The world spent a total of $500bn on green energy initiatives last year. Moreover, this spending is only expected to accelerate in the years ahead. Indeed, BP alone is planning $60bn of spending on renewable energy generation projects over the next nine years.
And with that in mind, I’ve been looking for green energy shares to add to my portfolio as a way to ride the renewable energy boom.
Green energy shares to buy
The number of companies on the market with exposure to renewable energy has increased dramatically in recent years. Amid all the new businesses sits old hand Drax (LSE: DRX).
This company owns and operates the UK’s largest power station. In recent years it’s been positioning itself as a green energy company by converting its power stations to burn biomass and installing carbon capture technology.
It recently became the world’s leading sustainable biomass generation and supply business after acquiring Pinnacle Renewable Energy, a major producer and supplier of good-quality, compressed bioenergy pellets.
This is all part of the company’s ambition to become a carbon negative by 2030. It looks as if it’s on track to hit this target.
The company’s principal risks and challenges are regulation and costs, both of which could hold back its transition to becoming a carbon negative business. Still, despite these risks, I’d buy the stock for my portfolio of green energy shares.
Unlike Drax, which is already a well-established business, Ceres is still in its development stages. As such, the company may not be suitable for all investors. Moreover, as long as it remains unprofitable, there’s always going to be a risk the company could run out of money.
Nevertheless, the group is moving forward with its green energy ambitions. Turnover for the 12 months ended 31 December 2020 increased 15% to £21.9m. At the beginning of March, the company also completed a £181m fundraising to invest in developing its fuel cell technology and manufacturing capabilities.
I’m encouraged by Ceres Power’s recent progress. So, despite the company’s speculative nature, I’d buy the stock for my portfolio as a way to invest in a niche but growing sector of the green energy revolution.
The final company I’d buy for my portfolio of green energy stocks is Bluefield Solar Income (LSE: BSIF). This enterprise does what it says on the (recyclable) tin. It is seeking to produce income for investors by investing in solar assets.
So far, management has achieved this aim. It’s targeting an 8p per share dividend for the year, which could provide a dividend yield of 6.5% on the current share price.
The company is also looking to expand its universe of investable assets. Management is expanding beyond its core market into unsubsidised solar, onshore wind and battery storage assets. If it’s successful, this could help it become a green energy champion.
That said, at present most of the company’s income streams are attached to government subsidies. So its dividend could be at risk if those subsidies are cut. This is the main risk the green energy group faces right now.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.