Renewable energy has been gradually replacing coal as the preferred choice of energy source for electricity generation across the globe, with the United States playing a key role. Per the latest report by the U.S. Energy Information Administration (EIA), U.S. annual energy consumption from renewable sources exceeded coal consumption for the first time in 2019 since 1885. Notably, coal consumption in the United States decreased nearly 15% while total renewable energy consumption grew 1% from the prior-year’s figures.
Consequently, U.S. alternative energy stocks outperformed the broader market. Impressively, iShares Global Clean Energy ETF (ICLN), of which U.S.-based stocks comprise almost 37%, has gained a solid 22.5% in the past year, while the S&P 500 Index increased 10.6%.
What Led to Increased Consumption?
Overuse of fossil fuels, which emit hazardous carbon dioxide, over the years has expedited the process of climate change. However, in the last decade, realization of the need for a cleaner energy environment has rapidly increased the adoption of alternative energy sources.
Consequently, the global renewable energy sector has been witnessing massive growth in the past few years, with the United States being one of the forerunners.
Solar and wind energy have been dominating the U.S. renewable space, as a source of electricity generation, over the past couple of years. In fact, EIA’s January 2020 report projected that wind will lead 2020 electric generation capacity in the nation.
Factors like extension of the Production Tax Credit (PTC) and the federal Investment Tax Credit (ITC) for offshore wind energy have been bolstering adoption of wind energy in the United States. Moreover, a steady decline in levelized cost of wind energy over the past couple of years, thanks to decline in price of U.S. wind turbines, increase in turbine heights and improved capacity factors, have been boosting wind installations.
Also, given the rapidly plummeting prices of solar modules and panels, the cost of producing solar power has declined rapidly over the last decade in the United States. Moreover, oversupply of power in the grids has led to a boom in the solar power storage market.
In addition to these factors, technological advancements along with grid developments have made the U.S. renewable sector an attractive investment target for big corporate houses, apart from utility providers. Evidently, an investment of $55.5 billion was made in the sector last year, an increase of 28%, second only to China and beating Europe, according to research by BloombergNEF.
All these factors have made it possible for total renewable energy consumption in the United States to grow for the fourth year in a row to a record-high of 11.5 quadrillion Btu in 2019.
Stocks to Gain
The growth in U.S. renewable energy since 2015 can almost be entirely attributed to the use of wind and solar in the electric power sector. Expecting a similar trend to continue in the near term as well, we have mentioned some stocks that are focused on expanding their solar and wind energy portfolio in the United States and thus should be part of an investors’ watchlist.
General Electric Company’s GE renewable energy unit is one of the world's leading wind turbine suppliers, with over 42,000 units installed across the globe. GE Renewable Energy was recognized by American Wind Energy Association (AWEA) as the top manufacturer of wind turbines in the United States in 2018, supplying more than 3 GW of capacity, or 40% of the total onshore wind energy installed nationwide in 2018. Last year, the company secured more than 2 GW in onshore wind orders in North America through May 2019. It carries a Zacks Rank #3 (Hold).
Vestas Wind Systems VWDRY designs, manufactures, installs and services wind turbines across the globe. It has more than 113 GW of wind turbines in 81 countries. The company’s deliveries in the Americas region amounted to 1,092 MW during first-quarter 2020 compared with991 MW in the first quarter of 2019. It carries a Zacks Rank #3.
Since the beginning of commercial shipments in 2010, solar inverter manufacturer SolarEdge Technologies SEDG has shipped more than16.2 GW of its DC optimized inverter systems and its products have been installed in solar PV systems in 133 countries. Notably its U.S. solar revenues grew a solid 60.3% year over year to $246 million in first- quarter 2020. It carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enphase Energy ENPH revolutionized the U.S. solar industry by pioneering a semiconductor-based microinverter, which converts energy at the individual solar module level. In December 2019, Wood Mackenzie announced that SolarEdge and Enphase control about 80% of the U.S. residential solar inverter market. It carries a Zacks Rank #2 (Buy).
First Solar FSLR designs, manufactures, and sells solar electric power modules. The United States accounted for 87% of its sales in 2019.After facing a few challenges in October 2019, the company announced that that it has reclaimed its position as the largest solar panel manufacturer in the United States, with the early opening of its second factory in Ohio. It carries a Zacks Rank #3.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
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