As oil continues to hover above the $100 a barrel mark, due to social unrest in the Middle East and the events that are unfolding in Japan, renewable energy stocks have surged. Solar and wind to biofuels, and wave energy, are having their moment in the sun. Short-term euphoria aside, geopolitical pressures in the oil patch, and new concerns with nuclear energy, are causing many nations to revisit their commitment to renewable energy. This new global focus has resulted in increased financing and investment for clean energy projects. This new fervor towards renewable alternative energy has many analysts predicting that 2011 could be the year renewable energy becomes mainstream.

TUTORIAL: Risk and Diversification

Cleantech Investment Rising
Despite the global credit crisis and recession, green energy investment continues to rise. According to the World Economic Forum (WEF), investment in Cleantech and renewable energy hit $243 billion in 2010, a rise of 30% on the $186 billion spent a year earlier. What's even more surprising is that the WEF found that the increase in spending was almost even across the various regions it tracks. Investment across Europe, the Middle East and Africa rose to $94.4 billion, while the Americas saw an increase of $17 billion.

In the Pacific, investment improved to $83 billion. Even those nations that were hit especially hard during the crisis and have been taking away subsidies for renewable energy are now talking about not pulling back so much. Areas like the Czech Republic, Italy and the U.K. have seen rapid growth. More than 90% of green investments were made in the world's 20 most industrialized nations. Most of this growth has come from small scale clean energy projects, such as commercial rooftop solar installations, with global investment almost doubling to $59.6 billion.

However, the developing world continues to inject new life into the sector. Kenya, which relies on hydro-electric generation for 60% of its energy, has strained during severe droughts that have caused supply problems, has plans to significantly increase its reliance on renewable energy sources by 2013. Pakistan has recently partnered with utility AES (NYSE:AES) to build a new $375 million, 150 MW wind facility. Analysts at research firm Clean Edge, predict that South Korea will invest nearly $84 billion in Cleantech investments by 2013, and China will spend between $440 and $660 billion on renewable energy over the next 10 years.

Overall, the clean energy sector since 2004 has seen 630% growth in investments and project financing. Despite the lack of a federal climate or energy bill in the United States and any potential reduction in feed-in tariffs, analysts predict that high and rising traditional energy costs will ultimately increase demand for renewable sources.

Adding Those Mega-Watts
With the continued spending by various governments on green energy and overall long term power demands, investors might want to consider the space for a portfolio. Funds like the PowerShares Global Clean Energy (NYSE:PBD) and iShares S&P Global Clean Energy Index (Nasdaq:ICLN) make it easy for investors to add the sector. However, there are plenty of individual and sector picks.

According to the WEF report, wind power can compete with fossil fuel rivals without government subsidies in many areas, and wind produced electricity has tripled since 2005. The First Trust Global Wind Energy (NYSE:FAN) bets on a global basket of wind energy related stocks. For a domestic dividend wind play, utility NextEra Energy (NYSE:NEE) operates the largest wind fleet in the U.S., and yields 4%.

Despite a dour warning by some analysts, shares of individual solar companies have been on fire since the start of the year and many Chinese solar firms such as JA Solar (Nasdaq:JASO) and China Sunergy (Nasdaq:CSUN) have reported that business will be better in the months ahead. With the bulk of its holdings in China and Germany, Claymore/MAC Global Solar Energy (NYSE:TAN) will be a beneficiary of the growing emerging market interest in solar.

Electric hybrid vehicles, solar panels and wind turbines all require batteries and other storage systems to function. The underlying holdings in the Global X Lithium ETF (NYSE:LIT) focus more on battery production rather than lithium prices. The fund is a perfect proxy for the advanced battery market, and companies like A123 Systems (Nasdaq:AONE).

The Bottom Line
Investments have surged more than 600% since 2004, and analysts predict that this will continue beyond 2011, as various governments look at their own energy pies. Funds like the First Trust Nasdaq Clean Edge Green Index (Nasdaq:QCLN) make interesting bets on the sector's growth. (Find out how morals and ethics can bring you a surprising return. Check out Go Green With Socially Responsible Investing.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  5. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  6. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  9. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!