The rise of renewable energy stocks globally has been significant, and many investors and analysts believe the time to invest in the sector is now, given the expected surge over the next few years.
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The UK stock market has a number of energy stocks. However, clean and renewable energy companies are slowly growing, with investment in the sector increasing. Here are the best UK renewable energy stocks.
| Company | Market Cap | Sector | Revenue (Recent Fiscal Year) |
|---|---|---|---|
| Greencoat UK Wind | Wind Farms | £1.02bn | |
| Ceres Power | Fuel Cell Technology | £22.1m | |
| The Good Energy Group | Solar, Wind | £248.7m | |
| Ørsted A/S | Wind farms | DKK132.3bn | |
| BP | Wind, Solar | $248.89bn |
How We Chose the Stocks
While it goes without saying that all of the stocks chosen have made strong moves in the renewable energy space, the majority are also well-known players in their respective renewable energy sectors. Furthermore, you will notice that the company’s chosen work in differing sectors such as wind, solar, and fuel cells.
We also aimed to provide potential investors with a list of stocks that have renewable energy projects globally, not just in the UK.
Greencoat UK Wind (UKW)
Founded in 2012, Greencoat UK Wind is listed on the London Stock Exchange and is a member of the FTSE 250 index. It operates more than 44 onshore and offshore wind farms and is committed to expanding its capacity via purchases of other operators. Working in the style of an investment fund, the firm buys established operations rather than creating its farms from scratch.
| Pros | Cons |
|---|---|
| An established company: Greencoat UK Wind, is one of the larger operators in the sector, and its market cap of more than £3bn offers investors protection from the high price volatility that is a feature of UK renewable energy stocks. | Industry challenges: The challenges faced by firms in setting up farms make that area of the industry a riskier proposition. |
| Ability to invest: This size also means that the firm has the critical mass to invest in expanding its operations as the sector grows. | |
| Dividend: The company currently offers a dividend yield of 5.27%. The sound business model means that there is also room for capital protection. |
Ceres Power Holdings (CWR)
Ceres Power is a fuel cell technology company based in the UK. The company states its SteelCell technology changes how homes, vehicles, and businesses generate power. In addition, it is said to reduce costs, lower emissions, and increase efficiency. CWR has been at the cutting edge of the green revolution for more than 20 years, and some of the pioneering products it produces look set to step out of the lab and become money spinners. In addition, it holds a strong position in the hydrogen fuel cell sector.
| Pros | Cons |
|---|---|
| Strong potential upside: With a strong emphasis on R&D, Ceres Power offers considerable gain should some of the firm’s pioneering projects come good. | No dividend: The firm doesn’t pay a dividend, so this pick is one for buy-and-hold investors willing to ride out an, at times, bumpy ride. |
| Well-positioned: It holds a strong position in the hydrogen fuel cell sector, which is gaining in popularity as world leaders realise that all possible avenues need to be explored if climate change is to be tackled. | Volatility: Ceres Power Holdings has a stock price history that demonstrates the relatively high risk-reward profile of UK green energy stocks. |
| Efficient: The firm’s core cell technology enables high-efficiency energy conversion at low cost. Not only does this represent good value for users, but the functionality of Ceres products also means that they can operate in either fuel cell or electrolysis mode, which opens up a larger number of potential markets. |
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The Good Energy Group (GOOD)
The Good Energy Group is a UK-based end-customer-facing energy supplier that is picking up market share thanks to its commitment to providing energy that is 100% renewable. The company operates via its three segments: supply, electricity generation, and holding companies. Solar farms represent part of the firm’s business operations, installing solar units for those customers who want to generate their own green electricity. It is also a key player in the rollout of EV charging stations across the UK.
| Pros | Cons |
|---|---|
| Well-positioned in the EV sector: More than 3% of vehicles on the road currently use green energy, with that number poised to soar in coming years. GOOD is well-positioned in the sector with its electric vehicle charging points. | One potential negative for the company is its strategic shift away from clean power generation. The shift, announced in 2023, involves moving towards the provision of clean energy solutions rather than directly generating it. It is said the move will open up new opportunities and growth potential, but it also introduces uncertainty and concerns for investors. |
| Ethical investing: The Good Energy Firm will be a top pick for investors who give additional weight to ecological factors. The firm’s engagement with stakeholders and ESG and CSR initiatives reflects a whole-hearted commitment to playing a part in the fight against global warming. | |
| Dividends: There are also financial rewards on offer, with the firm currently having a dividend yield of 1.2%. Capital returns are also possible. |
Ørsted A/S (OMX)
While Ørsted isn’t listed on the London Stock Exchange, it is easily traded from the UK, where it has significant exposure. The company has been developing UK green energy facilities since 2004 and currently operates offshore wind farms globally. Ørsted is one of the sector’s most prominent firms and one of the few genuinely green energy giants.
| Pros | Cons |
|---|---|
| Output: Wind-based renewable energy is the sector most expected to increase output in the near future. Hydro, solar, and bio are also all expanding, but not as fast as wind. Given the prospects for growth, it is worth considering buying into the firm. | US business troubles: In 2023, Orsted warned of significant potential impairment charges related to its US offshore wind portfolio, which led to Moody’s downgrading its outlook for the company. Recently, the company Ørsted lost two of its most senior executives after abandoning two windfarm projects off the US coast at a cost of more than £3 billion. |
| Significant energy generation: Its more than 1,000 offshore wind turbines provide enough green energy to power 4.5 million UK homes. | Wind farm profitability: Given the issues in its US business, some have questioned the affordability of wind farms and wind power. |
| ESG: For many years, Scandinavian firms have led the way in terms of balancing corporate and social responsibilities. Danish-based Ørsted ticks the box if you’re looking to buy into a firm that devotes time and resources to good work practices and social projects. |
BP (BP)
Oil giant BP is not a company you would consider a top green energy stock, but it aims to position its business to develop into the green energy sector. From an investment perspective, its huge size makes it an interesting proposition, as the profits it is still making from carbon-based energy mean that it can expand into developing markets on a scale far beyond the capacity of smaller firms. BP aims to generate 50 gigawatts of green energy by 2030, which is equivalent to the current total demand in the UK.
| Pros | Cons |
|---|---|
| Investment: BP will invest $60 billion in trying to achieve its green energy target using profits from its existing operations and has committed to reducing its oil production over the next decade. | An oil and gas giant: The oil company is seen by many as being part of the problem rather than the solution to it, given its significant status in the oil and gas markets. |
| Potential: BP could become one of the biggest players in the UK’s green energy sector, and when it comes to infrastructure, investing size matters. | |
| Dividends: BP has a formidable track record as a high-dividend stock and currently offers investors an annual yield of 4.68%. |
How to Invest in UK Renewable Energy Stocks
Shares in the companies listed can all be purchased via an online brokerage account. Some of the best brokers available are below.
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Why invest in UK Renewable Energy Stocks?
Renewable energy, whether harnessed from the sun, wind, or water, is becoming the world’s power source of choice. Across the globe, consumer preferences and public funding are piling into the sector as the world strives to tackle climate change.
Lower-carbon energy production has been gaining momentum for years, and more and more people are willing to embrace change regarding their daily habits. At the same time, changing weather patterns are leading to headline-grabbing natural disasters, which are making the point that methods of producing energy need to change.
Politicians, investors, consumers, and corporate bosses have all committed to the change to the extent that the move to green energy has passed a tipping point. The landscape of energy production is about to change, and these are the firms that will be part of that movement.
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What to Know Before Investing in UK Renewable Energy Stocks
Before diving in to invest in some of the best UK renewable energy shares, it's crucial to understand the unique characteristics and potential risks involved.
Government support: While the UK government has set ambitious targets for renewable energy deployment, we are starting to see a pullback from some of those key targets. Furthermore, while the government supports renewable energy, future changes in policy or political leadership could impact the sector's growth trajectory.
Subsidy dependence: Many renewable energy projects rely on government subsidies for profitability, which makes them vulnerable to changes in subsidy schemes and government policies.
Market dynamics: Again, while there has been a growing public awareness of climate change and the potential need for cleaner energy, there has also been a pushback from some, including government ministers.
Project developments: The continuous development of renewable energy technologies is leading to increased efficiency and cost reductions, making renewable energy projects more competitive with fossil fuels. However, the affordability and profitability of some of the projects have been called into question. At the same time, they are also often complex and subject to delays, can have cost overruns, and run into regulatory hurdles.
Infrastructure challenges: Integrating large-scale renewable energy into the existing grid requires significant investment in new infrastructure, which can lead to delays and increase project costs.
