There’s no shortage of top-quality renewable energy stocks for me to buy right now. And I think Invinity Energy Systems (LSE: IES) could be one of the best UK shares to play the green energy boom.
This particular company doesn’t actually produce power from renewable sources. But the energy storage technology it creates allows a constant source of electricity from intermittent sources like wind and solar.
Its technology is therefore essential for the widespread adoption of renewables. Our need for power doesn’t change according to whether the sun is shining or the wind is blowing. Invinity’s vanadium-based batteries allows producers to store, regulate and release electricity when conditions aren’t favourable for producing energy.
The bear case
Vanadium batteries aren’t the only way that renewable energy can be stored. Lithium-ion energy storage is also highly popular and this poses a threat to Invinity’s profits potential.
It’s important to note too that Invinity is yet to turn a profit. And City analysts don’t think the business will move into the black until 2023 at the earliest. Any delays on this front could prove disastrous for the tech firm’s share price, and particularly if it means extra additional shares are issued to fund its work.
The bull case
Still, I’m highly encouraged by recent news flow that suggests Invinity’s route to profit remains on track. A few weeks ago, it successfully installed and energised the first part of the so-called Energy Superhub Oxford project’s flow battery. The battery will be the UK’s largest flow battery with a capacity of 5MW when finished. Completion is expected by the close of the year.
The company’s sales pipeline continues to grow strongly and, as of mid-September, was up 18% from levels recorded since mid-May. As brokers at Canaccord noted, the pipeline is also double the levels reported since redT and Avalon merged to create Invinity Energy Systems in March 2020.
My verdict on this renewable stock
Like any UK share, Invinity carries its share of risk. Development problems can arise at any moment and competition in the energy market is huge and likely to keep growing.
That said, I think there’s a lot to like about this particular renewable energy stock. Project execution has so far been impressive, and customer interest in Invinity’s energy storage systems is growing rapidly. Analyst research suggests that the vanadium battery market will keep expanding quickly too. Analysts at Researchandmarkets.com think the vanadium redox battery market will be worth $4.8bn by 2027, up from just $235m last year.
Vanadium flow batteries have a longer life, are cheaper over the cost of the project, and are found to be safer than lithium-based equivalents. This is what could give Invinity the edge against its rivals offering non-vanadium technology and pave the way to explosive profits growth.
I think this renewable stock could help me make some sparkling returns in the coming years.
Royston Wild 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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