I’m looking for the best renewable energy stocks to buy right now. Here are two green shares I believe could create sparkling returns for me in the years to come.
Green hydrogen is made using electrolysis to separate water into oxygen and hydrogen. Energy from renewable sources is used to do this. And it’s one of the cleanest ways to produce the gas. But there’s a problem. Most hydrogen is created by combining fossil fuels with steam. Some scientists say this creates a bigger carbon footprint than the use of coal and natural gas to produce energy.
The main issue for investors is that the green hydrogen industry is tiny. And it might stay that way because ‘rival’ renewable energy sources like wind and solar attract massive investment. However, there are signs that suggest the tide could be turning. In recent days Australia’s Fortescue Future Industries signed a multi-billion-pound deal with JCB. It will supply green hydrogen to the construction equipment firm and I think it could prove a landmark moment in the adoption of the technology.
This suggests to me that AFC Energy (LSE: AFC) could become an increasingly-popular UK renewable energy stock. The company produces alkaline fuel cells that harness the power of the sun to create hydrogen. Its tech has proved to be highly effective and is the primary energy source for the highly-publicised Extreme E racing series.
Green hydrogen could account for more than a fifth of Europe’s power demand by 2050, at least according to analysts at Norwegian renewable power producer Statkraft. And it should be responsible for almost 10% of global energy consumption. Yet I see shares like AFC Energy as highly speculative buys right now. That said, recent news flow encourages me to take a very close look. I think the returns could be explosive.
A renewable energy stock using wind
Greencoat UK Wind (LSE: UKW) is another attractive green share I’m considering buying today. This real-estate investment trust has invested in 40 wind farms in Britain. The Government has made wind power a cornerstone of its green revolution and firms like this will play a big role in helping legislators hit their target.
This week Greencoat said it’s to acquire a 15.7% stake in Burbo Bank Extension wind farm off the coast of North-West England. It will pay £250m, which will be partly funded through a fresh share placing. The business recently described its acquisition pipeline as “healthy”. And its formidable cash generation gives it extra financial firepower, so we should expect more earnings-boosting deals.
But it’s important to remember that this renewable energy stock’s operations are highly regulated. Shareholder returns could take a big whack if Ofgem decides to clip Greencoat’s profits-making capabilities. However, I believe the risks here are more than offset by the potential rewards. I’d happily buy this quality stock for my own portfolio right now.
Royston Wild has no position in any of the shares mentioned. 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.