Best green energy stocks to watch
Consider some of the best green energy stocks to watch. These are some of the most popular companies in the sector.
Green energy stocks in brief
Green energy stocks refer to companies which are involved in environmentally friendly and sustainable energy production, storage and distribution — this includes solar, wind, geothermal, biofuels and hydro power. The general emphasis is on reducing carbon footprints and improving energy efficiency.
While there is significant crossover between green energy and renewable energy, green energy is widely viewed as a specific subset of renewable energy — meaning that while most green energy sources are renewable, not all renewable energy sources are green. For clarity, green energy has a specific focus on environmental credentials, but also includes firms engaged in energy storage, efficiency solutions, and carbon capture technologies.
A good example is wood. Burning wood is clearly renewable because trees are renewable — but is arguably not green because it releases pollution into the atmosphere. Nuclear power is not renewable because the supply of uranium is finite, but it is arguably green because of the low associated carbon emissions though detractors disagree given the waste created.
It gets more complicated than this though. A large scale hydro plant which causes environmental damage while being built and operated — but massively saves on carbon emissions — may or not be green dependent on your philosophical perspective
Green energy companies tend to have higher valuations than traditional oil and gas giants, because of higher growth expectations. They also usually reinvest profits into expansion where the oilers pay out for dividends and share buybacks — but in the longer term, this is widely expected to pay off handsomely as carbon pricing, emissions regulations, falling hydrocarbon reserves and environmental concerns reshape the energy market.
In particular, green energy investors are interested in investing in global decarbonisation efforts — which are attracting all sorts of political support, including through the US Inflation Reduction Act, the EU Green Deal and Chinese green targets. There are now also significant corporate efforts to become green; for example, both Google and Amazon have committed to clean power purchase agreements in an effort to achieve net zero.
Compounded with falling costs for solar panels, wind turbines, and battery storage, the sector is perhaps becoming more attractive than in the past. But as with all investments, there are still risks. Green energy is capital intensive, and subject to the whims of changing government policy. Inflation and supply chain issues persist, and the industry is to some extent reliant on higher oil and gas prices — because if traditional energy prices fall, then the green transition will likely slow down.
How to invest in green energy stocks with us
- Learn more about green energy stocks
- Download the IG Invest app or open a share dealing account online
- Search for green energy stocks on our app or web platform
- Choose how many shares you’d like to buy
- Place your deal and monitor your investment
Investors look to grow their capital through share price returns and dividends - if paid.
But the value of investments can fall as well as rise, past performance is no indicator of future returns, and you could get back less than your original investment.
We also offer many green energy-focused ETFs, including the popular iShares Global Clean Energy ETF, which sports a 0.41% expense ratio and tracks clean energy stocks from around the world. Top holdings include First Solar and Iberdrola.
Top green energy stocks to watch
These are some of the most popular companies in the green energy sector.
NextEra Energy (NYSE: NEE)
NextEra Energy is the largest green energy company in the United States and focuses primarily on wind and solar power. The company operates through multiple subsidiaries, including Florida Power & Light and NextEra Energy Resources. It owns thousands of wind turbines across North America and has one of the largest solar energy portfolios in the world.
NextEra is popular for its steady growth, strong balance sheet, dividends and long-term commitment to renewable energy in a sector where certainty can sometimes be lacking. The company has consistently expanded its capacity over the years, taking advantage of government incentives and growing demand for clean power.
Tesla (NASDAQ: TSLA)
Tesla is widely recognised as the electric vehicle industry trailblazer, but its contributions to green energy go far beyond cars. The company is a large producer of solar panels but also specialises in energy storage products like the Powerwall and Powerpack.
These storage solutions sport twin uses as they help stabilise power grids while allowing homes and businesses to maximise their green energy use. Tesla’s integration of EVs and solar energy under a single brand makes it unique among clean energy companies.
Tesla has a history of scaling production rapidly and maintaining strong profit margins despite market fluctuations. With growing global interest in EVs and clean energy storage solutions, Tesla remains of the most widely followed stocks in the world.
First Solar (NASDAQ: FSLR)
First Solar is one of the largest US-based solar panel manufacturers, specialising in thin-film solar technology. Unlike traditional silicon-based panels, First Solar’s cadmium telluride panels perform better in hot and humid conditions, making them ideal for utility-scale solar farms whatever the climate. The company focuses on large-scale projects, giving it a specific niche.
First Solar benefits from US government incentives promoting American-made solar technology — while its large backlog of orders and continuous efficiency improvements make it a popular long-term investment.
Brookfield Renewable Partners (NYSE: BEP)
Brookfield Renewable Partners owns and operates one of the world’s largest portfolios of renewable energy assets, including hydro, wind, solar and energy storage. Unlike many pure-play solar or wind companies, Brookfield’s diversified portfolio allows it to generate stable revenue streams across multiple green sources, including very stable hydroelectric assets, which makes it a popular choice for defensive investors.
The company offers an attractive dividend yield, which appears sustainable given its long-term power purchase agreements agreed with clients all over the world.
Vestas Wind Systems (CPH: VWS)
Vestas Wind Systems is the world’s largest wind turbine manufacturer, with operations across more than 80 countries. The Danish company designs, manufactures, installs, and services wind turbines — both onshore and offshore — playing a critical role in global wind energy adoption.
Vestas is a key investment in the green energy sector not only because of its continued R&D spend, but mostly for its established market presence. With governments worldwide setting ambitious wind energy targets, Vestas is well-positioned to benefit from increased demand, and continual revenue due to the servicing segment.
Enphase Energy (NASDAQ: ENPH)
Enphase Energy is the market leader in solar microinverter technology, the advanced tech which converts energy from solar panels into usable electricity. Unlike traditional string inverters, Enphase’s microinverters allow each solar panel to operate independently, improving performance in shaded or variable conditions. The company has also expanded into battery storage.
Enphase enjoys high margins and strong growth, benefitting from the increasing adoption of residential and commercial solar power, as well as the rising demand for smart energy management systems.
Sunrun (NASDAQ: RUN)
Sunrun is one of the largest residential solar companies in the United States, providing solar panel installations and leasing primarily for homeowners. Its business model allows customers to adopt solar energy with a small upfront cost, and it also offers battery storage solutions through its Brightbox system, enabling homeowners to store solar energy as well.
As the residential solar market grows, Sunrun maintains a dominant market position and retains a strong balance sheet due to the recurring revenue from leasing agreements. The company also benefits from government incentives for home solar adoption, and with electricity costs rising it appears well-positioned for continued expansion.
Orsted (CPH: ORSTED)
Orsted is a Denmark-based global leader in offshore wind energy. The company has transitioned from fossil fuels to fully renewable energy and is arguably the pioneer of offshore wind farm development. Orsted operates some of the largest offshore wind projects in Europe, Asia and North America.
Analysts tend to view Orsted as the prime offshore wind stock due to its expertise, government-backed contracts, and first-mover advantage in the sector.
Plug Power (NASDAQ: PLUG)
Plug Power specialises in hydrogen fuel cell technology, an alternative energy solution for transportation, industry and power generation. The business is a market leader in the green hydrogen movement, producing fuel cells for forklifts, delivery vehicles, and heavy-duty trucks. Its partnerships with major corporations, including titans Amazon and Walmart, are helping drive large-scale adoption of hydrogen power.
While still facing profitability challenges, Plug Power remains a popular speculative play in the green energy sector due to its pioneering role in hydrogen technology.
Siemens Energy (ETR: ENR)
Siemens Energy is a global energy technology company with a growing focus on renewable energy, particularly wind power. A significant portion of its business comes from Siemens Gamesa, its wind turbine division, which supplies both onshore and offshore wind farms. The company also develops energy transmission and storage solutions to support a greener electrical grid.
Siemens Energy is a popular green energy stock due to its diversified energy portfolio and leadership in wind power — though is potentially under diversified.
Green energy stocks summed up
- Green energy stocks refer to companies which are involved in environmentally friendly and sustainable energy production, storage and distribution
- It’s widely viewed as a specific subset of renewable energy
- Investors are interested in investing in global decarbonisation efforts
- Green energy is capital intensive, and subject to the whims of changing government policy
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