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Clean Energy Fuels Is One Renewable Energy Stock to Watch

By Howard Smith - Sep 3, 2020 at 11:29AM

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There's much speculation on battery-electric and hydrogen fuel cell commercial vehicles, but there's already a clean-burning fuel network using renewable natural gas.

When investors hear the terms "renewable energy" and "trucking" together, they are likely to immediately think of Tesla (NASDAQ: TSLA) or Nikola (NASDAQ: NKLA). Both aim to manufacture clean-energy semi trucks in the next couple of years. 

But there's another angle if an investor wants to be a part of cleaning up the emissions of the trucking industry. Clean Energy Fuels (CLNE 4.68%) is already supplying fleets of commercial trucks that run on fuel with significantly lower greenhouse gas emissions, and investors can be a part of that growing segment.

Clean Energy Fuels renewables logo

Image source: Clean Energy Fuels.

Growing renewable volume

Clean Energy Fuels operates a network of about 550 natural gas fueling stations across the U.S. and Canada. The fueling stations supply the transportation market with compressed natural gas (CNG) or liquified natural gas (LNG). The company also transports bulk CNG and LNG to non-transportation customers.

A growing volume of the natural gas supply is from renewable natural gas (RNG), which is made from methane derived from the breakdown of organic waste. The product, which the company branded Redeem, is made from organic waste collected from farms, landfills, and wastewater treatment plants. Clean Energy is supplying a growing volume of Redeem to fuel natural-gas fleets, including heavy-duty commercial trucks, waste disposal trucks, airport shuttles, and buses. Since Redeem was introduced in 2013, the total volume has grown by 1,000%. 

Metric 2019 2017 2015 2013
Redeem volume (in millions of gallons) 143 78.5 50 13

Data source: Clean Energy Fuels

Big energy takes notice

The growth in a fuel that reduces greenhouse gas emissions by up to 70% compared with diesel or gasoline has gotten noticed by big energy companies looking to become greener. In 2018, energy giant Total (TTE 2.46%) became Clean Energy's largest shareholder with a 25% stake in the company. The partnership launched a financing program called Zero Now that entices customers to purchase new natural gas heavy-duty trucks for the same cost as diesel trucks or less. 

Clean Energy also has partnerships with BP (BP 3.22%) and Chevron (CVX 2.44%). In 2017, BP and Clean Energy announced that BP would buy the upstream RNG production facilities from Clean Energy for $155 million. In return, Clean Energy has a long-term supply contract for Redeem, allowing it to focus on growing its network of fueling stations and its customer base. The agreement was expanded a year later to allow for increased volume of RNG supply, as demand from customer fleets grew. 

In July 2020, Clean Energy and Chevron announced an initiative to supply trucks that serve the California ports of Long Beach and Los Angeles. Clean Energy will operate the fueling stations while Chevron will supply the RNG, and help subsidize port truck operators for new purchases of RNG-powered trucks. 

Fleets are turning green

Many well-known shippers and fleet operators are turning to natural gas, including Anhueser-Busch, UPS, Pepsi and FedEx. One of the largest conversions is in the waste-collection sector. 

Clean Energy says it has 60% of the market share in the natural gas waste-collection truck market, which is now 10% of the total 2 billion gallons of fuel used in that industry. One recent agreement with Republic Services (RSG -0.80%) will add almost 130 new fueling spots in the Las Vegas and Chula Vista, California, areas. 

Investing in sustainability

Almost every public company has begun a sustainability initiative of some kind. One of the common points is addressing climate change. Republic Services' goal is to reduce both direct and indirect greenhouse gas emissions by 35% by 2030, from a 2017 baseline. Last year, Amazon co-founded The Climate Pledge, where it committed to be net zero carbon across its entire business by 2040. 

There will be many avenues to achieve these goals. Some are still being developed, such as Nikola's plans to have a network of hydrogen fuel cell stations. Natural gas fueling is available now, however. And RNG is a fuel source with negative greenhouse gas emissions, since it's sourced from the breakdown of organic waste. Investors looking for a growing renewable energy source should consider RNG leader Clean Energy Fuels.

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, FedEx, and Tesla. The Motley Fool recommends Anheuser-Busch InBev NV and Clean Energy Fuels and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Clean Energy Fuels Corp. Stock Quote
Clean Energy Fuels Corp.
CLNE
$8.27 (4.68%) $0.37
Chevron Corporation Stock Quote
Chevron Corporation
CVX
$159.62 (2.44%) $3.80
BP p.l.c. Stock Quote
BP p.l.c.
BP
$31.42 (3.22%) $0.98
TotalEnergies Stock Quote
TotalEnergies
TTE
$53.73 (2.46%) $1.29
Republic Services, Inc. Stock Quote
Republic Services, Inc.
RSG
$141.80 (-0.80%) $-1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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