According to The Wall Street Journal, renewable energy stocks have "surged more than 80%" in 2020. But anyone investing in renewable energy knows it's just getting started.
It's only a matter of time before renewable energy stocks really take off...
The International Energy Agency (IEA) recently reported that solar is now the cheapest form of electricity for new power plants. As a result, the agency is hopeful there will be "43% more solar output by 2040 than it expected in 2018," according to Carbon Brief.
This is the catalyst investors have been waiting for, and it could mean a huge pop across the entire clean energy sector.
Some of our best electric vehicle stocks and clean energy pure plays are getting ready to deliver profits for investors in the next year. Some have doubled as clean energy investing has ramped up - and they're not finished.
We'll go into more detail on these clean energy stocks below...
|Renewable Energy Stock||
|Workhorse Group Inc.||WKHS|
|General Motors Co.||GM|
|Kandi Technologies Group Inc.||KNDI|
|Ford Motor Co.||F|
|iShares Clean Energy ETF||ICLN|
|First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)||QCLN|
|Invesco WilderHill Clean Energy ETF||PBW|
|Invesco Solar ETF||TAN|
|NextEra Energy Inc.||NEE|
|JinkoSolarEdge Technologies Inc.||JKS|
Long-term, it's only a matter of how quickly these renewable energy stocks bound upward. As clean energy sources begin to supply cheaper energy than gas, coal, and oil, it's only a matter of time before they supply the majority of the world's energy.
It's not just solar that's getting cheaper, either. Down the road, expect more efforts to harness green energy sources like wind, hydrogen, biomass, geothermal, and nuclear power for homes, factories, and cars.
Possibly the biggest boon for clean energy stocks in 2020 was in electric vehicle (EV) stocks, or EV stocks.
Investors have realized electric vehicles are the wave of the future and have put their money where their mouth is.
Tesla Inc. was on an absolute tear, but riding on the heels of that company were others like Nikola Corp. (NASDAQ: NKLA) and Workhorse Group Inc. (NASDAQ: WKHS). Workhorse soared over 1,000% mere months after we wrote about it in January. Nikola shares more than doubled in the week after going public.
Both stocks have since seen their ups and downs, but this industry is still revving up.
There is also so much more to renewable energy than electric vehicles.
And there are much bigger profit opportunities, too...
Why You Should Be Investing in Renewable Energy Stocks
Switching to clean energy is a big investment for economies around the globe. The global renewable energy market could hit $1.5 trillion by 2025, according to Allied Market Research. A lot of that money will be coming from economies that had fossil fuels at their center for decades, now seeking alternative energy sources.
BP Plc. (NYSE: BP), a $78 billion market cap energy giant, announced it would switch billions of its oil and gas investment into clean energy. BP Chair Helge Lund said he expects demand for fossil fuels to fall by 75% over the next 30 years.
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Over the next 10 years, U.S. renewable energy consumption is expected to grow by 24% more after coming in at 11% in 2018.
It sounds like a fairytale to many investors. But when you consider how many governments around the world have already started investing in renewable energy, it looks a bit more grounded in reality.
China, the world's second-largest economy and consumer of electricity, has its government nudging people toward green energy for both vehicles and factory emissions.
The Chinese government has been providing support for renewable energy since the 1950s. In 2004, China's Ministry of Water Resources was providing low-interest loans of around $26 million for small hydropower development.
Today, Chinese enterprises engaged in waste management or pollution monitoring get a 15% corporate income tax rate. The normal rate in the country is 25%.
In 2016, the country committed to growing its solar energy production by 45% annually, creating 105 gigawatts over four years. Analysts have predicted that China's solar energy production could rocket 700% by 2035.
Stateside, California has also talked about fully transitioning from gas to electric by 2045. Governor Gavin Newsome set a goal of 100% zero-emission energy sources by that year.
It would be the first U.S. state with such a strict ban on gas-powered vehicles. But it follows 15 other countries, including France and Germany, in phasing out of fossil fuels.
While California's measure may sound extreme, it could only be a matter of time before other states fall in line.
Government initiatives are only one piece of funding green energy, however. The switch to renewables can come from subsidies, or it can come directly from consumers. Clean energy is getting cheaper and higher in demand.
On top of that, the culture is shifting toward clean energy. That's evident when you look at how EV stocks performed this year.
What's Moving the Top Electric Vehicle Stocks
Electric vehicle stocks had a big 2020.
Telsa stock has gone up 383% since January, and the company announced a vehicle delivery target of 766,000 for 2021, up from a prior projection of 687,000.
Workhorse Group Inc. passed a safety standards test and landed a deal with the U.S. Postal Service for delivery trucks.
Other electric vehicle companies were being wildly bought up by SPACs. That included Nikola Corp. (NASDAQ: NKLA), bought by VectoIQ. There was also Hyliion Holdings Corp. (NASDAQ: HYLN), bought by Tortoise Acquisition Corp.
Plenty others followed, with at least $22 billion raised by SPACs for the year, according to SPACInsider.com. Many of those funds went toward making EV stocks a hot commodity on the public market.
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Tesla stock has been able to prove EV stocks more than a punchline with its growth. The stock has skyrocketed, and the company is expecting to finish 2020 with 36% more vehicle deliveries than in 2019.
Overall, the technology is getting better and cheaper. And there is more to "green" cars than hydrogen fuel cells. Hyliion, for example, uses renewable natural gas instead.
Several mainline auto manufacturers are set to produce more electric vehicles than they ever have before.
While we're seeing a lot of successful EV stocks spring up, the industry is still in the process of weeding out pretenders. Let us help you separate the good from the bad...
Best EV Stocks to Buy
Tesla Inc. (NASDAQ: TSLA)
Tesla Inc. (NASDAQ: TSLA) is an electric vehicle pioneer based in Palo Alto, Calif.
The company has gone through several embattled years under its unpredictable CEO, Elon Musk, including production shortages, earnings misses, and near-bankruptcy.
In the last couple years, though, the stock has taken a nearly 400% leap after some increased sales revenue and the opening of a new factory in China.
The giant surge even prompted the company to split its stock to allow for new investors to get in on the action.
While many analysts still worry Tesla will be a highly volatile stock, it's spent many years cementing its name in leading the EV industry and will be hard to ignore.
The company has been profitable for five consecutive quarters. Its revenue has skyrocketed from $7 billion to $28 billion - over 300% - in the last five years. And it's only begun to show the world its autonomous vehicle capabilities as well as new EV models for different audiences.
Tesla has been steadily improving the range of its vehicles, or the distance they can travel between charges. In 2021, the most basic Model 3 will be up from 250 miles to 263 miles.
The company is looking to make these cars more affordable over time, hoping to widen consumer access to the vehicles.
Meanwhile, Tesla also builds batteries for home power alongside an entire solar panel division.
Nio Inc. (NYSE: INO)
One of the things that makes Nio Inc. (NYSE: NIO) an EV stock to watch is that it's based in China, a country that has become super-friendly toward green cars in recent years. For perspective: China had over 1 million EV sales in 2019, while the United States did just 245,000.
NIO stock soared more than 800% in 2020 after announcing $1 billion in new funding ahead of a battery as a service (BaaS) launch that would lower the price of its vehicles by around 25%.
We recently learned that Nio is also working on its own self-driving chips in house. Google parent Alphabet Inc. (NASDAQ: GOOGL) and Ford together have put more than $10 billion into self-driving vehicles combined. With such a huge race to develop self-driving cars, vertical integration will be an important edge for taking the market.
Next to Tesla, this could be one of the biggest worldwide names in the electric vehicle industry. And the development of in-house chips pits it head-to-head against the American EV maker, which produced its own chips in 2019.
A vertically integrated EV manufacturer, this company is set to co-lead the world EV market with Tesla.
Workhorse Group Inc. (NASDAQ: WKHS)
Workhorse Group Inc. (NASDAQ: WKSH) is another electric vehicle company that saw huge gains in 2020 after a couple of big catalysts.
We wrote about Workhorse stock in January. Then it soared from $3 to $30 between January and September 2020, a gain of 900%.
The company had passed a safety test for its electric trucks and had announced it was working toward a deal to supply mail trucks to the U.S. Postal Service.
Workhorse also has a drone delivery technology called HorseFly. This is aUAV delivery system that fully integrates with the company's truck delivery system.
It will be interesting to see how this company's technology ecosystem plays out when clean energy is even higher in demand.
Aptiv Plc. (NYSE: APTV)
Aptiv Plc. (NYSE: APTV) is a New Jersey-licensed and Ireland-based software company. It designs technologies for the future of mobility in two different segments.
Its work is divided between signal and power solutions, and advanced safety and user experience. Both efforts are directed at supplying connection and electrical distribution systems for fleets of vehicles running on artificial intelligence (AI) and machine learning (ML).
These are the nuts and bolts of the self-driving car industry - sensing systems, computing platforms, and other features driven by software.
Aptiv stock has rallied over 130%, back near record highs since the COVID-19 crash, and we may continue to see this company grow as EVs - and self-driving vehicles - increase in use.
General Motors Co. (NYSE: GM)
An age-old auto industry titan might still lead in a fully electric world. In March 2019, General Motors Co. (NYSE: GM) announced plans to invest $4.5 billion for EV production at three of its manufacturing sites.
More recently, the company said it expects to invest another $2 billion in its U.S. manufacturing operations to increase EV production.
CEO Mary Barra has been outspoken about a "pivot" toward electric vehicles. GM has a whole line of competitive EVs waiting in the wings, including an all-electric hummer. Its Cadillac Lyric is set to compete against Tesla's Model Y.
It could be a while before you see GM shares pop from their electric vehicle efforts. The company is taking its time to release what would be its hallmark electric vehicles.
But if you are looking for evidence that an auto stock will be around awhile, GM has a proven track record and has the resources to stay competitive for years to come.
Kandi Technologies Group Inc. (NASDAQ: KNDI)
Kandi Technologies Group Inc. (NADSAQ: KNDI) is another Chinese auto company that makes EVs and EV batteries. The company just launched its U.S. operations in 2020 to see its stock double.
Kandi's main mission is to bring affordability to the electric vehicle market - which will be an important niche, considering Tesla vehicles start at $35,000 and go up near $80,000.
The company supplied 20,000 electric vehicles to Hangzhou, China, in 2012 for the city's electric vehicle leasing program.
It has since expanded to the UK as recently as 2019. Now that it's about to break into the United States, investors are excited to see what happens with the stock.
You could look for this one to pop in the next year as Kandi sets up camp in the U.S. affordable EV market.
Ford Motor Co. (NYSE: F)
The company that brought us the Model T wants to be on the right side of history again.
Ford recently announced it was investing $1.8 billion in fully electric battery vehicles in Canada. This follows a wave of Ford U.S. electric vehicle investment including its fully electric Mustang Mach-E.
The company said the Mach-E, set for release in 2021, "takes less than half a second to reach peak acceleration."
Ford already had a line of hybrids in 2020. Like GM, it's another electric vehicle company that has the capital needed to stay competitive, though it might not be a "disruptor."
While cars are nice, there are a few other places to look for renewable energy investing opportunities.
Now, we're going to show you some of the top renewable energy stocks that are working on replacing oil. But first, here are some different ways you can invest in the entire renewable energy industry at once...
Best Renewable Energy ETFs
iShares Clean Energy ETF (ICLN)
iShares Clean Energy ETF (NYSE: ICLN) is a chance at getting exposure to a wide range of clean energy stocks, from solar to wind and other renewable energy producers.
You're investing in clean energy stocks around the world. Shares are up 69% on the year and 135% since the coronavirus crash of March 2020. Expect long-term growth from this stock as clean energy is adopted around the world.
Money Morning's Tom Gentile, one of America's top traders and world class researcher, says the clean energy market is "the way to profit on energy from here on out." And this ETF gives you a well-diversified exposure to that.
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With this ETF, you'll be investing in top renewable energy stocks like SolarEdge Technologies Inc. (NYSE: SEDG) and Plug Power Inc. (NASDQ: PLUG).
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
This renewable energy ETF is similar to ICLN, but it focuses on clean energy companies based in the United States.
Investors buy into First Trust Nasdaq CLEAN Edge U.S. Liquid Series Index Fund ETF when they want to follow publicly traded U.S. companies that at different parts of the clean energy technology assembly line.
Shares of QCLN have nearly doubled, going from $25 to $49 in the last year. If we start to see increased "green" legislation in the United States, you may want to be holding shares of this one.
With First Trust, you will be investing in EVs, batteries, and panels. Top holdings include Tesla, Nio, and SolarEdge.
Invesco WilderHill Clean Energy ETF (PBW)
This renewable energy and energy conservation ETF follows the WilderHill Clean Energy Index. It gets you exposure to a mix of tech companies and industrial ones.
For this ETF, 90% of the assets are common stocks for U.S. companies. More than a third of the investments are in Information Technology, with Industrials closely behind that.
Basically, you're investing in companies involved in anything cleaner energy and energy conservation.
Shares of this ETF go for $67. That's on the high side compared to some others. But the price popped 91% over the last year, and it probably won't slow down.
Invesco Solar ETF (TAN)
We talked about how solar is the most affordable energy source to build out. As demand builds, this ETF is one you want to be holding.
This ETF tracks the MAC Global Solar Energy Index. It tries to tackle all aspects of the solar industry, mainly in the United States and China.
Its allocation is over 60% Information Technology dedicated to solar power, with 45% of investment in the United States and 25% in China.
There are about 35 U.S. and international stocks in the fund. Top holdings include SolarEdge, Sunrun, and Enphase Energy Inc. (NASDAQ: ENPH).
Now, onto the renewable energy pure plays....
Best Renewable Energy Stocks to Buy Now
Now we get into the pure plays on energy. The market for clean energy is expected to be worth a total of $10 trillion by 2050. Wind and solar power costs are steadily dropping. Meanwhile, technology is advancing rapidly.
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As we've already discussed, the global transition to renewables is inevitable. You want to invest in companies that you know are going to still be around as this industry ascends its peak.
These are some of the best renewable energy stocks to buy with this in mind.
NextEra Energy (NYSE: NEE)
NextEra has been called "America's most valuable energy firm."
The company is around 100 years old and has over 5 million customers. It generates both wind and solar power, the world's largest generator of clean energy in that department.
This company got a "best in class" ranking from S&P Global Ratings in the Environmental, Social and Governance (ESG) Evaluation.
Analysts are still expecting NextEra stock to hit $340 over 12 months. But there is no telling how high it will go if the United States switches to renewable energy faster.
Remember this name as clean energy goes further mainstream.
Sunrun Inc. (NASDAQ: RUN)
Sunrun's unique offering is a proprietary software that maximizes power savings for customers through its battery, the Sunrun Brightbox.
The battery is what homes will rely on whenever the grid struggles to keep up.
There could be plenty of hidden revenue with this stock. The company has a special leasing program that lasts 20 years - customers don't have to pay the total cost up front.
This may entice new business.
Sunrun recently completed an acquisition of Vivint Solar Inc. (NYSE: VSLR).
Vivint provides solar power systems to commercial and industrial communities around the United States.
Shares of Vivint soared over the last year, and the two companies together could be a force to reckon with.
JinkoSolar Holding Co. Ltd. (NYSE: JKS)
JinkoSolar is another company that saw absolutely hyperbolic growth in 2020, shooting up 200%.
It's the largest solar panel manufacturer in the world. And now with solar consumption set to increase, this stock may be on a perpetual incline for the foreseeable future.
This China-based solar production company also makes photovoltaic (PV) cells in-house. PV cells are otherwise known as "solar cells" and are an important component in solar panels.
The vertical integration is huge in this budding industry and sets it apart from competitors.
Shares of JKS have nearly tripled in the last year, from $22 to $64.
We can expect to watch it soar even further over the next few decades.
SolarEdge Technologies Inc. (NASDAQ: SEDG)
SolarEdge is one of the most solid pure plays in the renewable energy industry right now.
The stock shot up 177% in a 2020 buying rush, from $101 to $280. But it's likely we haven't seen the last of it.
SolarEdge is another dominant company with a vertically integrated production chain. The company supplies batteries and energy storage solutions to improve solar panel efficiency.
The company supplies advanced inverters, storage batteries, and smart monitoring platforms around the world.
Its systems have been installed in over 130 countries on five continents.
If you can afford to buy shares, this could be a long-term buy-and-hold.
Banking on Clean Energy Stocks
Now that it's not only disruptors, but established names in the energy business with other major players, we're going to see more upside from renewable energy stocks.
Growth in the coming years will be generated by actual value and not mere speculation, as we saw from the IEA report.
This will be one of the most exciting investing trends in the years to come, and you're going to start seeing more everyday investors pile into renewable energy stocks.
Stick with Money Morning to stay updated as the renewable energy market progresses.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.