One year ago, Japan's earthquake and tsunami disasters sent ripples throughout the world. The resulting nuclear failure at its Fukushima power plant caused a variety of nations to rethink how they power their populations. Both Germany and Switzerland pledge to end the use of nuclear power in their nations by 2020 and 2034, respectively. To that end, both have taken up the mantle of renewable and alternative energy sources as way to meet their electricity demands. Germany recently unveiled its plans on how to implement that shift and the dollar amounts are staggering. For investors, this could be exactly the catalysts needed to spark renewables swing into the mainstream.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Billions of Dollars
Since March of 2011, the German government has been reviewing the role of nuclear power in the country's electricity mix. As the Fukushima Daiichi nuclear complex continues to malfunction, Germany ultimately made the ambitious decision regarding the fate of its nuclear power plants: the nation will close down all of its nuclear power plants by 2022.

In order to replace the seventeen nuclear reactors that supplied about a fifth of its electricity with renewables, German will have to undertake a massive public works project. Just how big? Chancellor Merkel has plans to construct an offshore wind farm, roughly the size of Manhattan and erect a grid whose lines could stretch from London to Baghdad. In order to get the 25,000 MW or about 25 nuclear power plants worth of generating capacity, Germany will require about 5,000 turbines and 2,800 miles of new high voltage power lines in order to connect the turbines with the electric grid. In addition, upgrades to storage and frequency regulation must be made in order to get the "choppy" renewable power into the grid correctly. Overall, the program will cost around $263 billion to build.

So far, Germany has already built the world's biggest renewable generation complex. The nation had a capacity of 53.8 gigawatts worth of wind and solar generators at the end of 2011. While the project is certainly ambitious, Germany has had a history of innovation in renewables and was the first major economy to provide incentives for clean energy. The nation pioneered the idea of offering feed-in tariffs that guarantee above-market prices for solar power back in 2004. If there's any nation that seriously implements a major shift towards renewable energy, its Germany's high tech and high engineered economy. (For related reading, see The Basics Of Tariffs And Trade Barriers.)

Playing the Major Shifts
Germany's decision to revamp how it powers itself could finally be the real spark to spur renewables as a viable energy generator. Nations like Sweden, Austria and Slovenia have been following what Germany's example and have begun the planning stages of their own renewable shift. For investors, that could mean a big boost to stocks within the sector. The PowerShares Global Clean Energy (ARCA:PBD) tracks 95 different global renewable and alternative energy based holdings including Suntech Power (NYSE:STP) and smart meter maker Elster (NYSE:ELT). The fund's expense ratio is 0.75% and good be a great broad way to play the shift. Likewise, the iShares S&P Global Clean Energy Index (Nasdaq:ICLN) makes a good choice as well.

Known for its high tech industrial giants, Germany's homegrown companies will see much of the business from its renewable roll-out. German utility E.ON (OTCBB:EONGY.PK) is planning on spending 7 billion euros on new renewable projects over the new five years. Getting a major chunk of that is Siemens (NYSE:SI). The company will provide 80 of its wind turbines to E.ON's Amrumbank West wind farm. The nation's largest construction firm, Hochtief AG has recently purchased four ships in order to build wind farms at sea. These two firms along with the Market Vectors Germany Small-Cap ETF (ARCA:GERJ) and its 30% stake in industrial firms, make ideal choices to play Germany's shift towards renewables.

The Bottom Line
Japan's Fukushima nuclear disaster set in motion a sweeping change in how nations power themselves. Germany's stance to ban nuclear energy and replace that capacity with renewables is certainly ambitious. However, it could be the spark needed to ignite alternative energy stocks. The previous picks, along with the wind-based First Trust Global Wind Energy ETF (ARCA:FAN), make ideal selections to play that monumental shift. (For more, see Earning Forecasts: A Primer.)

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

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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.
  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, ...
  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

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!