The United States has made a big push toward renewable energy in the past 15 years. Say what you want about mandates and subsidies, but they’ve gone a long way in thrusting wind, solar, and biofuels into the country’s energy mix. But even with all of that nudging, renewable energy accounted for only 9% of total energy consumption in 2011.
The rise of renewables has been fascinating nonetheless. Wind generation has cruised from 6 billion kilowatthours (BBkWh) in 2000 to 140 BBkWh in 2012, while ethanol production has soared from 3 billion gallons in 2003 to more than 13 billion gallons in 2012. Despite that growth, there is plenty of market left to disrupt and plenty of opportunity for investors. Here are five of the best stocks to buy in renewable energy.
NextEra Energy, Inc. (NYSE:NEE)
NextEra Energy, Inc. (NYSE:NEE) has been a key player in boosting the country’s adoption of wind generation, with roughly 10,130 MW of capacity. It has stumped critics by turning wind power into a competitive advantage, although some of that may be tied to the controversial production tax credit. Nevertheless, wind represents 57% of the company’s 17,771 MW of total capacity — the largest proportion of any energy supplier. More than 95% of all energy generated by this green leader comes from clean or renewable sources, which include natural gas (23%) and nuclear (15%).
Only 360 MW of power comes from solar currently, but the company expects to add 900 more megawatts by the end of 2016. That is a trend that investors can expect to continue, as NextEra Energy, Inc. (NYSE:NEE) seeks to add more wind and solar for the long haul. Shares have neared an all-time high recently, but growth, profitability, and dividends remain intact.
Renewable Energy Group Inc (NASDAQ:REGI)
Don’t let the recent run-up scare you away from Renewable Energy Group Inc (NASDAQ:REGI): The company was vastly undervalued for most of its time on the market. The argument could even be made that the current share price doesn’t account for growth assets coming online in the next few years. A leader in the American biodiesel market, Renewable Energy Group Inc (NASDAQ:REGI) operates more than 225 million gallons of annual capacity, with 150 million gallons more under construction. It reached $1 billion in annual revenue for the first time in 2012.
How important is Renewable Energy Group Inc (NASDAQ:REGI) to biodiesel? The company is on pace to supply 25% of the American market in the next few years. Still, shares will probably continue to have volatile swings thanks to the inherent uncertainty with mandates, which are made at the last possible moment each year. So don’t be surprised if shares cool off soon.
SunPower Corporation (NASDAQ:SPWR)
Investors in the solar market have been taken on a wild ride in the past five years, but SunPower Corporation (NASDAQ:SPWR) shows that the trend may be reversing. The company has plenty of growth ahead of it in the residential solar market despite its torrid climb in 2013. Panel efficiency is expected to rise to 23% by 2015 — tops in the industry — while cost per watt is expected to decrease 35%, according a recent presentation (link opens a PDF). Both developments will help profitability soar.