Renewable Energy

My Favorite Energy Power Play

A decade ago, governments around the world were pushing solar, wind and electric vehicle adoption. Now these technologies are being “pulled” by consumers.

Consumers increasingly want solar on their rooftops. And they want energy storage and EVs in their garages.

All this interest in clean energy has financiers and developers excited. They’re taking money from fossil fuels and putting it into greener alternatives.

But it’s not just individuals driving the clean energy megatrend. Shareholders around the world are telling corporations to lower their fossil fuel emissions too.

As a result, more commercial companies have net-zero carbon footprint goals. And they are installing on-site renewable energy or demanding it from their utilities.

Prior to renewables, electricity was generated at large, central, fossil-fuel-burning or nuclear power plants. But these are increasingly being replaced by wind and solar farms.

And all of these steps are just the beginning. This trend is going to only continue picking up speed in the years ahead.

Some Get It, Some Don’t

Playing this shift in the energy market doesn’t mean you have to swing for the fences.

Forward-thinking utility companies are great – and conservative – investments that will profit from the switch to clean energy. You just have to do your due diligence and research the companies before you invest in them.

For instance, Dominion Energy (NYSE: D) is scrambling to meet net-zero carbon mandates in the states that it serves. Its 2020 integrated resource plan includes 5.1 gigawatts of offshore wind, 16 gigawatts of solar and 2.7 gigawatts of energy storage.

And that’s for just the next 15 years. But that’s four times the renewables target it had the year before.

And Duke Energy Corp. (NYSE: DUK) plans to double its renewable generation to 16 gigawatts by 2025. In addition, it plans to retire all of its coal-fired generation by 2030.

On the other hand, there’s Southern Company (NYSE: SO). Its goal is to provide carbon-free energy generation by 2050.

It already has 12% renewable energy and 17% nuclear energy in its generation portfolio. However, 65% of Southern Company’s generation is still via coal and natural gas.

And it has no plans to close any of its coal plants. In fact, it even plans to add new natural gas generation.

That’s in direct conflict with its 2050 goal. And it could negatively impact investment returns in the long run.

If you want to play this megatrend, investing in utilities could lead you to safe gains. But you still need to be careful about the companies you buy.

And my favorite “power play” that profits from the switch to renewables is a bit outside the box…

Microgrids Are Coming

Renewables are distributed energy resources by nature. And the giant power grids here in the U.S. are slowly being replaced by smaller, renewable energy-powered microgrids.

A small microgrid might power a single neighborhood. A larger one might power a small town.

They take just months to install. And they’re far more reliable than the fossil fuel plants they replace.

Solar, wind and energy storage are driving the switch to microgrids. And investors who get in on this movement before the change could be richly rewarded… and they can do so by investing in companies that are manufacturing microgrids.

Why should investors get in now?

For one thing, the cost of renewables keeps dropping. It is now less than the costs of fossil fuel and nuclear power.

And technology continues to improve. For example, the solar panels I installed last year are 28% more efficient than the ones I installed in 2012. They were also cheaper.

New advances in thin-film solar are next. These will open up an entire new segment of the solar market. Imagine windows, siding and roof shingles as solar panels!

And storing the electricity that they produce for later use is now a reality.

Today’s batteries use expensive lithium-ion chemistry, but cheaper batteries are on the horizon due to technological advances and mass production kicking in.

Since 1991, the cost of making batteries for EVs and energy storage has dropped 97%. And prices will fall even further as volumes increase.

I’ve mentioned just a few of the segments of the clean energy megatrend. The good news is that it’s still early for investors who want to capitalize on this.

Make sure clean energy companies – including clean power companies, like certain utilities and microgrid manufacturers – are represented in your portfolio.

Good investing,

Dave

P.S. To read my other articles about renewable energy, click here.

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