Renewable energy as an asset class is booming around the world, as wind and solar power plants become more competitive against fossil fuels. But renewable-energy stocks haven’t been guaranteed winners because cost pressure has hampered investment returns.
Given the competitive landscape, three of our Foolish contributors scoured the industry for their best renewable-energy stock picks. And Bloom Energy (NYSE:BE), NextEra Energy (NYSE:NEE), and Clean Energy Fuels (NASDAQ:CLNE) made it to the top of the list — for very different reasons.
Travis Hoium (Bloom Energy): If renewable energy is going to be a mainstay on the grid, there needs to be a way to store energy made by solar and wind farms for later use. I’m not talking about a battery that charges during the day and discharges at night. I’m talking about a solar power plant in the Mojave Desert generating extremely low-cost summer electricity that can be stored and used in the Midwest or Northeast in winter months when demand rises and solar production is low. Bloom Energy may have cracked the code on this energy storage.
Bloom Energy recently announced a solid oxide electrolyzer that will convert electricity and water into hydrogen fuel, which is usable in electricity-generating fuel cells. This could make hydrogen a viable fuel for shipping, long-haul trucking, and even grid applications. It’s even possible that hydrogen fuel could be pumped around the country using pipelines, much like oil and natural gas is transported around the country.
Bloom Energy isn’t yet profitable, but it has the chance to upend fossil fuel energy as we know it. And that’s worth buying a starter position in this disruptive renewable-energy stock.
Not just a utility
Howard Smith (NextEra Energy): NextEra Energy is a Florida-based company that owns Florida Power & Light, the largest regulated electric utility in the U.S. by retail megawatt-hour sales, as well as Gulf Power, which serves the northwest part of the state. Its other subsidiary is NextEra Energy Resources. This segment, along with its affiliates, is the world’s largest generator of wind and solar power, and invests in battery storage.
NextEra estimates it can provide investors an annual total return of 10% to 12% through 2022 with earnings growth and dividends, in large part due to growth in the renewables segment. It estimates growth in the wind and solar market will average about 15% annually through 2022. The additional returns from NextEra Energy Resources have helped create a track record of earnings-per-share (EPS) and market capitalization notably higher than more traditional utilities like Consolidated Edison (NYSE:ED), Duke Energy (NYSE: DUK), and Dominion Energy (NYSE:D):