Renewable energy and fossil fuel stocks often trade inversely to each other. When coal is more expensive, wind and solar generation start looking more appealing. When oil is cheap, paying more for an electric vehicle is more of a hurdle to overcome.
Plus, even though inflation has been coming down, it’s still well above where it was before the pandemic, making capital-intensive renewable energy installations more expensive. Add onto that higher interest rates set by the Federal Reserve to combat inflation and you have a recipe for large price tags for renewable projects and financing.
So it’s no surprise that renewable energy companies, as tracked by the iShares Global Clean Energy ETF (ticker: ICLN), are down by about 25% over the past year while the fossil fuel industry, as measured by the Energy Select Sector SPDR Fund (XLE), is up about 7% over the same period. The S&P 500 is up about 18%.
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Still, renewable stocks have started to do better as inflation has eased. The ICLN fund is just slightly in positive territory over the past six months, as of the market close on July 25.
And over the long term, experts expect the renewable energy sector to do nothing but grow. Indeed, even as renewable stocks haven’t been doing so great in recent years, solar and wind power generation have been growing much faster than natural gas-fired generation in the U.S., while coal declines and nuclear is relatively flat.
Because of new solar installations coming online, the U.S. Energy Information Administration expects solar power generation to grow 75% from 2023 to 2025 and wind power to grow 11% in that period.
That outlook, coupled with the underperformance of some renewable energy shares, means savvy buy-and-hold bargain hunters could do well over the long term. There are other renewable energy companies that are doing pretty well at the moment. With that in mind, here’s a look at seven top renewable energy stocks:
| Stock | Year-to-date performance* |
| Enphase Energy Inc. (ENPH) | -11.1% |
| First Solar Inc. (FSLR) | 25.5% |
| NextEra Energy Inc. (NEE) | 20.9% |
| Brookfield Renewable Corp. (BEPC) | -2.4% |
| Fluence Energy Inc. (FLNC) | -34.6% |
| Nexans SA (OTC: NEXNY) | 42.7% |
| HA Sustainable Infrastructure Capital Inc. (HASI) | 19.7% |
*As of July 25.
Enphase Energy Inc. (ENPH)
Enphase Energy designs, develops, manufactures and sells micro-inverter systems for the solar industry. These devices convert direct current power produced by solar panels to alternating current used by household appliances.
Companies that make these devices are key to solar energy expansion, and Steven Conners, president of financial advisor Conners Wealth Management, likes this stock for its broad reach.
“They are a global company,” he says. “This is important given the nature of politics and their on/off subsidies, especially here in the U.S.”
The stock is down more than 30% over the past year, but Conners thinks it might have turned a corner.
“This is a risky stock, which is not suitable for many investors due to the volatility in the shares,” he says. “But if you are comfortable with the higher risk, I believe over the next five to 10 years they should do quite well.”
First Solar Inc. (FSLR)
This solar stock is up about 10% over the past year. The company has benefited as solar installations in the U.S. have become more popular.
First Solar uses cadmium telluride technology for its solar cells in a process that has a smaller carbon footprint than other manufacturers that use polysilicon. Additionally, First Solar isn’t reliant on Xinjiang, a polysilicon-producing region in China where the U.S. says Muslim minorities are forced to work against their will.
“(First Solar) provide panels that utilize a thin-film substrate that does not need silicon semiconductors in their manufacturers,” Conners notes. “Their proprietary panels also may be able to thwart their competition given the difference with their technology.”
Conners notes the company’s large pipeline of work.
“They have a large backlog, which is an attractive place given their market position and should bode well for the future,” he says.
NextEra Energy Inc. (NEE)
Jon DuPrau, managing partner at Quantum Portfolio Management, says one of the indexes his company has developed is an investable index that responds to changing priorities amid climate change.
“Our approach to investing in this transition includes companies that are benefiting and increasing their earnings now because of the changes, in addition to those that are influencing the transition in the long term,” he says.
In the index’s rebalancing in July, the company added NextEra, which often makes lists of top renewable energy companies. Its regulated utility segment engages in the generation, transmission, distribution and sale of electric energy in Florida. Another segment produces electricity from renewable sources, including wind and solar. The company is also involved with green hydrogen, battery storage and nuclear plants. As a utility, NextEra can fit into portfolios in a defensive capacity. While it likely won’t outperform growth stocks in the tech sector, for example, it also may not decline as much when the market turns sour because people need electricity in any economic environment.
The company stands to grow as demand for data centers increases, and in the second quarter, NextEra added 3,000 megawatts of new renewables and storage projects to its backlog of work.
“In the end, our criteria found NEE’s steady and consistent earnings growth, which is projected to be 6% to 8% through 2026, to be attractive relative to peers in the renewable energy space,” DuPrau says.
Brookfield Renewable Corp. (BEPC)
Investors looking to combine income with the potential for long-term growth from a beaten-down stock can consider Brookfield Renewable Corp.
Shares are down about 12% over the past year, and the company’s dividend yield is 5.1%.
Brookfield owns and operates a wide variety of renewable energy projects, including hydro, wind and solar. That diversity can prove useful as a hedge when one part of the renewable energy market is doing better than another.
Fluence Energy Inc. (FLNC)
Battery storage is a key part of the decarbonized economy. Because solar and wind generation are intermittent based on when the sun is shining and wind is blowing, energy storage systems offer a way to help stabilize electric grids.
Last year saw the biggest annual gain on record for the global energy storage market, according to BloombergNEF. The research provider anticipated that market this year will add more than 100 gigawatt-hours of capacity for the first time, mostly driven by growth in China.
After China, the U.S. is the biggest energy storage market, followed by Germany and then other European nations, BloombergNEF says. That means that companies with an international footprint stand to benefit.
Fluence, an energy storage products and services company, has a presence in 47 markets globally and is a joint venture between German multinational technology conglomerate Siemens AG (OTC: SIEGY) and American utility AES Corp. (AES).
Those companies provide an amount of stability in an industry where there are plenty of startups that might have great ideas but could struggle to get funding.
Fluence stock is down about 40% over the past year. Still, those wanting to place a long-term bet on the future of battery technology might find this an attractive entry point.
Nexans SA (OTC: NEXNY)
Another thing the energy transition will need in great quantities besides batteries will be wiring that connects distributed solar, wind and other renewable energy sources to the grid and to homes and businesses.
Wiring connections are also needed within renewable energy installations — especially offshore wind farms that will power coastal metropolitan areas and take miles of cable to connect individual wind turbines with substations at sea to land.
As a cable products company, Nexans provides infrastructure to connect offshore wind farms with the grids that transfer the electricity to homes and businesses on land. It is also involved in the onshore wind and solar industries and develops cabling solutions for electric vehicle charging stations, which will be in increased demand as more people adopt electric transportation.
The diversity of Nexans’ markets helps explain why the company is doing so well. Its stock is up about 40% over the past year.
HA Sustainable Infrastructure Capital Inc. (HASI)
The Inflation Reduction Act has supercharged renewable energy companies domestically as well as those abroad that can meet certain U.S.-centric criteria.
This U.S. company — which provides capital to companies involved in energy efficiency, renewable energy?and other sustainable infrastructure markets — is one of the beneficiaries of the legislation.
Its portfolio includes behind-the-meter energy efficiency; distributed solar and storage investments; grid-connected wind, solar and storage projects; fleet decarbonization; and ecological restoration.
The company, whose stock is up about 21% over the past year, says it is the first U.S. public company solely focused on climate solution investments.
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7 Best Renewable Energy Stocks to Buy Now originally appeared on usnews.com
Update 07/26/24: This story was published at an earlier date and has been updated with new information.
