Last year was a record year for clean energy finance. According to Bloomberg New Energy Finance, investment in clean energy increased in China, Africa, the U.S., Latin America and India, driving the world total to its highest ever figure of $329.3B, up 4 percent from 2014 and beating the previous record set in 2011 by 3 percent. However, 2016 should give it a run for its money, so to speak.
Clean Energy Investment – Stocks
The global energy transition is underway and mainstream investors, particularly in the U.S., are starting to take notice. That was the message that Tom Konrad, financial analyst and CFA offered in an interview on the topic of clean energy investing in 2016. For the past six years, Konrad has put together a list of 10 clean energy stocks that he feels are worthy picks for the coming year. He then tracks those stocks writing monthly updates on the portfolio, which has regularly outperformed the benchmark.
New Investment in Clean Energy 2004-2015. Credit: Bloomberg New Energy Finance.
Konard is certain that a shift has occurred regarding mainstream investments. He believes that the greater attention that was focused on clean energy — through the clean power plan in the U.S., the Paris Framework, and the late-2015 extension of tax credits for clean energy in the U.S. — will lead U.S. investors to jump into the clean energy investment market, bringing with them significantly more dollars into the sector. “I’m optimistic that 2016 could be a year where clean energy starts being more and more part of major portfolios,” he said.
Konrad believes that more money will be invested in the sector in 2016 even if the general market goes down. “2016 could be the first year that we see renewable energy do a lot better than the overall market,” he said.
“And then if we have a flat to positive year in the general market, this could be another one of those plus 50 percent years,” he said.
While renewables have also experienced those minus 50 percent years, Konrad doesn’t see that as a likely scenario for 2016. He offered First Solar as an example.
“It’s trading at a P/E [price to earnings] ratio of 12, which is appealing to non-green investors.” Konrad explained that this means First Solar is “a reasonably valued company that just got this giant benefit from the ITC extension. When you have a value company that suddenly has more drivers behind it, it’s really hard to see why it could possibly go down much.”
While globally investors have already “woken up” to the potential of clean energy, according to Konrad, that fact that 2016 could see more U.S. investors entering the market is huge. That’s because the U.S. has the largest equity market in the world and U.S. investors make up a healthy portion of it. “The U.S. making a shift is a big deal. It is the most widely followed market,” said Konrad.
While Yielcos had a rocky 2015, they did rally a bit in December, said Konrad, who thinks they ought to do pretty well in 2016.
“It is very likely we will never again see as good of a time to buy clean energy stocks as we did in December 2015,” said Konrad explaining that clean energy companies were very much undervalued in December because not enough investors were paying attention to the sector. “I don’t think that will ever happen again,” he said.