Renewable energy stocks have had another strong year in 2021, but the gains haven't been as widespread as a year ago. Companies have needed to impress investors with strong growth and improving margins, which haven't always been easy in a supply-constrained environment. 

Three stocks that have beaten the market this year are Enphase Energy (NASDAQ:ENPH), BYD (OTC:BYDDY), and Equinor (NYSE:EQNR). Three of our contributors took a look at why they've done so well and what their prospects may be as renewable energy grows. 

Home with a large solar installation.

Image source: Getty Images.

The brains of solar energy

Travis Hoium (Enphase Energy): The stock performance of Enphase Energy in 2021 has been driven primarily by the market's reaction to third-quarter 2021 financial results, which were outstanding. Revenue more than doubled from a year ago to $351.5 million, and non-GAAP net income jumped from $41.8 million a year ago to $84.2 million. 

Enphase has clearly carved out a great niche for itself in the middle of the residential solar market. It doesn't make solar panels that generate power and isn't the installer of solar projects, but it's a critical supplier to the market. The business started with microinverters that provided module-level power electronics for each solar panel on a roof, and now includes energy storage and monitoring solutions for homeowners and small businesses. 

The reason Enphase stock has jumped 53% this year and an incredible 5,340% over the past three years is that it's one of the most scalable businesses in solar energy. The company is a global supplier that can work with any solar panel manufacturer and any solar installer. There has also been a shift, driven by regulations, toward module-level power electronics to make rooftop solar projects safer, which has driven demand. 

As the solar industry has unwound vertically integrated companies, the niche suppliers with differentiated products have been the biggest winners. Enphase Energy is a great example of that, and it's beating the market once again in 2021. 

Cars, buses, batteries, and more 

Howard Smith (BYD): Most people looking at electric vehicle (EV) sales in the world's largest auto market think about Nio (NYSE:NIO), XPeng (NYSE:XPEV), or even Tesla's (NASDAQ:TSLA) Shanghai facility's production. But the less well-known BYD -- which stands for Build Your Dreams -- is the largest new energy vehicle (NEV) maker in China. And shareholders that have owned BYD's American depositary receipts (ADRs) in 2021 have recorded 50% gains, nearly double the return of the S&P 500 index. 

While Nio and XPeng continue to ramp up EV production at rates near 10,000 per month, Tesla sold more than 54,000 EVs made at its China plant in October 2021. But BYD, which Warren Buffett has owned in Berkshire Hathaway's portfolio since 2008, sold more than 80,000 NEVs in October (NEVs include battery electric, plug-in hybrid electric, and fuel cell electric vehicles). That was a jump of more than 260% year over year for BYD. 

BYD Dolphin electric subcompact cars.

The BYD Dolphin entry-level subcompact starts at about $15,000. Image source: BYD.

And BYD isn't just an electric car maker. In addition to traditional fossil fuel powered cars, the company manufactures electric buses, and the batteries and control technologies that power its EVs. BYD has over 50,000 electric buses on the road globally, including more than 1,000 in the U.S. The company manufactures electric buses in the U.S. at a plant in California. 

It also makes its own batteries at the world's largest iron-phosphate battery factory, and offers modular energy storage systems. In the third-quarter period ended September 2021, BYD reported revenue that increased 22% compared to the prior-year period. And unlike its Chinese competitors, BYD is a profitable company. BYD is one electric mobility and energy company that not only brings investors profits, it also has been crushing the market this year. 

Equinor couldn't have scripted a better 2021

Daniel Foelber (Equinor): 2021 has been just about perfect for Norwegian energy giant Equinor. High oil and gas prices are expanding the company's margins, allowing it to generate more free cash flow (FCF), raise its dividend, buy back shares, and shore up its balance sheet.

The company's master plan is to scale back oil and gas spending over time by allocating more and more capital toward renewable energy -- specifically offshore wind energy. Although Equinor is looking to become a leading operator in offshore wind energy, its megaprojects will take years to complete. In the meantime, it's relying on the short- to medium-term upside of oil and gas.

Despite a challenging 2020 where oil and gas prices plummeted, Equinor stock was down less than 20% while its integrated oil major peers were down anywhere from 24% to 46%. So far in 2021, Equinor continues to outperform its peers.

EQNR Chart

EQNR data by YCharts

The beauty of Equinor's business is that its low spending and entrenched position in offshore oil and gas exploration and production in the North Sea allows it to achieve some of the lowest breakeven prices in the business. Having a low breakeven price means that Equinor makes more money when oil and gas boom. More importantly, it gives Equinor a wide moat so that when oil and gas prices fall, it's likely to still be able to generate positive FCF. 

Equinor's Q3 2021 results were nothing short of incredible. The company generated its highest quarterly revenue and FCF in five years while posting impressive net income. With a dividend yield of 2.7%, a healthy oil and gas business, and a committed renewable energy business, there are few energy stocks that are as well rounded as Equinor. 

Tailwinds to ride

Each of these stocks are riding long-term tailwinds in energy and that could continue for a decade. Outperformance of the market like we've seen in 2021 isn't guaranteed, but winners generally keep winning and that bodes well for these stocks long term. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.