We recently published a list of The 7 Best Alternative Fuel Stocks to Buy Now. In this article, we take a look at how Clearway Energy (NYSE:CWEN) compares to other stocks in the alternative fuels space.
The future of alternative fuels
The alternative fuels and renewable energy industry is currently one of the most significant sectors worldwide. Examples of alternative or renewable fuels include wind, solar, hydropower, and biofuel energy. According to the Business Research Company, the global alternative fuels or renewable energy market was valued at $1.10 trillion in 2024 and is expected to reach $1.55 trillion by 2028, growing at a compound annual growth rate of 8.8%. The growing environmental concerns and stringent environmental regulations in many developed countries have given a significant boost to the renewable energy sector, and the power generation market has witnessed a rise in the installed capacity of renewable sources. The increasing electricity demand and energy consumption are also the major reasons for the growing demand in the alternative or renewable fuels industry.
According to the International Energy Agency (IEA), global energy demand will grow by 3.4% annually through 2026. 85% of this additional demand is expected to come from China and India. India’s electricity demand alone is expected to grow by over 6% annually through 2026 due to economic growth and increasing use of air conditioning. Southeast Asia is also expected to see a 5% annual increase in electricity demand through 2026. The United States is expected to see a moderate increase in electricity demand in the coming years, driven primarily by data centers. Electricity consumption from data centers, artificial intelligence, and cryptocurrencies could potentially double to 1,000 TWh by 2026. The IEA predicts that the increase in electricity generation from low-emission sources will meet global demand growth over the next three years, with renewables expected to overtake coal as the leading energy source in early 2025.
The U.S. Energy Information Administration (EIA) expects renewable energy deployment to grow by 17% in 2024, potentially reaching 42 GW and accounting for nearly a quarter of national electricity generation. However, this growth may be accompanied by a temporary increase in the cost of renewable energy due to high financing, labor, and land costs. However, tax credits from the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) should keep solar and wind energy competitive. Solar and storage markets are expected to continue to grow due to tax incentives and government support, particularly through programs such as the DOE’s Loans Program Office. However, the wind and hydrogen energy sectors may face challenges. Wind energy faces challenges due to higher deployment costs and permitting delays, while hydrogen energy struggles due to a lack of government incentive programs to support it.
Investing in a greener future
In a recent interview, Bruce Flatt, CEO of Brookfield Asset Management, emphasized that decarbonization of the world is a major trend that is reshaping industries and investments. The company has established a dedicated renewable energy fund, initially raising $15 billion, and plans to establish a second fund to help companies reduce their carbon emissions by investing in and developing renewable energy projects. Flatt emphasized that the company is one of the largest global builders and owners of renewable energy assets, including solar and wind power projects in 15 countries. The company’s approach includes not only building renewable energy infrastructure but also supplying renewable electricity directly to corporate customers, which helps these companies meet their net-zero commitments. The U.S. Inflation Reduction Act (IRA) has had a positive impact on the renewable energy sector. The IRA has provided significant incentives for renewable energy projects, which has accelerated the pace of development. Flatt pointed out that the law has increased the likelihood of projects being completed as more projects are moving forward in a shorter period of time, which benefits the renewable energy market. He mentioned that they are targeting returns of around 9-10% for debt and around 20% for equity investments in the renewable energy space. Flatt is optimistic that returns will improve as the sector continues to grow and attract more capital.
Hanchen Wang, equity analyst at DWS Group, is optimistic about the future of the renewable energy market and believes that the market is becoming increasingly attractive to investors due to the long-term potential for stable returns and alignment with global sustainability goals. Wang stresses that while renewable energy sources such as wind, solar and hydropower are expanding their market share, they still face challenges such as high initial costs and intermittency issues. He points out that technological advances, such as improved energy storage solutions and grid infrastructure, are critical to address these challenges and support the sector’s growth.
The alternative fuels and renewable energy industry is expected to experience significant growth due to growing environmental awareness, supportive regulations and technological advances in alternative fuels such as wind, solar and hydropower. Despite challenges such as high initial costs and technological hurdles, the sector’s trajectory remains positive, driven by strong global demand and significant investment opportunities.
Our methodology
For this article, we used clean energy ETFs and online rankings to compile an initial list of 40 alternative fuel stocks. From this list, we narrowed our selection down to 7 stocks based on their hedge fund sentiment, which was sourced from our database of 912 elite hedge funds (as of Q2 2024). We also included the market capitalization of these companies (as of August 20). The list is sorted in ascending order of their hedge fund sentiment (as of June 30).
Why do we care what hedge funds do? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A wind farm in motion, its many turbines turning in the wind.
Clearway Energy (NYSE:CWEN)
Number of hedge fund owners: 38
Market capitalization as of August 20: $5.71 billion
Clearway Energy (NYSE:CWEN) is an energy company that operates a diverse portfolio of wind and solar projects, as well as conventional power generation assets in the United States. Global Infrastructure Partners (GIP), an independent infrastructure investment fund, and TotalEnergies (EPA:TTE), a large multinational energy and petroleum company, have collaborated on projects with Clearway Energy (NYSE:CWEN) to leverage its expertise in renewable energy in the United States.
Clearway Energy (NYSE:CWEN) is working on several large-scale renewable energy projects in California, such as Luna Valley and Daggett I, which are expected to be operational by 2025. The Luna Valley Solar Project is a 200 MW solar project in Fresno County that, once completed, will generate enough electricity to power over 80,000 homes annually. The Daggett Storage I Project, on the other hand, is a 113.5 MW battery storage facility in San Bernardino County that includes 482 MW of solar and 280 MW of energy storage. These projects are backed by long-term contracts with investment-grade companies and are expected to generate significant profits for the company.
The company’s diversified portfolio and strategic focus on renewable energy positions it to capitalize on ongoing global energy transition trends and provide long-term growth potential. Clearway Energy (NYSE:CWEN) has a market capitalization of $5.71 billion as of August 20. In the second quarter, the stock was held by 38 hedge funds with shares valued at $139.80 million. Point72 Asset Management is the company’s largest shareholder, owning $25.10 million worth of shares as of June 30.
Total CWEN 6th place on our list of the best alternative fuel stocks to buy. While we recognize CWEN’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than CWEN but trades at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
