The world’s population is growing at a little over 1% per year. That means an annual increase of approximately 82 million people, all of whom will eventually consume energy resources.
In addition, developing nations are focused on increasing the standard of living for their citizens. That means efforts are being made to bring basics like clean water and electricity to areas that are currently without such services.
These factors, combined with greater reliance on energy-heavy technology, are driving a need for larger supplies of reliable energy sources.
The biggest obstacle to increasing energy production is the impact traditional energy sources have on the environment. Conventional coal and oil power are responsible for significant disruption to the global ecosystem, and scientists agree that climate change is one of the most serious threats facing humanity in coming decades.
Investment in the development and implementation of clean energy solutions is the most promising way to meet the world’s energy demand without bringing further harm to the environment.
Many organizations are focused on creating innovative technology that harnesses renewable resources like solar, hydro, geothermal, and wind power to supply energy to consumers.
Renewable energy isn’t the only area of focus for companies developing clean energy solutions. Because conventional coal and oil are the biggest contributors to environmental damage, many organizations are exploring alternatives that are better for the environment, though perhaps not entirely renewable. Examples include nuclear power, clean coal, energy from waste, fuel cells, biofuels, and natural gas.
The clean and renewable energy industry offers exciting new opportunities for investors. However, enjoying profits associated with increased use of clean energy requires investors to purchase stock in companies most likely to make significant contributions to this field.
As with any investment, it is nearly impossible to predict a specific company’s future success with 100% accuracy, and clean energy investors face some risk.
For example, changes in the global economic and political climate can affect the profitability of businesses in any industry.
These issues have already impacted companies specializing in renewable energy. Changes in US tariff regulations increased the cost of imported solar panels. This is believed to be responsible for a 15% year-over-year drop in solar panel installations for the third quarter of 2018.
Despite the risk, all indications are that clean energy consumption will grow, making this industry a solid choice for investors. These are some of the clean energy companies that analysts are most excited about.
First Solar Energy is leading the industry when it comes to solar panel innovation.
The company has developed an exclusive technology that makes it easier and less expensive for users particularly commercial and industrial clients to make the transition to solar power. Instead of producing solar panels from the traditional material, polysilicon, First Solar Energy [NASDAQ: FSLR] uses a proprietary thin-film technology.
Though this technology does not currently match traditional solar panels when it comes to amount of energy generated, newer versions are already in development.
First Solar Energy [NASDAQ: FSLR] has a large backlog of orders, because the product is so popular. It enjoys a strong balance sheet with plenty of cash available for investment in research and growth.
Year-over-year net sales increased substantially in 2018, and the company forecasts earnings per share of $2.25 to $2.75. This is an increase over the 2018 forecast of $1.40 to $1.60 per share in 2018.
All of these factors indicate that when it comes to clean energy stocks, First Solar Energy is a compelling investment opportunity.
When measured by sheer size, NextEra Energy is the industry leader in clean energy. It is the biggest utility company in the world, both generating power and selling power to consumers. Two primary divisions fall under the NextEra Energy umbrella: Florida Power & Light and NextEra Energy Resources [NYSE: NEE].
Florida Power & Light is a major US distributor of electricity and natural gas, supplying more than 5 million Florida customers.
NextEra Energy Resources [NYSE: NEE] is a world leader in the production of solar and wind power. It operates a subsidiary, NextEra Energy Partners, which is a publicly-traded company that owns and operates assets in the clean energy space.
Analysts like NextEra Energy [NYSE: NEE] for a variety of reasons, but one of the most important is its reliable revenue stream.
The organization owns a huge number of power plants, more than two-thirds of which produce renewable wind energy. It sells the energy through long-term contracts, ensuring predictable cash flow. Investors who prefer a more diverse company are choosing to purchase stock in NextEra Energy.
TerraForm Power operates in North America and Western Europe, producing and selling power through long-term contracts.
Two-thirds of the power generated comes from renewable wind energy, and the remaining third is captured from solar energy.
TerraForm Power [NASDAQ: TERP] is particularly attractive to investors, because it prioritizes shareholder returns. Current plans are to pay between 80 and 85% of the company’s total cash flow in dividends.
At the end of 2018, this yield was 7.2%. Remaining cash will be reinvested in the organization. Projects include updating older turbines and expanding sites to increase capacity.
All of these plans make TerraForm Power attractive, particularly for investors who want to focus on renewable energy sources.