Renewable energy stocks: 1 to buy and 1 to watch!

The ongoing energy crisis has highlighted the need for sustainable energy sources. Here are two renewable energy stocks that could help towards this goal.

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Solar panels fields on the green hills

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We’re experiencing something of an energy crisis right now. Just this month, Ofgem has raised the price cap for household energy bills by a huge 54%. Natural gas prices have skyrocketed during the pandemic. Crude oil prices have also rallied due to a severe undersupply of the fuel. But this brings me to renewable energy stocks. There are going to be many opportunities to invest in this sector as the world transitions away from fossil fuels. If the current energy crisis shows me anything, it’s that there’s a long way to go before we end our reliance on fossil fuels. But here are two companies that I’d consider buying to help us get there.

One I’d buy

The first is The Renewables Infrastructure Group (LSE: TRIG), or TRIG for short. It’s an investment company specialising in renewable energy assets. Shareholders benefit from quarterly dividends, and TRIG aims to grow this each year. The net asset value of the portfolio has also increased since the initial public offering in 2013. This can provide capital returns for shareholders too.

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TRIG’s portfolio is diversified across solar and wind infrastructure assets, with a small allocation to battery storage technology. I do note that onshore wind represents 58% of the portfolio at present. I’d like to see it expand its other renewables assets exposure to diversify the portfolio even more.

Indeed, it recently announced it was acquiring four solar panel sites in Spain. It’s going to more than double its exposure to solar energy, which is a positive sign in my view.

Nevertheless, it’s the first investment in Spain, and required the issue of over 161m shares to fund the acquisition. There’s a risk that the acquisition doesn’t work out, or that it overpaid, which would destroy shareholder value.

But taking everything into account, I’d add the shares to my portfolio today.

And one I’m watching

The next renewable energy stock is Velocys (LSE: VLS). It’s a company that I have on my watchlist right now. I see the huge potential, but it’s still early-stage and comes with high risk.

Velocys develops sustainable fuels made from waste materials, particularly for the heavy goods transportation and aviation sectors. Therefore, replacing crude oil as an energy source in these sectors would improve air quality, and reduce carbon-based emissions.

The company announced two agreements with Southwest Airlines and International Consolidated Airlines last year that look significant. Velocys says they have the potential to generate “multi-billion revenues”. And collectively, almost 9m tonnes of carbon emissions could be avoided by using its sustainable fuels instead.

Some caution must be noted here though. For example, the sustainable fuel is to be produced at the Bayou Fuels plant, which is still only in development as it stands.

But I do still see the potential here. Velocys could be a solution to replace fossil fuels for our transportation sectors. For now though, as it’s still in the development stage and loss-making, I’m keeping it on my watchlist.

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Dan Appleby 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.

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 considered, so you should consider taking independent financial advice.

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