Clean energy stocks could provide one of the biggest investment opportunities in our lifetime. Wind, solar, hydrogen, and other clean energy technologies are upending the multitrillion-dollar energy industry, and the transition is happening more quickly than you realize.
In 2011, renewable energy (excluding hydro) provided 4.7% of the electricity generated in the U.S. But that will nearly triple in about a decade to 14.3% of supply in 2021. And with coal in retreat and the cost of wind and solar coming down, the opportunity is opening up for more growth for companies bringing clean energy to the market. If you're getting into clean energy stocks today, Brookfield Renewable Partners (BEP 2.34%), SunPower (SPWR 6.17%), and Bloom Energy (BE 10.35%) are three of the top stocks to buy.
The finances behind clean energy
One of the critical pieces of any clean energy project is financing. Wind, solar, hydrogen, and energy storage projects have large up-front expenses and then generate a return over decades. So, getting financing for projects is key to any clean energy being deployed. And that's where Brookfield Renewable Partners comes in.
The company owns 20,000 megawatts (MW) of renewable power plants all over the world, with 66% of the portfolio being hydroelectric power plants. The remaining -- and growing -- portion of the portfolio is wind, solar, and some energy storage projects.
With the money generated from these plants, Brookfield Renewable Partners pays a dividend that yields 4.8% today, and management aims to grow that payout 5% to 9% each year through organic cash flow growth and new project development. In total, management's goal is to generate returns of 12% to 15% each year through dividend growth and share appreciation.
Owning clean energy projects for decades and just collecting cash flows may not seem like an exciting investment, but it's a lucrative one, and that's why it's a great way to start investing in clean energy stocks.
Making solar energy accessible
SunPower used to be known as a manufacturer of high-efficiency solar panels, but it has changed dramatically over the last few years. It spun off the manufacturing business into Maxeon Technologies (MAXN 10.86%) last year and is now focused on building technology to deploy, monitor, and control energy in homes and businesses.
On the deployment side, it builds the software for bidding and selling rooftop solar to consumers and puts together hardware packages as well, including Maxeon solar panels. Then local dealers do the installation work and act as the "last mile" of distribution.
Where SunPower is putting its focus today is spreading that reach deeper into homes and businesses through energy storage and overall energy management. Energy storage in homes and commercial buildings can give customers control over when they are consuming energy from the grid and when they're providing the grid with electricity. This means customers can not only provide their own backup, but they can also provide revenue-generating services to the grid. And SunPower will be at the center of that business, building virtual power plants with tens of thousands of energy storage installations across the country. That could be a truly revolutionary business long-term.
Building a hydrogen future
Bloom Energy has just started its journey building the hydrogen economy of the future. The company makes fuel cells that are currently used as backup power for utilities or commercial buildings, but that's just the start. It is now transitioning to hydrogen-powered fuel cells, from primarily natural gas, and aiming to use clean hydrogen that it makes with its own electrolyzer that splits water molecules into hydrogen and oxygen.
The company has already proven that it can continually lower the cost of fuel cells and is now cost-competitive with other energy sources for backup at commercial buildings. The next step will be making an electrolyzer cheap enough that it can produce hydrogen from wind or solar power and then consume that hydrogen on demand at an all-in cost that's comparable with electricity from the grid. If it can do that, this company has a multitrillion-dollar market to tap and could be one of the top performing stocks of the next decade.
Clean energy is the future
It's always important to have tailwinds behind you in investing. Clean energy is clearly one of the industries that has heavy tailwinds, and Brookfield Renewable Partners, SunPower, and Bloom Energy could all be massive winners as the industry grows.