The best places to invest for the renewables sector in the coming months include a mix of stocks that are on the rise, as well as smaller companies that are struggling.
The ABC’s Energy Matters team has put together a guide to help investors understand which stocks are worth investing in, and which ones are going bust.
“Investors are in a bit of a panic mode right now because there are no clear answers, and there’s a lot of uncertainty,” says Mark Tully, an energy analyst at IBISWorld.
“There’s a sense that there’s been a lot more hype around renewables, and that’s not necessarily a good thing.”
In the months since the government’s Clean Energy Target was rolled out, investors have become more worried about the long-term viability of the sector, with investors turning to companies that have been hit hard by a severe recession.
“It’s really clear to me that the renewables industry is facing a crisis,” says Dr David Gillingham, a senior lecturer in energy and sustainability at the University of Technology Sydney.
“If the renewables boom was a bubble, it has gone way beyond the bubble.”
Dr Gilling, who was among the first to predict the crash of the solar industry in 2011, says it’s important for investors to keep a keen eye on what companies are on a roll and what stocks are doing well.
“I would be surprised if the renewables business was going to be going up at all in the next five years,” he says.
What’s a renewable energy company? “
But it’s certainly a bubble worth monitoring.”
What’s a renewable energy company?
A company is a business that produces, sells or installs renewable energy to the grid.
Many are small, focused on selling energy for a few cents per kilowatt hour (kWh), but some are big-name energy providers that produce electricity for thousands of customers in the market.
The Renewable Energy Target has given the sector a boost, but many of the new companies are struggling to get off the ground, and many have struggled to get funding.
Some of the big winners in the renewable energy sector are small businesses like energy companies like Energie and Sibbald, but they are struggling too.
In recent years, a number of big-ticket renewable energy projects have fallen by the wayside, while others are struggling, like Powerhouse Solar, which was purchased by a Chinese investor last year.
“We’re in a great period for the solar market,” Dr Gill says.
It’s important to note that while the renewables price index has increased from its low levels in 2015 to around $1.50 per kWh in 2016, it’s not yet a market that is going to make big money.
The new Renewable Fuel Cell, or RFS, has come on leaps and bounds since its launch last year, but Dr Giller says investors are still wary of the company.
“You have to remember that in 2020, the price of renewables has been going up, and it’s really hard to justify the investment,” he explains.
“The fact that we’re seeing this spike in RFS prices is probably indicative of the fact that people are becoming more sceptical about the viability of this technology.”
While it’s easy to be sceptical of the technology, it can still have an effect on investors if a company is not doing well, says Dr Gills son, Chris Gilling.
“They have to be very, very careful about the business model of a company that is not growing,” he said.
In addition to the price increase, there are also concerns that investors are not getting the full benefits of the renewable electricity market.
Dr Gelling says it is important to remember a lot is riding on whether the renewable power technology is going well, and whether a company can survive the downturn.
“What we’re witnessing right now is a bubble with no clear way out,” he concludes.
The best renewable energy investments Investing in renewable power could be one of the best ways to diversify your portfolio.
Dr Tully says that the rise in renewable electricity has created a huge opportunity for investors, and he is pleased that investors have embraced the opportunity.
In the short term, Dr Gilly says it may be worth looking at companies that were once a niche industry. “
Now it’s starting to show signs of the boom, and I think that’s fantastic news,” he adds.
In the short term, Dr Gilly says it may be worth looking at companies that were once a niche industry.
“Solar PV, for example, was always niche,” he explained.
“And now you have these companies that look very promising in terms the future of solar.”
With the Clean Energy Fund, governments around the world have been encouraging investors to support renewable energy by buying stock in these companies.
But, as Dr Gili says, investors should be