The renewable energy market’s booming, and I want to get in on the surging demand for green energy. As such, here are five renewable energy stocks I’d buy right now.
Renewable energy giant
When it comes to finding investments with exposure to the renewables sector, I think it is best to look outside the box. Many companies offer direct exposure to the sector, but even more offer indirect exposure.
BP‘s a good example. This business is a major oil and gas producer, but it’s planning to invest tens of billions of dollars in green energy projects over the next few years.
Some investors might want to avoid this company due to its exposure to fossil-based fuel production. That’s understandable. However, there aren’t many other London-listed businesses that offer the same kind of exposure and growth potential as BP, in my eyes, when it comes to renewable energy stocks.
That’s why I’d buy the firm for my portfolio, despite the risks of investing in an oil-based business. Indeed, as a major polluter, the company could face rising costs as we advance.
One of the significant challenges the renewables industry faces is storing energy. Power generation from wind and solar assets can be volatile, so finding a way to harvest energy and smooth out grid volatility is vital for the sector.
To play this theme, I’d buy the Gresham House Energy Storage Fund. The fund invests in utility-scale operational energy storage systems, primarily utilising batteries across Britain.
The investment trust has a target return of 8% per annum, before leverage, and 15% per annum when leverage is considered.
And recently, it raised another £100m from investors to fund expansion plans. That said, while the trust has recently performed well, these are just targets. If it ends up overpaying for assets, returns could come in below expectations. A price war with competitors could also dent returns.
Still, considering the need for energy storage and demand from investors for exposure to these assets, I think the firm can continue to expand. That’s why I’d buy the shares for my portfolio of renewable energy stocks today.
Another way I’d play the energy storage trade is with hydrogen. As this sector’s quite experimental, I’d diversify my holdings. The two stocks I’d buy are ITM Power and AFC Energy.
AFC produces alkaline fuel cells that consume hydrogen and pure oxygen to produce water, heat, and electricity. By comparison, ITM manufactures electrolyser equipment that can use renewable power to produce hydrogen from water.
ITM is the more advanced of the two firms. Its technology is already being used by Shell to produce hydrogen at the oil major’s fuel stations. AFC is scaling up the production of its new H-Power systems, and we should see further progress on this front throughout the rest of the year.
Both ITM and AFC are exciting renewable energy stocks, but their technology is still relatively new. Therefore, they’re speculative investments and may not be suitable for all investors. Nevertheless, I’m excited about their prospects and I’d buy both today.
Rupert Hargreaves 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.