When you are weighing up your investment options you should always have the balance of risk and return in your mind and this is the same scenario when looking at alternative energy investment opportunities.
You have a choice of alternative energy sources from solar, wind and biomass energies in particular, so how do they fit the bill in terms of risk and reward?
The conundrum that investors face is that there is growing urgency for an increased uptake in the use of alternative and renewable energy options with the world’s natural resources such as fossil fuels approaching an end date at some point in the future.
The problem from an investment perspective is that few companies who embrace renewable energy lose money but their returns are modest too up to now. The signs are however more positive in recent years and despite the fact that neither solar or wind energy investments have provide a decent ROI so far, there is sense of anticipation that the level of returns for investors, may well be higher as renewable energy becomes more mainstream.
There are several key points to consider about investing in alternative energy. The first is that the technology is now scalable and therefore much more investable and the second is that the returns on investment are improving, especially solar energy in comparison to wind power.
This guide to clean energy investment provides a view of how the industry is expected to evolve over the next fifteen years and may help with your background research.
If you are looking to invest in stocks that provide wind energy, there are three companies in the U.S who control virtually the entire market.
These are GE, Siemens and Vestas. If you are looking for a portfolio of renewable energy stocks the other companies to look at include SunEdison, SunPower, First Solar, and SolarEdge.
Please bear in mind that these are not recommendations to invest in these companies, and the details are provided for guidance only.
You could also consider the option of investing via an exchange-traded fund. A wind energy ETF will invest in a basket of stocks involved in providing goods and services exclusively related to the wind energy industry.
There has been quite an impressive rally in solar energy ETFs recently and that has seemingly been prompted by a noticeable increase in the number of renewable energy installation deals announced.
Apple for example, is a company that is investing big in solar energy and they announced earlier this year that they had signed an $850 million deal with the photovoltaic panel maker First Solar.
Google also announce a similar investment deal, stating that they were investing $300 million in SolarCity power plants.
It should be noted that the recent spike in some solar energy ETFs were needed in order to claw back losses from the previous year , so you need to be a patient investor if you are going to include solar energy and any sort of renewable energy source in your investment portfolio.
Biomass is actually the biggest component of the renewable energy industry and accounts for 53% of total production estimates.
Biomass energy is produced by processing a range of common wastes and subsequently and transforming them into renewable energy through a specific biochemical conversion process.
There are a number of different feedstocks used in the biomass process including corn, ethanol, palm oil and vegetable oil.
There is great diversity in the range of raw material inputs and one of the fundamental reasons why biomass energy is the largest of the renewable energy resources is that it is using a technology which can be replicated in numerous different landscapes and environments, which is not always the case with solar and wind energy.
There are currently very restrictive investment opportunities to get directly involved in biomass technologies and this is because private companies and local government institutions are running the current biomass plants and operations.
You can consider an investment in CPFL Energia, which is the world leader in biomass generation and is listed on the Sao Paulo Stock Exchange but also has a ticker (CPL) on the New York Stock Exchange.
There is every chance that there will be a number of new openings to invest in biomass energy over the next few years, but the same rules of engagement will apply. Which is to remember that investing in renewable energy needs to be viewed as a long term play with plenty of ups and downs along the way as the number of energy initiatives increase and the technology improves to improve the ROI.