The current energy price crisis has only enhanced the case for renewable energy. The prices of gas, oil and coal around the world have exploded over the past few months, as countries have tried to outbid each other to gain access to limited supplies of these resources.
The UK isn’t suffering as much as China and India, which rely heavily on coal power plants to produce their electricity. These countries are both having to ration power to manage the situation.
Here in the UK, heavy investments in renewable energies, such as wind, are helping insulate the market from the worst.
As such, it seems likely that governments and companies worldwide will try to accelerate renewable energy investment over the next few years to increase energy independence. With that in mind, here are the organisations I believe are the best renewable energy stocks to buy now to take advantage of this trend.
Renewable energy stocks for growth
Rather than focusing purely on wind and solar businesses, I’d buy companies in all stages of the green energy value chain.
This includes companies like XP Power, which produces electric transformers and power converters. As the world moves away from hydrocarbon energy, it will have to invest trillions in developing the global electricity grid. Corporations like XP will play an essential part in this.
The group’s already reporting increasing demand from renewable energy customers, and I think this trend will continue. However, it doesn’t have the exclusive rights to produce all of the world’s transformers. So competition will be a significant issue.
A growing electricity grid will require copper and, with that in mind, I’d buy Antofagasta. As one of the world’s largest copper miners, the organisation’s one of the best ways to bet on rising copper prices.
However, the enterprise may not be suitable for all investors. Commodity prices can be incredibly volatile, and mining groups tend to have poor ESG credentials.
Green energy
As well as the company’s outlined above, I’d also buy renewable energy stocks SSE and Greencoat Wind for my portfolio. These are renewable energy producers and some of the largest green energy producers listed on the London market.
Both have significant growth plans, with SSE looking to invest billions over the next few years to increase its renewable energy generation. Meanwhile, Greencoat is always on the hunt for new wind farms to add to its broad portfolio. As cash floods into the renewable energy sector, I think the group will continue to find deals.
Challenges these companies may face include fighting over renewable energy assets as more money flows into the sector. This could push up prices for buyers and reduce returns. That would ultimately have an impact on investor returns.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind and XP Power. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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