As the world continues to push towards a clean energy future, companies harnessing the power of renewables are perfectly positioned to capitalise. In the UK, the British government has put forward an ambitious green energy strategy, which includes the target of achieving net zero carbon emissions by 2050. With this in mind, I’ve got my eye on several quality UK shares that I reckon could profit nicely from the UK’s green energy transition.
The best sustainable UK shares
First up, I’m excited about the long-term growth potential of FTSE AIM-listed Velocys. The company aims to create sustainable fuels composed of waste materials for aviation and heavy goods transport. This is to help achieve lower emissions and improve air quality with its innovative technology. Velocys’ ties to the aviation industry may explain why the stock has failed to explode in price in the same way many other green energy stocks have. However, since I’m confident airlines will make a steady comeback, I reckon Velocys shares are a savvy long-term play.
Unlike Velocys, fellow AIM-listed ITM Power has exploded in price recently. In a nutshell, the company’s solutions take excess energy from the power network and convert it into hydrogen. Since the beginning of the year, its valuation has rocketed by around 528%. Despite this, I’m sceptical of rating the company’s shares as overpriced. Furthermore, the UK’s energy strategy focuses on offshore wind and hydrogen power. This means that ITM’s specialisation in hydrogen energy positions it perfectly to realise further growth over the long term.
Finally, I’m on the lookout for stocks that look set to profit from the UK’s ambitious offshore wind energy plans. Prime Minister Johnson has hailed the UK as the ‘Saudi Arabia of wind’, and I think Britain looks set to continue being a global leader in the sector. As such, energy firms like SSE instantly spring to my mind as solid investment opportunities. SSE is planning the world’s largest offshore wind firm, which could be operational as early as 2026. Ultimately, thanks to a bright outlook, I think a price-to-earnings ratio of 18 classifies the stock as good value.
The long-term potential of the green energy industry
With governments around the world pouring billions into renewable energy alternatives, the long-term outlook for the industry remains highly favourable. Furthermore, if harnessed effectively, clean and renewable energy could play a significant role in powering a clean economic recovery.
While rocketing share prices indicate that investors have cottoned on, I believe there’s still room for growth. That’s why I’d plan to add several stocks operating in this sector to my investment portfolio in 2021. Once bought, I’d hold for the long term in order to maximise returns and ride the UK’s wave towards a carbon neutral future.
Matthew Dumigan 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.