UK renewable energy stocks to consider for 2021

The clean energy sector looks set for huge growth. Here, Edward Sheldon looks at the UK renewable energy stocks on the London Stock Exchange.

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Renewable energy stocks are popular right now. It’s not hard to see why. In the years ahead, the clean energy sector is likely to experience huge growth as the world focuses more on sustainability and climate change. Here in the UK, the renewable energy market is projected to grow at around 9% per year between now and 2026.

Here, I’m going to provide a broad overview of the renewable energy stocks listed in the UK. For those interested in investing in clean energy, these are some options on the London Stock Exchange.

Large-cap UK renewable energy stocks

In the FTSE 100, there are no ‘pure-play’ renewable energy stocks. However, there are a number that have exposure to clean energy.

One is BP. Today, BP is still very much an oil and gas company. However, the company is currently in the process of transforming itself into a renewable energy company. Its aim is to reduce the carbon footprint of the oil and gas it produces to ‘net zero’ by 2050.

Another FTSE 100 company that has clean energy operations is SSE. Its goal is to triple its renewable energy output from 2019 levels to 30TWh by 2030. By 2050, its aim is to achieve net zero emissions. 

Then there’s Johnson Matthey. It’s an under-the-radar company specialising in sustainable technologies. These include batteries for electric vehicles and catalytic converters. Its goal is to create a leading, sustainable, electric vehicle ecosystem.

Smaller clean energy stocks

In the mid-cap and small-cap areas of the UK market, there are a number of exciting renewable energy stocks that are pure-plays on the theme.

One example is ITM Power. It’s an innovative company that specialises in hydrogen energy. Its solutions take excess energy from the power network, convert it into hydrogen and use this energy in a range of applications. Recently, ITM signed deals with a number of big players in the energy industry including Shell, Linde, and Snam.

Another example is Ceres Power Holdings. It’s a fuel cell technology company that’s aiming to bring cleaner and cheaper energy to businesses, homes, and vehicles.

Other stocks in this area of the market include Powerhouse Energy and Drax Group. The former is a clean energy business. It has developed a technology that converts non-recyclable waste plastic and end-of-life-tyres into synthetic gas. The latter is an electrical power generation business dedicated to enabling a zero carbon, lower-cost energy future.

Investment trusts

In the UK, there are also a number of investment trusts with a focus on renewable energy. Some to consider include Renewables Infrastructure GroupBluefield Solar Income FundGreencoat UK Wind, and Greencoat Renewables. 

Renewable energy stocks: the risks 

It’s worth stressing one thing. Yes, the renewable energy sector looks set for big growth in the long run. But there are plenty of risks associated with stocks in this area of the market.

A number of the companies I’ve mentioned above, for example, aren’t yet profitable. So, this means they are higher-risk investments. And in some cases, the technologies aren’t yet proven. As with any emerging industry, these stocks are likely to be volatile at times.

As always, it’s important to think about both risk and reward. The long-term story looks attractive. However, to capitalise, risk will need to be managed carefully.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in London Stock Exchange and Royal Dutch Shell. The Motley Fool UK has recommended Greencoat UK Wind. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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