The renewable energy industry is booming, and there are plenty of stocks to buy to gain exposure to this theme. Here are three green energy stocks I would buy for my portfolio today.
Renewable energy fund
One of the easiest ways to build exposure to renewable energy assets is to buy an investment trust.
Impax Environmental Markets aims to invest in a portfolio of global companies working towards improving efficiency or reducing emissions. Some of the top holdings include FTSE 100 chemical specialist Croda and American corporation Clean Harbors, specialising in hazardous waste disposal.
The downside of investing through a fund like this is that there is usually a management charge to pay. Impax charges 0.95% per year. Further, some investors may not be comfortable with this level of international diversification, as more than 90% of the portfolio is invested outside the UK.
Still, despite these risks, I would buy the company for my portfolio of renewable energy stocks.
Clean power
Another company I would buy is Greencoat UK Wind (LSE: UKW).
This enterprise is one of the leading green energy funds in the UK. It owns a portfolio of wind farm assets across the country, which generated 1,476GWh of zero carbon electricity during the six months to the end of June.
Management is focused on growing the company’s portfolio. During the first half of the year, the organisation raised another £200m from investors to fund additional acquisitions, including the remaining 50% of the Braes of Doune wind farm that it did not already own. This took overall group generation capacity to 1.2GW.
As the government tries to make the UK “the Saudi Arabia of wind,” I think there will be plenty of other opportunities for the group to acquire wind generation assets as we advance.
As well as reinvesting for growth, management is also returning cash to investors. The stock offers a dividend yield of around 5% at the time of writing.
As renewable energy companies go, Greencoat UK Wind is one of the best. That is why I would buy the stock for my portfolio. Some risks the group may face going forward are higher prices for wind energy assets, which may depress returns. Higher interest rates could also impact its borrowing costs.
Energy storage
Generating renewable energy is the easy part. Getting it to where it needs to be and making sure it is available at all times of the day is the hard part.
The Gore Street Energy Storage Fund (LSE: GSF) is trying to rectify this issue. The company develops assets that it can use to store renewable energy and push it back into the grid when it is needed.
It recently raised an additional £135m from institutional investors to finance other projects in its growth pipeline. This doubled the size of the enterprise. Considering the growing demand for renewable energy, I think plenty more projects will be added to the pipeline in the foreseeable future.
The trust is also returning cash to investors. It offers a dividend yield of 6.2%. Challenges it may face in the future include competition from larger providers such as National Grid and technological difficulties if it cannot keep up with advances in energy storage technology.
Despite these potential risks, I would buy the company for my portfolio of renewable energy stocks today.
