of just over $11 billion. While the company is already one of the largest publicly traded clean power providers in the world, it is planning on continued expansion.
The company has a thick book of projects in its pipeline as it aims to take its chunk of the $100 trillion investment opportunity many believe the renewable space will provide over the next three decades.
Brookfield isn’t just interested in project build outs. Instead, it’s got a hefty balance sheet and it isn’t afraid to use it. The company seems to be working to consolidate a heavily fragmented market and has been straightforward about its plans to grow both organically and through acquisitions.
Historically, the companies that use their profits to consolidate fragmented markets early on become the big dogs in the long run. So, the company is positioning itself to become a leader as the world transitions away from burning millenia-old dinosaurs to capturing the energy of the sun, wind, and water. All in all, the stock is one worth considering.
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4. Tesla (NASDAQ: TSLA)
Tesla may be the last company you expected to see on this list. Most people who talk about clean energy stocks talk about energy producers, solar providers, and wind turbine developers. Why add a vehicle manufacturer to the mix?
Any vehicle manufacturer that centers its operations around electric vehicles (EVs) is a renewable energy company. According to the U.S. Energy Information Administration (EIA), about 26% of energy consumption in the U.S. is used in the transportation of people and goods from one place to another. The U.S. Environmental Protection Agency (EPA) estimates that 29% of greenhouse gas emissions in the U.S. are the result of transportation.
Tesla deserves a place on this list because it is the largest electric vehicle manufacturer in the world, with a market capitalization of nearly $750 billion dollars.
It’s also a stock subject to quite a debate among investors.
The stock is one of many growth stocks that have seen significant upward movement over the past few years, and many believe that this movement has led to a dangerous overvaluation. At face value, that’s easy to believe. The stock trades with a price-to-earnings ratio (P/E ratio) of more than 250. With such a high valuation, many believe there’s not much growth potential left.
But there are plenty of investors on the other side of that coin as well. For some time now, Elon Musk, the mastermind behind Tesla, has been spending a massive amount of money to innovate and build out infrastructure, much like Jeff Bezos did in the early days of Amazon.
The bulls argue that this spending skews valuation metrics because the company’s earnings could be far higher if it focused on maximizing profitability today rather than investing in expensive infrastructure. At the end of the day, Musk is looking to grow his infrastructure as fast as possible while maintaining world-class innovation in order to stay ahead of his peers and maintain Tesla’s position as the top dog in the long run.
Over time, these investments are likely to pay off in a big way, making today’s valuation less of a concern and setting the stage for tremendous growth ahead.
5. Solaredge Technologies (NASDAQ: SEDG)
As its name suggests, Solaredge Technologies is another company in the solar power industry. Rather than selling photovoltaic panels, however, it focuses on optimizing the production output of these and other clean energy technologies.
The company’s claim to fame is its inverter technology, which not only converts energy generated through solar systems into usable electricity, but does so in an optimized, maximally efficient way.
Other products Solaredge offers include:
- Whole Home Backup. When the metered utility services are down due to storms, fires, or maintenance, consumers look to generators and backups to keep their lights and refrigerators running.
- EV Chargers. Electric vehicle charging is quickly becoming a big business, and if you plan on owning one of these vehicles, you’ll need a charger to keep it operational. Solaredge offers some of the most advanced, smart EV chargers on the market today.
- Power Optimizers. Power optimizers are module addons designed to be added to traditional solar energy systems, increasing total power output by constantly tracking the maximum power point for each module individually.
- Monitoring Platforms. Solaredge offers monitoring platforms capable of notifying the home or building owner if anything is out of the ordinary with the system. With the monitoring platform, customers can keep a close eye on efficiency and the financial benefit of their system.
Panels and traditional setups are important, but there are several moving parts in the clean power industry. Solaredge has made a name for itself, carving out a niche around optimizing output and quality maintenance, and it’s worked out perfectly, considering the company’s more than $45 million in net income generated in just the last quarter. All told, this is a stock that’s well worth watching.
6. Canadian Solar (NASDAQ: CSIQ)
As its name suggests, Canadian Solar is a Canada-based solar energy company, and a unique one at that. Unlike other companies that focus only on the commercial, utility, or residential sides of the industry, CSIQ is looking to capture the whole market, and it has done well to date. Here are some interesting facts about the company:
- A Global Reach. Canadian Solar is one of the largest manufacturers of solar modules in the world. The company has active buying customers in more than 150 countries.
- Solar Modules Shipped. To date, the company has shipped more than 59 gigawatts (GW) of solar modules to customers. To put that into perspective, that’s enough to power more than 17 million homes.
- Manufacturing Facilities. The company’s reach is paired with a strong infrastructure, with 20 manufacturing facilities in the Americas and Asia.
The company is no small fish in the big green energy industry. It also has been a key player in the shift away from outdated nuclear power plants and toward solar plants, providing safe, clean electricity to homes and businesses around the world.
This work isn’t going to stop either. The company currently has a pipeline of large-scale projects that will account for an additional 22 GW to be added to its roster of successfully completed solar farms.
While other companies are focused on becoming a residential provider, a commercial provider, or a utility provider, Canadian Solar’s focus is to become the solar provider for all. The company isn’t limiting its target audience nor its solutions. That opens the door to a vast audience at a time when clean power generation is in high demand.
As the market continues to grow, those who have worked to become leaders early on will be rewarded in big ways. CSIQ is one of those companies, making this stock a top pick among clean energy investors.
7. Renewable Energy Group (NASDAQ: REGI)
With transportation being one of the leading sources of global greenhouse gas emissions, there’s a significant need for transportation reform. Some companies are focused on moving toward EVs, but there are still challenges there, especially considering the time it takes to charge the vehicles and the range a single charge will take you.
For consumers, a transition away from a fast fill-up experience isn’t likely to happen quickly. Renewable Energy Group has the solution.
The company is working to transform the transportation industry, but not by changing the way engines work. Instead, REGI wants to change the fuel that keeps vehicles on the road.
The company’s claim to fame is its renewable diesel fuel, which is like biodiesel but made differently and far more efficient. This relatively new form of fuel has been met with high demand because it is an effective way to reduce greenhouse gas emissions while offering the same performance and meeting the same specifications as ultra-low sulfur diesel fuel.
Renewable Energy Group also produces high-efficiency, low-emission fuels for heating homes and energy generation. The company also creates renewable chemical products that are used in a wide range of commercial and industrial applications.
With the world’s shift away from the burning of fossil fuels, a focus on renewable diesel is one that’s likely to lead to tremendous growth ahead. Moreover, by offering a long lineup of green products in addition to clean energy, the company’s hedging its bets, making it one worth your attention.
8. Plug Power (NASDAQ: PLUG)
Plug Power is centered around hydrogen fuel cell technology, which has the ability to replace conventional batteries in equipment and vehicles powered by electricity. As consumers and businesses alike move toward EVs, fuel cell technology has the potential to solve two key problems with the lithium ion batteries that power these vehicles:
- Lithium. The element lithium, a key component in rechargeable batteries, is in short supply. Hydrogen fuel-cell technology alleviates the need for lithium, which could help to solve power source issues for electric vehicles in the future.
- Environmental. Lithium ion batteries also pose environmental issues. Lithium is expensive and resource-intensive to mine, and mining and disposal create their own environmental impacts. While consumers are incentivized to recycle batteries, those incentives don’t always work, leading to harmful chemicals finding their way into landfills.
Fuel cells solve another major issue with EVs: that the user must charge the vehicle for hours between uses. That poses a problem for shipping companies that must drive long distances, consumers looking to take a road trip, and any other EV driver going for more than a stroll into town.
Fuel cell vehicles run on liquid hydrogen, a readily available commodity that can be pumped into fuel cell vehicles just like gasoline. This offers a clean transportation solution that also meets the needs of consumers who aren’t interested in making an hours-long pit stop when on a road trip.
Plug Power is the largest buyer and seller of liquid hydrogen in the world, and it has a network of refuelling stations to match.
As a pioneer in the fuel cell industry, Plug Power has built itself into a position of dominance, becoming a force to be reckoned with. As a result, the company is likely to become a key player in the transportation energy sector and the go-to source for fuel cell products and hydrogen refills in the years to come, making it an investment opportunity that shouldn’t be ignored.
9. Sunnova Energy (NYSE: NOVA)
Sunnova Energy is another company focused on the solar side of green energy. However, unlike those looking to tap into the big-money utility-scale projects, Sunnova focuses solely on residential solar and energy storage services.
The company is working to bring energy independence to the average consumer, offering affordable, efficient, and reliable solar energy systems to homeowners.
Founded in 2012, the company is relatively young, but don’t let that fool you. With a niche centered around the end energy consumer, Sunnova has quickly become a leader in its industry.
To date, the company has installed solar systems for more than 160,000 customers across the U.S., with services offered by more than 500 independent dealers in 31 states.
Sunnova’s model is simple; make it easy for consumers to switch to solar, and provide them with the services required to do so. To meet this mission, Sunnova does two things other solar companies simply aren’t willing to do:
- Roof Rebuild. Solar systems can only be installed on relatively new roofs. If the homeowner’s roof isn’t up to par for a solar system, the company will install a new roof and wrap it into the solar system financing for the customer.
- Financing Options. While most residential solar providers offer loans for the purchase of the equipment and cost of the installation, Sunnova goes a bit further, offering three forms of financing. Either the consumer can go the traditional loan route, take advantage of a lease option, or opt to purchase the power generated by the system as though they were purchasing energy from a utility company.
These concessions have helped to catapult Sunnova to the top of its industry, and that leadership position isn’t likely to go anywhere anytime soon. As such, the stock is one for the watch list.
As consumers, businesses, and governments around the world continue to see fossil fuels differently, clean and green energy will continue to rise in popularity, generating opportunities for corporations and the investors that back them.
When choosing a stock in this category, it’s important to do your research and make sure the company offers something unique and is constantly working to innovate and stay on top of its competition.
The nine stocks listed above represent companies that do just that. These companies have carved out a niche in a vast and growing industry, and they continue to innovate in order to hold their positions as top dogs in the clean energy industry.
Disclaimer: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.