Renewable energy stocks to invest in the medium term



Solar and wind stocks appear to be attractive long-term assets. However, investors need to understand the medium-term prospects – for the next 3-5 years, take into account the nuances and be prepared for the instability of the movement of the shares of these companies.

Renewable energy stocks saw a new surge after Joe Biden won the election as the 46th President of the United States announced his intentions to support and invest in the industry in his program.

Today, solar and wind power in the United States is in a better position than combined cycle power plants (gas and steam turbines), in part because of tax incentives.

On March 31, the White House released a major new stimulus package through infrastructure investment called the American Employment Plan, worth about $ 2 trillion, which provides for hundreds of billions of dollars to upgrade power grids.

Investors looking to take advantage of the favorable conditions for investing in renewable energy stocks should consider the following:

  • Biden’s infrastructure plan not yet approved and it is not known exactly what size the benefits and subsidies will be for these companies.

  • Nonetheless, the long-term outlook is strong given the US Energy Information Administration (EIA) forecasts that renewables will become more economically viable over timethan traditional energy sources, even without tax breaks.

  • Leading wind power companies Siemens Gamesa, Vestas and General Electric (GE) predict that in the medium term the number of onshore wind turbines will grow either at a stable or rather weak rate

  • The growth rate of the number of offshore wind turbines from 2021 to 2025 should accelerate.

  • Investors should be aware that while the average cost of generating renewable energy is lower, it may not always be the best solution – it is very important to take into account the peculiarities of the geographical area

  • Experts point out that gas turbines should not be “written off”as they will remain the main element of global electricity production, they are attractive because of the low gas prices.

Examples of investments in renewable energy stocks

Investors deciding to invest their money in the renewable energy industry must be prepared for temporary downturns due to changing market conditions.

For example, the shares of the manufacturer of wind blades TPI Composites (TPIC) fell sharply in February this year due to “short-term” problems with overcapacity in the industry. The management of the company said that by the end of 2021, TPI’s production lines will operate at a lower utilization.

Analysts have advised TPI investors to refrain from buying these shares pending news of renewals or new long-term supply agreements in 2021 with major wind turbine manufacturers.

Industrial and structural materials manufacturer Hexcel (HXL) fell sharply in February-March 2020 but has recovered half of its losses since then.

General Electric and Siemens Energy stocks are good investment choices

Analysts say GE and Siemens Energy shares are good choices, pointing to the potential for profit growth due to their expansion in the renewable energy sector, as well as their continued position as leading players in the gas turbine and combined cycle plant market. GE and Siemens Energy are expected to achieve profit growth at the level of Vestas, a leader in the wind power industry.

Forecasts indicate that GE will increase its wind power business revenues to $ 3 billion by 2024. Siemens Energy, in turn, expects to significantly increase profits by 2023 – both in the gas and energy business.

So while the medium-term outlook for renewables is mixed, they have a bright future, so investors will just need to be patient.

Libertex [CPS] WW

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