The Zacks Alternative Energy industry can be fundamentally segregated into two sets of companies. While one group is involved in the generation and distribution of alternative energy and electricity from sources like wind, natural gas, biofuel, hydro and geothermal, the other set is engaged in development, design and installation of renewable projects involving these alternative energy sources.
The industry also includes a handful of stocks that offer fuel cell energy solutions, which have gained popularity as an affordable clean energy of late.
Per the latest Global Trends in Renewable Energy Investment report, 2017 marked the eighth year in a row in which global investment in renewables exceeded $200 billion. Since 2004, the world has invested $2.9 trillion in green energy sources.
Here are the industry’s three major themes:
- Among alternative energy sources, wind energy has made commendable progress in the United States lately. Per American Wind Energy Association’s latest report, the U.S. wind industry added 7,588 megawatts (MW) in 2018 and another 841 MW in the first quarter of 2019. U.S. wind power has more than tripled over the past decade and is the largest source of renewable generating capacity in the nation currently. With increased focus of energy developers on large-scale off-shore wind projects, the recent tax credit extension bills introduced by the U.S. Senate should bode well for growth of the U.S. wind space. With projections that wind power is slated to surpass hydropower as the U.S. grid’s largest source of renewable electricity in 2019, the outlook for the alternative energy industry seems favorable.
- The outlook for the alternative energy industry is also encouraging as utilities and corporations are increasingly shifting to renewables. This shift can be attributed to lower cost of generating electricity from alternative energy sources and storing the same, thanks to rapid technological advancements. Per International Renewable Energy Agency, cost of all commercially available renewable power generation technologies declined in 2018. By 2020, onshore wind is projected to be a less expensive source of new electricity than the cheapest fossil fuel alternative. This indicates that alternative energy sources can be profitable for industry players. Thus, stocks in this industry should remain prudent choices for investors.
- Per a report by S&P Global Platts, with U.S. states increasingly adopting favorable renewable portfolio standards, existing technologies are not adequate to support their ambitious 100% clean energy goals. In particular, the stakes are high when it comes to transmission costs. Per a report by Wood Mackenzie, the United States currently has about 200,000 miles of high-voltage transmission (HVT) and achieving 100% renewables will require doubling of these transmission lines. The addition of 200,000 miles of new HVT will add $700 billion to the total price of grid decarbonization, excluding the cost of materials.
