Top renewable energy stocks

Renewable energy still has plenty of growth opportunity

The International Energy Agency (IEA) predicts renewables will be responsible for powering 12.4% of global demand in 2023. That includes all consumption of renewable energy, whether that be to power and heat a building or to keep transport ticking along.

^{(Source: International Energy Agency, 2018)}

Capacity of virtually all types of renewable energy will continue to grow over the coming five years, but some are forecast to increase at a faster rate than others. A similar amount of new wind and solar PV capacity are expected to be brought online by 2023, but bioenergy will remain the most-consumed renewable energy source.

^{(Source: International Energy Agency, 2018)}

Generating electricity will remain the main use case for renewables, which is expected to account for almost 30% of global electricity demand by 2023. Hydropower is expected to be the biggest contributor, accounting for 16% of global electricity demand, followed by wind at 6%, solar at 4% and bioenergy at 3%.

The IEA says around 70% of the new power generation capacity to come online in the period up to 2023 will be powered by renewables, led by solar and followed by wind, hydropower and bioenergy.

How to take a position on renewable energy stocks

1. Trade renewable energy stocks – without taking ownership of the underlying asset – by opening a live account with IG
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Top ten renewable energy stocks: RENIXX-World stocks

The Renewable Energy Industrial Index (RENIXX) is a global index that tracks the largest 30 renewable energy companies from around the world.

Some of these companies have diverse portfolios, while others concentrate solely on one power source, such as solar. Despite the fact it is still early days for renewable energy many of the largest players are already highly cash-generative, profitable and dividend-paying, and many offer relatively stable business models that benefit from reliable revenues sourced from regulated markets.

Take a look at these top ten renewable energy stocks in more detail:

Remember, although renewable energy companies are receiving a lot of positive attention as the shift toward clean energy continues to gain traction, the market is still growing and the high competition is causing drastic swings in prices. It’s important to stay abreast of any news surrounding these companies when you’re looking to take a position, or holding a position on a stock.

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Tesla ($699.25 billion)

Tesla has long been praised for changing the game when it comes to sustainable innovation in the automotive industry. But the company has gone far beyond the realm of electric vehicles (EVs), and into renewable energy generations and energy storage solutions.

Tesla produced a whopping 206,421 EVs in its second quarter (Q2) of 2021, breaking its 2020 record of 179,757. This figure represents a year-on-year (YoY) growth of 151% over its Q2 2020 production of 82,272 EVs. The vehicles boast zero emissions, which has earned Tesla a significant amount of praise from markets and the public alike.

Year-on-year total gross profit, as reported, is up 128% in the second quarter of 2021 – to $2.88 billion. However, some questions still remain as to how scalable Tesla’s business model is with soaring demand for the cars, as well as a significant amount of competition in the EV space.

Notably, 2021 also saw the launch of Tesla Vision, which aims at solving the problem of full autonomy through the collection of large datasets from Tesla vehicles and the implementation of advanced AI.

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Ørsted A/S ($209.15 billion)

Responsible for 29% of global installed capacity, Ørsted A/S (ORSTED) became the world’s largest offshore wind power developer in 2020.

In their 2021 interim financial report, the company indicates that its operating profit (EBITDA) increased by DKK13.1 billion (£1.51 billion) compared to the same period in 2020, including a DKK5.4 billion (£620 million) gain from the offshore windfarm, Borssele 1 and 2.

Encouragingly, Ørsted is forecasting operating profits near DKK15 billion (£1.73 billion) for 2021, and expected gross investments may increase to DKK39 billion (£4.49 billion).

The company is currently constructing two of the largest offshore wind farms in the world – Greater Changhua 1 and 2a, and Hornsea 2. Both should be completed and commissioned in 2022. In May 2021, the first wind turbine was installed at Hornsea 2, a 1.3GW wind farm just off the UK’s coast. When completed, Hornsea 2 will be the world’s largest offshore wind farm, exceeding Ørsted’s Hornsea 1.

Other notables from the interim report include the commissioning of the Permian Energy Centre in Texas – a combined solar PV and storage facility – and the securing of a 20-year offshore wind renewable energy certificate (OREC) from the New Jersey Board of Public Utilities.

A large proportion of Ørsted’s shareholders are institutions. This is a good sign for retail traders and investors because it means these institution’s analysts have taken a look at the stock and believe it has growth potential. However, it’s important to remember analysts can be wrong, too – so do your own research and only take a position if you have understood the risks of doing so.

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Vestas Wind Systems ($41.46 billion)

Vestas Wind Systems is the world’s largest wind turbine manufacturer – responsible for designing, installing and servicing wind turbines in 82 countries. It has over 100GW of wind farm capacity spread across companies such as the US, Germany, Denmark, India and China.

The company’s Q2 2021 financial report indicates that while year-on-year revenue remains stable, profits have increased. To be more precise, Q2 revenues for 2021 were €3.536 billion, and earnings before interest and tax (EBIT) increased from €67 million to €101 million – resulting in an EBIT margin of 2.9% (up from 1% in Q2 2020).

The intake of orders for wind turbines amounted to just under 5,300MW and, as of June 2021, the company’s wind turbine order backlog was valued at €21.2 billion. Additionally, Vestas’s service agreements were evaluated to have expected revenues of €26.9 billion. Combined, the value of orders and service agreements are up €13 billion year-on-year (an increase of 27%).

However, due to supply chain constraints, cost inflation, and restrictions in key markets caused by Covid-19, the company has revised its expected revenues for the year down from around €16 billion to around €15.5 billion.

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Verbund ($31.73 billion)

Verbund, Austria’s largest electricity provider, generates 90% of its energy from renewable sources – primarily hydropower plants, photovoltaic and carbon dioxide-free hydrogen. The company is involved in testing technology on industrial scales to ensure replacing fossil fuels is an increasingly viable option.

Verbund has a 25% share of all Austrian industry power since 2006. It is Austria’s largest customer provider with more than 375,000 private customers using its climate-friendly electricity. It’s also active in over 20 countries – including Germany, France and Italy.

During the 2020, the company commissioned its first solar installation, which is expected to bring in 1.3MW of capacity. Over the next ten years, the company intends to invest $5.9 billion in further projects that will lower its carbon emissions – including $2 billion worth of hydropower projects.

In Verbund’s mid-year report on quarters 1 and 2 of 2021, the company highlights the fact that prices for both European CO2 emission rights and primary energy sources are on the rise. The company’s EBITDA increased by 2.5% to €654.9 million over the period, and the Group result rose by 4.5% to €324.5 million.

The company’s market capitalisation at the time of the report (July 2021) was €27 billion ($31.73 billion). Verbund has expectations of EBITDA of between €1.31 billion and €1.41 billion for FY 2021, and a Group result of between €590 million and €660 million.

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Enphase Energy Inc ($23.19 billion)

Enphase Energy Inc has been one of the most popular energy stocks in recent years, largely due to the company’s strong commercial performance.

Enphase has been so successful because its microinverter is compatible with virtually any solar panel, which means the company can create a huge number of partnerships with other firms.

Microinverters essentially turn sunlight into a safe and scalable source of electrical energy. The company has installed more than 36 million microinverters on more than 1.5 million homes across 130 countries.

According to its ‘CEO letter to shareholders 2020’, revenue increased 24% year-on-year to $774.4 million, compared to $624.3 million in 2019. Enphase also shipped approximately 6.8 million microinverters in 2020, compared to approximately 6.2 microinverters in 2019.

In Q2 2021, the company has reported a revenue of $316.06 million, up $14.3 million from Q1 2021, and a hefty $190.52 million from Q2 2020. This represents a year-on-year growth of 152%. It also shipped close on 2.4 million microinverters and 43 megawatt hours of Enphase storage systems in the quarter.

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SolarEdge Technology ($14.69 billion)

SolarEdge Technologies Inc developed the optimised inverter that changed the way solar power is harvested and turned into electricity. They’ve long been a solar energy industry leader, adding more products to their offering and improving their finances to become one of the most valuable companies on the solar energy market.

But in Q3 of 2020, the shine began to fade for many investors. Although shares of SolarEdge had tripled in value in the first few months of 2020, the company’s worldwide revenues declined as a result of the Covid-19 crisis and a reduction of investment in US solar instalment – resulting in a 45% fall in commercial sales.

There has been good news for the company, however. For example, in October 2020, SolarEdge partnered with Schneider Electric to provide a cohesive electricity environment for installers and device owners, while also accelerating solar installations.

Moreover, in their Q2 2021 financial report, SolarEdge indicated revenues of $480.1 million, up 18% from $405.5 million in the prior quarter and up 45% from $331.9 million in the same quarter last year.

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First Solar ($10.24 billion)

First Solar is a global provider and operator of solar plants. It has built and shipped over 20GW of capacity and facilitated $17 billion worth of project financing. It claims to invest more money in researching and developing solar technology than any other company.

The future for the photovoltaic industry looks bright – in fact, First Solar expects installed PV capacity to double globally in the next five years. It also believes that its technology and products will give it a competitive advantage in the prospective wave of demand for affordable clean energy.

During Q2 2021, the company started site preparation for a 3.3GW factory in Ohio. Furthermore, it announced a planned 3.3GW capacity expansion in India (contingent on approval). The company also reports record year-to-date (YTD) bookings of 9.0GW.

Net sales in Q2 2021 were at $629 million. Although this figure represents a $13 million drop year-on-year (YoY), YoY gross profits were up 6.3% from 21.4% to 27.7%.

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Ormat Technologies ($3.79 billion)

Ormat Technologies operates geothermal plants and energy recovery plants that turn excess heat into power. The company runs its own plants in the US, Guatemala, Guadeloupe, Honduras, Indonesia and Kenya, and it also builds and designs plants for others.

The company said that the coronavirus pandemic had little impact on its results throughout 2020 – as their efforts to ensure employee safety and optimise their supply chain kept their growth plans stable.

Although the company’s EBITDA for the six months prior to July 2021 were down year-on-year from $199.28 million to $165.19 million, Ormat reports revenue growths of over $700 million every year since 2018. Moreover, it projects strong market demand for geothermal energy both within the US and abroad.

Some newsworthy events from the quarter include:

• The signing of a contract with Polaris Infrastructure to supply a 10MW geothermal power plant in Nicaragua

• The signing of a supply contract for the delivery of a geothermal production pump (OPP) for the Landau geothermal plant in Germany

• Securing a new 14MW contract with Star Energy Geothermal Salak in Indonesia

• The signing of a 15-year power purchase agreement for geothermal power with the Clean Power Alliance (CPA), the fifth largest power provider in California

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Daqo New Energy Corp ($3.64 billion)

Daqo New Energy Corp (DQ) is a leading solar panel parts manufacture, specialising in high-purity polysilicon – it currently has a production capacity of 70,000 metric tons. The China-based company manufactures and sells low-cost solar solutions to companies all over the world.

In the past, DQ shares have been popular among both short- and long-term momentum traders as the company has outperformed its industry. In October 2020, DQ shares were up by 75.11% compared to the industry average of 3.2%. For the 12-month period between November 2019 and November 2020 DQ sock had increased by 445.38%, while the S&P 500 had only moved by 18.38%.

But, the meteoric rise of DQ shares hit a severe bump in October 2020, after a third-party report found that DQ would fail to meet new US regulations about the use of forced labour. The announcement on October 22 caused the price of DQ to fall from $241.99 to $173.89 just three days later.

In June 2021, the Biden administration ordered a US import ban on Xinjiang Daqo New Energy Co, a unit of Daqo New Energy Corp, after investigations concluded it was tied to the human rights violations of Muslim minority groups in China.

According to the company’s unaudited Q2 results, gross profit was $303.2 million in Q2 2021, compared to $118.9 million in Q1 2021.

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JinkoSolar ($2.06 billion)

JinkoSolar is the world’s largest solar panel manufacturer, shipping 59.9GW in 2020. The China-based company is largely operational in China, the US, Japan, Germany and the UK, but it operates in more than 100 countries globally. JinkoSolar is also attributed with having the industry’s largest research and development centre and testing facility, employing over 250 scientists and solar experts.

The company’s most recent quarterly report (for the quarter ending 31 March 2021) indicates that shipments were up 33.7% year-on-year, to 5,354MW (4,562MW for solar modules, 792MW for cells and wafers). Total revenues, however, were down 6.4% to RMB7.94 billion ($1.21 billion). Similarly, gross profit slumped 18% year-on-year to RMB1.36 billion ($207.3 million).

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