Top renewable energy stocks
Renewable energy – whether harnessed from the sun, wind or water – is becoming the power of choice as the world strives to tackle climate change. We have a look at what renewable energy stocks are on investors’ radars.
Renewable energy still has plenty of growth opportunity
The International Energy Agency (IEA) predicts that renewable energys will be responsible for powering 12.4% of global energy demand in 2023, one-fifth which is higher than the 10.3% seen in 2018. That includes all consumption of renewable energy, whether that be to power and heat a building or to keep transport ticking along.
Source: International Energy Agency, 2018
Capacity of virtually all types of renewable energy will continue to grow over the next five years but some are forecast to increase at a faster rate than others. A similar amount of new wind and solar PV capacity are expected to be brought online between 2018 and 2023, but bioenergy will remain the most-consumed renewable energy source.
Source: International Energy Agency, 2018
Generating electricity will remain the main use case for renewables, which is expected to account for almost 30% of global electricity demand by 2023 versus around one-quarter at present. Hydropower is expected to be the biggest contributor, accounting for 16% of global electricity demand, followed by wind at 6%, solar at 4% and bioenergy at 3%.
The IEA says around 70% of the new power generation capacity to come online over the next five years will be powered by renewables, led by solar and followed by wind, hydropower and bioenergy.
How to take a position on renewable energy stocks
- Invest in renewable energy stocks by opening a share dealing account
- Trade renewable energy stocks – without taking ownership of the underlying asset – by opening a CFD or spread betting account
- Practise trading CFDs and spread betting in a risk-free environment with a demo account
Alternatively, if you don’t feel ready to start trading at all, you can continue to learn more with IG Academy’s range of online courses.
Top 10 renewable energy stocks: RENIXX-World stocks
The Renewable Energy Industrial Index (RENIXX) is a global index that tracks the 30 largest renewable energy companies from around the world.
Some of these companies have diverse portfolios, while others concentrate solely on one power source, such as solar. Despite the fact it is still early days for renewable energy many of the largest players are already highly cash-generative, profitable and dividend-paying, and many offer relatively stable business models that benefit from reliable revenues sourced from regulated markets.
Take a look at these top 10 renewable energy stocks in more detail:
- Ørsted A/S
- Vestas Wind Systems
- Enphase Energy Inc
- SolarEdge Technology
- First Solar
- Ormat Technologies
- DAQO New Energy Corp
- Jinko Solar
Remember, although renewable energy companies are receiving a lot of positive attention as the shift toward clean energy continues to gain traction, the market is still growing and the high competition is causing drastic swings in prices. It’s important to stay abreast of any news surrounding these companies when you’re looking to take a position, or holding a position on a stock.
Whether shares are rising or falling in price, you can take a position with us.
Ørsted A/S: the offshore wind goliath ($453.80 billion)
As of 2020 Ørsted A/S (ORSTED) is the world’s largest offshore wind power developer – responsible for 29% of global installed capacity.
Ørsted reported stable results in their third-quarter results, with earnings from onshore and offshore windfarms climbing by 13% up to £547 million. While many traditional energy companies have suffered amid the coronavirus downturn, the majority of green stocks have seen an uptick due to the focus on clean energy. In fact, shares of Ørsted have risen by 37% since the start of 2020.
In November 2020, Ørsted announced it would be partnering with BP in a green hydrogen partnership project that would see the two collaborate on a 5-megawatt electrolyser. The plan is to use electricity from Ørsted wind farm’s to power the electrolyser. It marks BP’s first hydrogen venture, which would displace 20% of its fossil-fuel hydrogen power.
News of the partnership caused both Ørsted and BP stocks to edge higher on Tuesday 10 November – by 0.1% and 15% respectively. And as the green hydrogen market could be worth nearly $11.7 trillion by 2050, it’s likely this is only the start of a long-term trend.
A large proportion of Ørsted’s shareholders are institutions. This is a good sign for retail traders and investors, because it means these institution’s analysts have taken a look at the stock and believe it has growth potential. However, it’s important to remember analysts can be wrong too – so do your own research and only take a position if you have understood the risks of doing so.
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Tesla: leading the race on sustainability ($388.98 billion)
Tesla has long been praised for changing the game when it comes to sustainable innovation in the automotive industry. But the company has gone far beyond the realm of electric vehicles (EVs), and into renewable energy generations and energy storage solutions.
Tesla delivered a whopping 139,000 EVs in its third quarter (Q3) of 2020, breaking its 2019 record of 112,000, and this figure is only predicted to grow. The vehicles boast zero emissions, which has earned Tesla a significant amount of praise from markets and the public alike.
The company has now reported five consecutive quarters or profit, as revenue jumped up 39% in Q3 2020 to $8.77 billion. However, the question still remains as to how scalable Tesla’s business model is with soaring demand for the cars, as well as a significant amount of competition in the EV space. Elon Musk, chief executive officer (CEO) of Tesla, has confirmed that its fourth manufacturing plant is due to start construction, which will enable the firm to better meet this challenge.
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Vestas Wind Systems: harnessing wind in 82 countries ($230.16 billion)
Vestas Wind Systems is the world’s largest wind turbine manufacturer – responsible for designing, installing and servicing wind turbines in 82 countries. It has over 100GW of wind farm capacity spread across companies such as the US, Germany, Denmark, India and China.
Due to the broad market impact of Covid-19, the Danish wind company presented a profit of $241 million between January and September 2020, which is half of what it saw in the same period of the previous year. The volume of orders had fallen by 14.7% compared to the same period in 2019.
Despite the challenging environment, long-term investors in Vestas would have seen a 208% return on their holdings between 2015 and 2020. Vestas management remain optimistic about the future of the firm – especially due to their expansion projects in India and Vietnam that were announced in October 2020.
It’s worth also noting that in November 2020, Vestas took sole control of its offshore venture, buying out its partner Mitsubishi Heavy Industries’ – in return MHI will receive a 2.5% in the Danish firm. Bringing the turbines in-house means Vestas can maximise its savings and boost its future profits.
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Enphase Energy Inc: the brightest stock on the market ($13.82 billion)
Enphase Energy Inc has been one of the most popular energy stocks in recent years, largely due to the fact it doubled its revenue between July 2019 and July 2020, reaching $205.5 million. It shipped over two million microinverters – the component that converts energy from the sun – in the three months of 2020 alone, with a total direct current (DC) capacity of around 643 MW.
Enphase has been so successful because of its microinverter is compatible with virtually any solar panel, which means the company can create a huge number of partnerships with other firms.
Covid-19 has dramatically slowed solar instillations, which did cause Enphase’s revenue to decline by 1% from the previous year in Q3 of 2020. However, the company’s net income had risen to $39.4 million from $31.1 million a year ago.
Shares of Enphase increased by 18.8% in October following its Q3 results because it significantly outperformed the wider market. This can be seen as an indicator that Enphase is starting to gain a much larger portion of market share than it previously held, and is likely to become a significant competitor to some of its rivals – particularly SolarEdge.
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SolarEdge Technology: a global leader in solar energy technology ($11.55 billion)
SolarEdge Technologies developed the optimised inverter that changed the way solar power is harvested and turned into electricity. They have long been leading the game in terms of solar energy, adding more and more products to their offering and improving their finances to become the most valuable company on the solar energy market.
But in Q3 of 2020, the shine began to fade for many investors. Although shares of SolarEdge had tripled in value in the first few months of 2020, the company’s worldwide revenues declined as a result of the Covid-19 crisis and a reduction of investment in US solar instalment – resulting in a 45% fall in commercial sales.
As we’ve already seen, SolarEdge is also losing some of its ground to competitors – such as Enphase. However, this doesn’t mean the future of SolarEdge is dim. In fact, the company has a much wider range of product lines and geographical distribution.
The fall in SolarEdge shares could just be attributed to hype around the stock, leading to investors having much higher expectations – even though the company might be in line with its own guidance.
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Verbund: climate-friendly electricity giant ($9.12 billion)
Verbund, Austria’s largest electricity provider, generates 90% of its energy from renewable sources – primarily hydropower plants, photovoltaic and carbon dioxide-free hydrogen. The company is involved in testing technology on industrial scales to ensure replacing fossil fuels is an increasingly viable option.
Verbund has a 25% share of all Austrian industry power since 2006. It is Austria’s largest customer provider with more than 375,000 private customers using its climate-friendly electricity. It’s also active in over 20 countries – including Germany, France and Italy.
Although spot prices for hydroelectricity had declined significantly due to Covid-19, the futures market had boomed, which caused the companies earnings before interest, taxes, and amortisation (EBITA) to increase by 4.6% and revenues to rise by 6% in Q3 of 2020. Shares in Verbund increased by 3% following its results announcement in early November 2020.
During the quarter, the company commissioned its first solar installation, which is expected to bring in 1.3MW of capacity. Over the next ten years, the company intend to invest $5.9 billion in further projects that will lower its carbon emissions – including $2 billion worth of hydropower projects. This news also caused an uptick in Verbund’s share price.
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First Solar: an American leader in solar technology ($8.56 billion)
First Solar is a global provider and operator of solar plants. It has built and shipped over 20GW of capacity and facilitated $17 billion worth of project financing.
It claims to invest more money in researching and developing solar technology than any other company. With a net cash of $1.4 billion on its balance sheet in Q3 2020, it’s expected to invest far more into the efficiency of its solar panels.
In early 2020, shares of First Solar increased as the polls suggested Joe Biden and Kamala Harris could well win the US election. With the potential of a Green New Deal signed into law – that would address climate change and invest in clean energy projects – markets rallied around most renewable energy stocks.
However, Raymond James’ analysts have predicted that Biden’s presidency could actually hurt First Solar. As the tariffs on importing crystalline silicon modules, that were put in place during Trump’s trade war with China, benefitted US companies by reducing competition. If these tariffs are removed, First Solar could lose some of its market share domestically.
Ormat Technologies: a unique geothermal business ($3.96 billion)
Ormat Technologies operates geothermal plants and energy recovery plants that turn excess heat into power. The company runs its own plants in the US, Guatemala, Guadeloupe, Honduras, Indonesia and Kenya, and it also builds and designs plants for others.
The company said that the coronavirus pandemic had little impact on its results throughout 2020 – as their efforts to ensure employee safety and optimise their supply chain kept their growth plans stable.
Ormat shares rose 2.6% to close at $72.74 following the release of its Q3 2020 on 3 November, despite the fact revenues fell short of expectations. This was largely due to the impressive increase in earnings per share up to $0.31, which was 23% above estimates.
For the next year, analysts have predicted Ormat’s revenue will increase by 3.9%, which is drastically below the industry average of 8.1%. This could mean that Ormat Technologies will grow, but at a slower rate than its peers.
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Daqo New Energy Corp: a momentous solar power stock ($2.78 billion)
Daqo New Energy Corp (DQ) is a leading solar panel parts manufacture, specialising in high-purity polysilicon – it currently has a production capacity of 70,000 metric tons. The China-based company manufactures and sells low-cost solar solutions to companies all over the world.
DQ shares are popular among both short- and long-term momentum traders as the company is outperforming its industry – a key indicator of market sentiment. In October 2020, DQ shares were up by 75.11% compared to the industry average of 3.2%. For the 12-month period between November 2019 and November 2020 DQ sock had increased by 445.38%, while the S&P 500 had only moved by 18.38%.
DQ shares did hit a bump in their meteoric rise in October 2020, after a third-party report found that DQ would fail to meet new US regulations about the use of forced labour. The announcement on October 22 caused the price of DQ to fall from 241.99 to 173.89 just three days later. DQ have challenged this accusation, and stated the impact of any new regulation would be limited – especially as they serve a global client base. While the stock price might have recovered, it has now been questioned whether DQ can be considered a sustainability stock if it doesn’t meet basic environmental social governance (ESG) criteria.
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JinkoSolar: accelerating China’s sustainability pledge ($2.74 billion)
JinkoSolar is the world’s largest solar panel manufacturer, shipping 59.9GW in 2020. The China-based company is largely operational in China, the US, Japan, Germany and the UK, but it operates in more than 100 countries globally. JinkoSolar is also attributed with having the industry’s largest research and development centre and testing facility, employing over 250 scientists and solar experts.
Shares of JinkoSolar increased by 178.49% between September and October 2020 for three main reasons. First, the Chinese government pledged to cap emissions by 2030 and be completely carbon neutral by 2060. The announcement is likely one of the reasons why JinkoSolar’s management is expected to accelerate its production targets for 2020.
Second, the Chinese company had a strong earnings report in September, increasing its revenue by 18.8% to $1.2 billion.
And finally, the increasing likelihood – and eventually certainty – that Joe Biden would win the US presidential election was taken as a sign that US-Chinese trade tensions would ease and the company would have fewer tariffs blocking its US expansion.
The huge increase in optimism around the stock peaked in late October 2020 at a price of 87.55, and receded back to a range between 56 and 66 for much of November. However, analysts expect the reasons behind its rise to remain at the forefront of investor’s minds for the foreseeable future.
RENIXX-World stocks constituents
Here’s a list of all of the constituents of the RENIXX-World index:
|Ballard Power Systems||Canada|
|Brookfield Renewable Energy Partners||Bermuda|
|China Longyuan Power Group||China|
|China High-Speed DL||Cayman Islands|
|GCL-Poly Energy Holdings||Cayman Islands|
|Innergex Renewable Energy||Canada|
|SMA Solar Technology||Germany|
|Vestas Wind Systems||Denmark|
|Xinjiang Goldwind Science & Technology||China|
|Xinyi Solar Holdings||Cayman Islands|
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