When it comes to renewable energy stocks, investors are spoilt for choice. Companies worldwide are trying to capitalise on the conversation around climate change and raise money from investors when the demand for green investments is surging.
There are both benefits and drawbacks of this environment for investors. On the one hand, there are plenty of options to choose from in the green energy space. But on the other, the ever-growing range of options can be challenging to navigate.
What’s more, a large number of companies are developing experimental technology. This tech could be revolutionary, or it could fail. As such, these enterprises may not be suitable for all investors.
Still, I am incredibly excited by some of the work going on in the hydrogen space. That is why AFC Energy (LSE: AFC) is one of my favourite renewable energy stocks. I would be happy to invest £5,000 in this company right now.
Renewable energy stocks to buy
Analysts and scientists believe hydrogen is one of the most promising alternatives to hydrocarbon fuels. Electric vehicles are the perfect solution to replace petrol and diesel vehicles in towns and cities. But outside major population centres, getting the infrastructure in place to charge these vehicles is challenging, especially in the developing world.
The challenge is making hydrogen in the first place. There are two types of hydrogen, blue and green. Blue hydrogen is derived from methane in natural gas, a highly carbon-intensive process, and some research shows could be worse than burning coal.
Green hydrogen is made using green, renewable energy. This is the holy grail of clean energy production. Unfortunately, the current green hydrogen market is minuscule. It was valued at $0.3bn in 2020.
AFC is working to change that. The company is the leading provider of alkaline fuel cell systems for the generation of clean energy. This means the corporation is developing and manufacturing the technology to produce clean, green hydrogen.
Flagship product
Its flagship product is a fuel cell system currently being used in the Extreme E racing series. The vehicles taking part are all-electric and compete by racing around off-road circuits.
AFC’s system is able to produce hydrogen using solar energy. It then stores this resource and uses it to charge the racing vehicles’ batteries when needed. The technology is incredibly impressive and shows what can be done with hydrogen.
It also opens the door for the group to take on the green hydrogen market and provide specialist systems for companies and operators that want to lower their carbon footprint.
Despite its potential, I should point out that AFC is an incredibly speculative investment. The company is not yet profitable, and it is operating in a highly competitive market against bigger, deeper-pocketed competitors. These competitors may be able to move faster than the smaller firm and grab market share.
Even after taking these risks into account, this remains one of my favourite renewable energy stocks. That is why I would invest £5,000 in the group today.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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