As countries accelerate their respective energy transitions, they’ll continue to shift away from fossil fuels to alternative and renewable sources. Here is a collection of stocks poised to benefit from rising demand for solar, wind and nuclear energy.
- Enphase is ramping up its domestic manufacturing output in the US, opening three new facilities at the end of August.
- Vestas has secured contracts for the supply, delivery and commissioning of turbines for two wind farms in Germany.
- Chubu Electric Power is to acquire a stake in NuScale, which builds small modular reactors for nuclear energy.
Enphase Energy
The US Supply Chain Stock
Enphase Energy [ENPH] is the world’s leading supplier of microinverter-based solar and battery systems. Though its microinverters are generally made and assembled in China, India and Mexico, the company is expanding its US footprint.
At the end of August, the company started shipping its IQ microinverters from a US facility in Texas. The plan is to invest $60m to establish three new manufacturing lines across the US, creating 1,800 jobs and boosting domestic clean energy supply chains, on top of delivering power to over one million homes annually. Production at its inaugural facility in South Carolina kicked off in July, with an opening ceremony attended by President Joe Biden, who hailed Enphase in a speech.
“This generates income. It generates growth…Our plan is working. And one of the things I’m proudest of is that it’s working everywhere”, declared Biden, referring to how his economic agenda is encouraging investment in the US clean energy industry.
Vestas
The Wind Turbine Stock
Vestas [VWS.CO] announced on 1 September that it has secured two contracts for the supply, delivery and commissioning of turbines for two wind farms in Germany, totalling 96MW. The Danish manufacturer will also service the wind turbines, to optimise the lifespan of the assets.
When reporting second quarter (Q2) 2023 earnings in August, Vestas warned that a backlog of wind turbine orders will likely lead to increased costs, which will weigh on full-year earnings. The backlog as of the end of June had a value of €20bn, up from €18.9bn the year before. The number of turbines produced and shipped in the quarter fell from 947 in Q2 2022 to 782. “Although supply chain disruptions are easing off, we expect disruptions to continue throughout the second half of the year,” said Vestas CEO Henrik Andersen on the earnings call.
The company could be set to face more near-term headwinds from Ørsted [ORSTED.CO] writing down its US offshore wind portfolio, according to Sydbank analyst Jacob Pedersen in a note to clients seen by renewable energy news website Recharge.
Chubu Electric Power
The Nuclear Reactor Stock
Chubu Electric Power [9502.T] announced in early September that it has agreed to invest in NuScale Power [SMR], a US firm that builds small modular reactors (SMRs) to help meet nuclear energy demand needs.
“It is important to secure all options for the sustainable use of nuclear power generation, which is indispensable for realising a decarbonised society,” Hiroki Sato, Division CEO of Global Business Division at Chubu, said in a statement. The partnership with NuScale could potentially see SMRs deployed in Japan in the future.
While the size of the stake Chubu Electric has acquired hasn’t been disclosed, the Japanese utilities provider could end up being a major beneficiary of the Japanese government’s plans to once again embrace nuclear power. In 2022, the country announced it would restart nine reactors by the end of the year, with another seven coming online by this summer, notes the World Nuclear Association.
Another Way to Invest in Clean Energy
The iShares Global Clean Energy ETF
ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.
The iShares Global Clean Energy ETF [ICLN] holds Chubu Electric, Enphase and Vestas among its top 10 holdings as of 8 September. Renewable electricity accounts for 22% of the portfolio, with electric utilities taking a 21.4% share. Independent power producers and energy traders had a marginal 0.9%. The fund is down 32.2% in the past year through 7 September and down 18.9% in the past six months.
The ALPS Clean Energy ETF [ACES], which currently holds Enphase, has allocated 31% of its portfolio to electric vehicles, 23.9% to solar energy and 15.5% to wind energy. Bioenergy, geothermal energy geothermal, hydrogen, and energy management and storage all have weightings of under 10.5%. The fund is down 38.5% in the past year and down 9.6% in the past six months.
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