Renewable Energy Stocks Will Soar as Production Costs Drop
Something that Paul Mampilly and I discuss frequently when we talk about investments is the emergence of “new world” companies.
These are the disruptors — the companies that not only thrive in their industry, but also transform the way we live.
The example that I brought up recently was Amazon, which has essentially become the poster boy for disruptors.
In the “old world,” we didn’t have a choice on how to buy everyday things. Everything was bought in a physical store.
But thanks to Amazon, there’s been a shift to e-shopping.
This saves time and money, and it also means not having to make more than one stop.
Just about everything can be bought in one place, things are rarely sold out and you can complete a transaction from start to finish in about 10 seconds.
Now, a similar revolution is taking place in how we power our homes.
A Tangible Shift in How We Get Our Energy
The old world primarily used coal to generate electricity. However, that’s quickly being disrupted by renewable energy like solar and wind.
Coal was responsible for generating about 45% of the electricity in the United States back in 2010. That number dropped to about 28% in 2018, and two years from now it’s expected to be 24%.
As the use of coal continues to drop, solar and wind are soaring. Over the next two years, these new, renewable energy sources are supposed to grow their market share by about 30%.
This is going to create a tangible shift in how we get our energy.
Over the next two years alone, there will be about 19 gigawatts (GW) of wind energy and 10 GW of solar installed across the country.
To put that in perspective, 1 GW is enough to power about 700,000 homes. That means we’re talking about over 20 million homes powered by renewable energy in just the next two years.
These technologies always made sense, as they’re a transition from fossil fuels (a finite resource) to the sun and wind (infinite resources).
However, the costs to obtain these energy sources were too high for them to realistically take over. But like any other new technology, we’ve figured out a way to scale it to become cheaper as well as more abundant.
From 2010 to 2016, the cost of generating electricity from wind or solar has dropped by about 70%.
And that pattern is expected to continue: Through 2020, these costs are projected to drop at least another 25%.
Of course, since the technology is getting cheaper, we’re seeing huge renewable-energy projects all over the country.
For example, a company called NextEra Energy is in the midst of 11 different large-scale wind and solar projects.
These projects span from coast to coast, and they’ll power over 1 million homes once completed in 2019-2020.
NextEra is also spending over $2 billion on the development of two huge clean-energy power plants in Florida, where it does most of its business.
Combined, these plants are expected to generate over 3 GW of power using renewable energy sources, including wind and solar.
Now, consider the fact that NextEra is the largest publicly traded utility company in the world. All of these projects just became a lot more promising for the industry!
Billion-dollar investments like these from a global utility leader suggest that it sees the way the future is going. This clearly shows the same forward thinking that got NextEra to the position of leadership it’s in today.
3 Great Ways to Invest in Renewable Energy
Investing in renewables right now is similar to buying into telephone companies as power lines were being put up back in the early 1900s.
During that time, the infrastructure was being built to implement a new way of living. And we haven’t looked back since.
Now, the new infrastructure has been identified as things like solar panels and windmills.
And thankfully, there are exchange-traded funds (ETFs) that can provide great investment opportunities.
For solar, I’d recommend the Invesco Solar ETF (NYSE: TAN).
For wind, the best bet would be to go with the First Trust Global Wind Energy ETF (NYSE: FAN).
Lastly, I suggest buying shares of the iShares Global Clean Energy ETF (Nasdaq: ICLN). This ETF invests in a wide variety of clean energy sources.
Editor, Rapid Profit Trader