Investing in Renewable Energy Companies
Renewable energy, clean energy and alternative energy many times mean the same things, but not always. There are different ways you can invest in renewable energy companies.
The term clean energy refers to cleaner alternatives to oil, (though the manufacturing of photovoltaic cells creates toxic waste). Clean energy stocks were the hot topic when oil was up near and over $100 per barrel. People couldn’t get enough of the stock and everywhere you turned, you read about these alternative and renewable energy companies. Now that oil is back down again, below $40 per barrel at the time of this writing, no one wants these alternative energy stocks and their share prices have dropped dramatically. When it comes to oil and gas prices, Americans seem to have short memories and this shows up with the stock prices in the renewable energy companies.
What are the Alternative and Renewable Energy Companies
Solar, There are many companies that make solar panels and the materials that go into them, and they continue to develop more efficient panels. Many of these companies are located in China. Some of the more known solar companies are: In China: CSIQ, CSUN, JASO, LDK, SOLF, STP, TSL. In the United States: AKNS, ASTI, DSTI, ESLR, ENR, FSLR, WFR, SPWRA. Another way to invest in solar could be buying exchange-traded funds, TAN and KWT.
First Solar (FSLR) might be the most successful so far. ASTI recently announced they have developed a more efficient solar module. One area of importance when looking at solar companies is the price of the materials. Is the company buying them at higher prices than other companies or did they lock into a long term contract at better prices and to ensure against material shortages?
Solar company stock prices have been moving with oil prices, when oil prices dropped so did the stock price of the solar companies. The new US president seems to want to end the foreign oil dependence of the US; this might take the form of more solar and/or more drilling for oil, most likely it will be both. Tax credits for solar companies are important as well are tax credits for companies and homeowners who use solar for a portion of their home's energy costs.
In September 2008, congress extended the solar tax credits for another 8 years and that did help the solar stocks, but since that time, as oil has dropped below the $40 level, solar stocks have dropped again. Right now, with many of these solar stocks so low, it could be a good time to start accumulating shares in some of these stocks.
Wind energy, the ongoing discussion and sometimes arguments continue as to which is better for the future, solar or wind as renewable energy. It seems that public utility companies are now opting for wind energy and buying into wind farms.
There are really no pure wind energy companies; "pure" meaning that’s all they do like in the solar companies. Many companies manufacture products for wind energy as a part of their overall line. For example, one of the largest companies that supply parts for wind energy is General Electric (GE). Other companies are BWEN, AMSC and KDN.
Most of the pure wind companies at this time are very small and speculative companies, so possibly the best way to start investing in wind stocks at this time would be through the wind power Exchange Traded Funds, FAN and PWND.
Ethanol is blended with unleaded gasoline to make an alternative fuel, for example the E-85 blend is 85% ethanol and 15% unleaded gasoline. Ethanol became very popular until food shortages appeared across the world, many saying the cause of this was the heavy use of corn for ethanol. Currently the ethanol industry is looking at other products to use such as sugar cane and switch grass. Corn ethanol currently doesn’t look like it’s going to be the future; it just takes too much edible food (corn) to make for a real alternative to oil. Some companies have recently filed bankruptcy as well, VeraSun (VSUNQ) and is currently trading at .07 per share. Other ethanol companies are; PEIX, AVR and GPR have dropped dramatically.
Biodiesel (biofuel) is a renewable energy source derived from algae and waste and is another promising area. It contains no petroleum but it can be mixed with it. At this time there are all kinds of stories about people driving thousands of miles on only locally produced biodiesel from fats. Biodiesel is also known to not run very well in cold temperatures. You can read more about Investing in Algae.
Lithium Ion, with much being made now of the auto bailout and how these car companies need to start coming out with alternative fuel cars, several companies are making headway with the Li-ion batteries including HYBR, ABAT and VLNC.
The major car companies are also doing research and development in this area including GM, Ford, Toyota and Honda.
Natural Gas is also touted as being a cleaner fuel and there is a large worldwide supply. Clean Energy (CLNE) is one company that has received numerous government contracts to supply their vehicles with liquid natural gas.
There are other renewable energy technologies coming along, including proton exchangers and wave action energy producers. Many if not all of these alternative or renewable fuel stocks are low in price now because oil has dropped so much and the current recession, I would watch for these stocks to move up in price as soon as there is a real reason for oil to move up again. And for oil to move up, the reasons can be varied, drillers cutting back, OPEC cutting production and demand increasing again. There are also ongoing discussions about global warming and our need to cut back on our carbon emissions.
This field is still new and only 1% of the country’s power comes from wind and less from solar. The time to buy stocks and invest is when those stocks are out of favor, and clean, renewable and alternative energy are certainly out of favor now in the winter of 2008.
Alternative Energy ETFs
For more alternative energy investing ideas, please read How to Invest in Alternative Energy with ETFs.
Sam Montana © 26 December 2008