Think Renewable Energy if You’re Looking to the Future

Investing in Renewable Energy

Renewable energy sources such as wind and sun are proving to be much cheaper than fossil fuels. And, the trend looks to get stronger.

Success in stock trading and investing often comes from an awareness of the deep potential of certain industries, and their underlying currents. In the energy sector, there’s a clear trend.

Renewable energy is on an upward trajectory and analysts predict it will go all the way to the point when it will overtake fossil fuels. They point out that in most of the United States, wind energy and solar energy have managed to be the cheapest energy options, according to Lazard’s Levelized Cost of Energy Analysis—Version 11.0 report by the Lazard investment bank. Wind and solar energy ended up being cheaper than nuclear energy, coal, diesel and even natural gas in most cases. As this continues and takes effect, fossil fuels could soon be trampled over. So should you be looking at renewable energy stocks for some long-term investment with your eye on the future?

Hard Facts Suggest Wind and Solar Energy Are Cheaper

Based on this report, Motley Fool analyst Travis Houim believes regulators won’t be able to justify using non-renewable energy sources. Utilities requiring building or replacing power generation facilities would seriously be thinking of renewable energy since it is proving to be cheaper.

Lazard’s report has presented a table, described by Houim, which analyzes the cost of building power plants with various fuel sources, on the basis of kWh:

Energy sourceLow-End EstimateHigh-End Estimate
Crystalline Utility-Scale Solar PV4.6 cents per kWh5.3 cents per kWh
Thin-Film Utility-Scale Solar PV4.3 cents per kWh4.8 cents per kWh
Wind3 cents per kWh6 cents per kWh
Coal6 cents per kWh14.3 cents per kWh
Natural Gas Combined Cycle4.2 cents per kWh7.8 cents per kWh
Nuclear12.2 cents per kWh18.3 cents per kWh
Diesel19.7 cents per kWh28.1 cents per kWh

Unpredictable Pricing for Fossil Fuels

Apart from the fact that diesel is the most expensive fuel source, you’d have seen from the table that fossil fuels have a much wider cost range. That can be explained by the differing construction costs of new plants in various states as well as the varying fuel prices and the plant’s usage cycle. With renewable energy though, you get to use almost 100% of the electricity it produces. That makes electricity pricing a lot more predictable.

Coming back to the point made earlier, coal, diesel and even nuclear energy are all more expensive per kWh than solar and wind energy, and the table prepared by Lazard’s clearly shows that. So even if you may not be too much of an environmentalist, thinking in terms of pure economic advantage also brings renewable energy sources such as the wind and the sun to the forefront. Since wind and solar energy derive their energy from sources that are freely available in nature, at no additional cost, they are basically zero-cost sources fuel. The non-renewable energy sources are, however, extracted fuels, meaning they are generated through elaborate processes and machinery. Due to so many of these factors involved, the cost of extracted fuels could further rise from the existing levels.

Costs Have Been Decreasing for Renewable Energy Sources

If anything, costs of renewable energy sources such as wind and sun have actually decreased, as this Lazard’s table from 2010 shows:

Energy sourceLow-End EstimateHigh-End Estimate
Crystalline Utility-Scale Solar PV13.4 cents per kWh15.4 cents per kWh
Thin-Film Utility-Scale Solar PV13.4 cents per kWh18.8 cents per kWh
Wind6.5 cents per kWh11.0 cents per kWh
Coal6.9 cents per kWh15.2 cents per kWh
Natural Gas Combined Cycle6.7 cents per kWh9.6 cents per kWh
Nuclear7.7 cents per kWh11.4 cents per kWh

This shows there is a clear shift in tide in the energy sector. Fossil fuels are getting more expensive or at least staying in the same price range as before, but renewable energy sources are getting cheaper. This plain economic factor combined with the overall positivity towards renewable and natural fuel sources is a clear indication that stocks in this field are really going to spike. So these renewable energy stocks could be a great pick for your portfolio, according to analyst Houim.

Renewable energy can be used as a tailwind, and Houim suggests stocks such as SunPower ($SPWR) and First Solar ($FSLR) that have the greatest market share in the American solar installation market. General Electric ($GE) is one of the world’s largest manufacturers of wind turbines, and Houim points out it’s been doing pretty well here.

So with the underlying trend identified thanks to some in-depth market analysis by experienced analysts, making the right investing or trading decisions becomes easier.

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TradeZero is an online broker dealer that offers commission free trading of the US equity markets, US equity and index options trading, along with a 14,000+ symbol short list of the US markets. Its clients receive up to 6 to 1 intraday leverage and the ability to trade the US markets without any pattern day trading rules. TradeZero clients have access to a variety of cutting edge trading platforms which include real-time streaming market data.

TradeZero

TradeZero is an online broker dealer that offers commission free trading of the US equity markets, US equity and index options trading, along with a 14,000+ symbol short list of the US markets. Its clients receive up to 6 to 1 intraday leverage and the ability to trade the US markets without any pattern day trading rules. TradeZero clients have access to a variety of cutting edge trading platforms which include real-time streaming market data.

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