I expect demand for zero carbon energy to grow for the rest of my life. But what are the best renewable energy stocks to buy today?
One challenge is that we don’t know which technologies will be long-term winners. Wind and solar seem pretty certain, but what about hydrogen and nuclear? I’d also want exposure to energy efficiency and recycling. Reducing resource usage is always going to be a win-win for the environment.
Given this uncertainty, the investment strategy I’d use today would be to build a mini portfolio of three renewable energy stocks. That way, I’d have a horse in the race, however the renewable energy market develops. Here’s what I’d buy.
Wind + more
My first stock would be FTSE 250-listed firm The Renewables Infrastructure Group (LSE: TRIG). This business has its roots investing in UK wind farms, but is gradually expanding into other types of energy and into Europe.
I’ve been following TRIG for several years and have been impressed by the management of the group. Each year’s results have generally been as expected. The dividend has grown steadily and currently offers a tasty 5% yield.
The main risk I can see here is that a lot of TRIG’s income still comes from subsidised wind farms with fixed energy prices. In the future, more of TRIG’s income will come from energy sold at market prices, so profits could be more volatile.
Even so, I think TRIG’s experienced management are handling the transition well. I’d be happy to buy TRIG today.
Some environmentalists are strongly opposed to nuclear power. I think it can be part of the solution to our energy needs, providing reliable low-carbon energy regardless of weather conditions.
One way I’d invest in nuclear energy is through Yellow Cake (LSE: YCA). This company buys and sells uranium, which is used to fuel nuclear power stations. The company held 15.8m lb of uranium at the end of 2021, highlighting its long-term strategy.
There’s plenty that could go wrong here. Yellow Cake buys most of its uranium from Kazakhstan producer Kazatomprom, so there are political risks. The value of the group’s assets is also dependent on the price of uranium, which is hard to forecast.
I don’t know how these risks will pan out. But I believe Yellow Cake’s assets are likely to remain valuable in the future. I’d be happy to tuck some of these away as a play on nuclear power.
An alternative renewable energy stock
My final choice is focused on energy efficiency. Impax Environmental Markets (LSE: IEM) is an investment trust that buys shares in companies involved in cleaner or more efficient delivery of energy, water, and waste disposal services.
Around half IEM’s assets are in North America, with one third in Europe, and the remainder in the Asia-Pacific region. I believe the technologies and businesses backed by IEM will be crucial to our future, regardless of where we’re getting our energy from.
Buying this stock would give me exposure to companies and markets that I wouldn’t invest in directly. Although some of the shares in the portfolio look expensive to me at the moment, I think many of them offer great long-term growth potential. IEM is a stock I’d tuck away for the next decade.