Best Renewable Energy Stocks Canada

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Renewable energy is gradually emerging as one of the most apparent yet promising investment themes globally. The COVID pandemic has induced a flurry of government infrastructure spending, and renewables are increasingly becoming the power source of choice due to global political support and financial/economic incentives. Most of the world’s biggest economies have set themselves targets of generating most of their energy from renewable sources by the end of this decade. This is why renewable energy stocks are increasingly exciting!

Over the past decade, the drop in the per-unit cost of renewable energy has far outstripped projections by analysts. For example, the cost per kWh of wind energy has dropped about 50% over the past decade, while solar is down 80%. Besides the evident positive environmental impact, renewables boast advantages such as decentralization because they do not depend on hydrocarbons often imported from other nations. Apart from decentralization, other benefits include the predictability of the ROI due to no variable costs.

Top Canadian Green Energy Stocks

Canada is one of the world leaders in renewable energy adoption. Canada’s most common renewable energy source is hydroelectric power, followed by wind energy. Hydroelectric power is nearly 60% of Canada’s power generation, followed by wind. We have compiled a list of Canada’s best renewable energy stocks to gain exposure to the green energy sector.

We believe the following stocks present great opportunities for investors –

Innergex Renewable Energy Inc. (TSE: INE)

Innergex operates renewable energy assets across North America, Chile, and Europe. Most of the company’s installed capacity is in Canada, followed by the US, France, and Chile. The company operates multiple renewable energy plants, including wind, solar and hydroelectric. Innergex has a share price of C$21.39 and a dividend yield of 3.37%.

As of Q1’21, the company has 37 hydroelectric plants at 33 locations, six solar farms, and 33 wind farms. The company adopts a diverse energy source strategy to account for seasonality. Due to the forces of nature, unavailability of water flows, wind velocity, or ample sunlight might lead to lost revenue. By building a diverse asset mix across various geographies, the company has hedged risks of lost revenue due to natural downtime. The company’s strategy of owning and operating its power plant instead of building and selling a model or signing a fixed-price off-take agreement exposes it to risks of unfavourable changes in power costs. However, we are in a period of high inflation due to global quantitative easing. As the operating costs of Innergex are primarily fixed and have low inflation exposure, the current inflationary environment will help the company by increasing its operating leverage.

In Q1, the company reported an EBITDA of $113.6 million. The company projects about $600 million in EBITDA for 2021 (up 7% YoY). However, due to its operator business model, the company has endured high capital costs, resulting in it being highly leveraged. As of Q1, the company has a debt of $4.8 billion.

Boralex Inc. (TSE: BLX)

Like Innergex, Boralex is an operator of renewable energy plants. The company operates in hydroelectric, solar, and wind energy and has a minor presence in thermal power. Its plants are situated across Canada, the US, the UK, and France. At the end of 2020, the company had an installed capacity of 2455 MW. Boralex has a share price of C$38.6, a dividend yield of 1.17%, and a P/E of 83.60.

Although Boralex and Innergex share many similarities, one significant difference is that while Innergex is exposed to fluctuating price and demand of power produced, Boralex signs fixed-price agreements for the energy produced by their plants over a decade. This gives the company predictable cash flow and removes downside risk.

FY20 was a remarkable year for the company as it managed to swing to profitability after a period of unprofitability. The return to profitability was mainly caused by increased demand due to work-from-home and other lockdown measures and a drop in interest rates, allowing the company to refinance on more favourable terms.

Boralex reported revenues of $619 million in FY20 (up 9.7% YoY) along with EBITDA of $434 million and a net profit of $48.3 million. However, in Q1’21, the company stepped up and reported revenues of $206 million and net earnings of $38 million.

Moving forward, the company aims to expand its renewables portfolio. In Q1, it sold its only thermal plant in France to commit to complete sustainability and added 180 MW of renewable assets to its portfolio.

TransAlta Renewables (TSX: RNW)

TransAlta Renewables is a subsidiary of Canadian power major TransAlta Group, one of the best Canadian energy stocks. The company operates in Wind, Solar, Hydro, Energy storage, and Natural gas. The company’s largest cash-flow generating segment is wind, which makes up 50% of CF, followed by natural gas, which makes up 43% of CF. Hydro and solar comprise 4% and 3% of CF, respectively. The stock is trading at C$ 20.3 and has a P/E of 38.

TransAlta’s assets are tied to long-term price contracts that give the company stability and flexibility to leverage the current asset base for growth. The company has a total installed capacity of 2537 MW and has an expansion pipeline underway. As of Q1, the company has 47 power generation plants across all segments, with an average life of 12 years remaining. For FY21, the company projects an EBITDA of between $480 and $520 million and cash-available-for-distribution of $285 million and $315 million. In addition, TransAlta has a current dividend yield of 4.65%.

However, the company shines with its cheap valuation and low debt, equating to very low downside risk and a high chance of value creation for investors. Compared to peers, the company has an average debt-to-EBITDA ratio of 7, and TransAlta boasts a debt/EBITDA of just 3.08. Therefore, there is low pressure on the company’s earnings, which they can use to distribute or fund expansions more aggressively or avail cheaper financing than peers. Also, unlike many renewable energy peers (e.g. Brookfield Energy Partners), the company has not raised any subsequent equity to fund expansion, and promoters still hold 60% of the company. Therefore, this is another avenue management can pursue to support growth.

Northland Power (TSX: NPI)

Northland Power is a developer and operator of renewable assets, most of which are in Europe. As of Q1, the company has an installed capacity of 2.8 GW and a project pipeline between 4GW and 5GW, depending on the business landscape. Northland has a price of C$41.85, a dividend yield of 2.87%, and a P/E of 34.64.

The company funds projects with asset-backed debt and fixed-price power purchase agreements to service the debt. The company recently raised C$900 million to fund a wind farm in Spain acquired for C$520 million; the balance will be held to preserve liquidity and capitalize on opportunities when they arise. The company has 33 renewable power assets – 14 wind sites, 18 PV solar farms, and one concentrated solar plant.

The company recently acquired Helia Renovables for C$1.6 billion. The acquisition added about 540 MW to Northland’s portfolio, 424MW in wind assets and 116MW in solar investments. In 2020, Northland generated revenue of C$2B and C$1.17B in EBITDA. In Q1, the company reported revenues of $613 million (down 8%YoY), EBITDA of $360 million (down 14% YoY), and net income of $145 million (down 45% YoY). The drop in financial performance was mainly due to the seasonality of wind velocity. Northland is very susceptible to the seasonality of wind velocity as 60% of its EBITDA comes from off-shore wind facilities, most of which are in the North Sea region. However, the company believes this underperformance will balance over the year and maintains its 2021 guidance of $1.1 billion-$1.2 billion of EBITDA.

Brookfield Renewable Partners (TSE: BEP.UN)

Brookfield Renewable Partners is the renewable energy arm of private equity firm Brookfield Partners. BRP has built a diverse global portfolio of sustainable energy assets such as wind farms, solar farms, hydroelectric dams, and the storage of captured renewable energy. BRP operates more than 6000 energy sites and has $59 billion of sustainable energy assets under management. In addition, BRP has a project pipeline under development that will increase its capacity by 54% to 65 GWh. While most other companies on this list are very concentrated in asset type or location, BRP is a diverse investment opportunity based on the breadth of places and energy sources for investors. In FY20, BRP generated 42GW/h of renewable energy from its installed base.

BRP operates on a simple yet effective business model. The company relies on mature asset sales, asset-backed debt, and secondary equity issues to fund expansions. Combined with their financial expertise as a significant private equity group, the company has grown spectacularly. The company develops assets based on economic opportunity and the natural characteristics of the location to ensure value maximization.

BRP posted a $133 million loss and power generation of 13,828 GW for the year’s first quarter. However, the company did report $242 million in funds from operations, up 11.5% YoY. In the quarter, the company made significant moves to strengthen its liquidity to fund expansion through a green bond issue of $350 million and raised $850 million from asset recycling. The loss was attributable to one-time non-cash charges.

Etrion Power Corporation (TSE: ETX)

Etrion Power is a developer and operator of utility-scale solar assets. The company was founded in 2012 with its first solar project in Japan. The company is Switzerland headquartered and owns assets in Japan and Chile. Currently, the company owns 750MW of solar assets, 70MW in Chile, and 680MW in Japan. Etrion trades at C$0.4 and has a market cap of $131 million.

Like most companies on this list, the company’s assets are backed by fixed-price power-purchase agreements to reduce downside risk and allow it to leverage its existing asset base for growth.

The company is currently negotiating sales for about 100MW Japanese assets of its Japanese assets. The recent snowfall in regions of its significant sites negatively affected the company, resulting in a loss of revenues and damages to solar equipment. The company expects about $130 million in proceeds from asset sales, which it will use to fund more appealing opportunities.

In Q1’21, the company reported a generation of 11,168 MW, revenues of $3.9 million (down 8.2% YoY) and a net loss of $2.4 million. The net loss was due to one-time expenses from the acquisitions and lower generation due to snow. The stock is down 30% YTD and should recover substantially once the asset sales are completed and weather issues blow over. Furthermore, the stock is available at ridiculous earnings multiple of just 4.74, compared to an industry average of 12. However, investors should note that risk is high.

Polaris Infrastructure (TSE: PIF)

Polaris operates a geothermal energy plant in Nicaragua, South America, and a hydroelectric plant in Peru. In addition, the company owns and operates the San Jacinto Project in the northwest of Nicaragua and two hydroelectric run-of-the-river plants in the Huanuco province of Peru. Polaris trades at C$19.15 at a market cap of C$374 million and a modest P/E of 13.68.

Polaris has a power-purchase agreement with the government of Nicaragua for the next decade, which includes an annual price increase and similar PPAs for its Peru projects.

This stock is most appealing because it is a very stable and safe dividend-paying stock. Polaris boasts a dividend yield of 3.81%, making it one of the high-yield dividend stocks TSX, substantially higher than what is offered at bank deposits, with the added advantage of instant liquidity. In addition, this stock’s downside risk and volatility are extremely low because it has only three operating assets with fixed revenue streams.

Algonquin Power & Utilities Corp (TSX: AQN)

Algonquin Power & Utilities Corp represents a robust investment in the green energy sector, offering a diversified portfolio that includes wind, solar, and hydroelectric generation. Its broad range of renewable energy assets across North America provides stability and growth potential, especially as the demand for clean energy increases. The company’s commitment to renewable power, coupled with its regulated utility operations, offers a balanced mix of innovation and reliability, making it an attractive choice for investors seeking exposure to sustainable energy with a lower risk profile. If you are a pure “play” player for renewable energy, you should know that some of the most prominent players in your utility sector are actively pursuing renewable energy.

Ballard Power Systems (TSX: BLDP)

Ballard Power Systems stands out as a pioneering force in the fuel cell industry, making it a compelling investment in the green energy sector. It is our pick for Hydrogen Stocks TSX. Its focus on developing and producing fuel cell products for transportation and backup power systems positions it well in the growing hydrogen economy. As global efforts intensify to reduce carbon emissions, Ballard’s expertise and leadership in hydrogen fuel cell technology offer significant growth potential, particularly in markets seeking clean energy alternatives for transportation.

Greenlane Renewables (TSX: GRN)

Greenlane Renewables is a key player in the renewable natural gas (RNG) market, a sector gaining traction for its role in reducing greenhouse gas emissions. Specializing in biogas upgrading systems, the company is well-positioned to capitalize on the growing demand for RNG, a sustainable alternative to conventional natural gas. Investing in Greenlane offers exposure to a niche yet rapidly expanding segment of the green energy market, with potential for significant returns as the world shifts towards cleaner energy solutions.

Xebec Adsorption Inc. (TSX: XBC)

Xebec Adsorption Inc. is at the forefront of gas purification and renewable gas solutions, making it a strategic investment in the green energy sector. The company’s focus on technologies for biogas upgrading to renewable natural gas and hydrogen purification addresses critical needs in the transition to a low-carbon economy. Xebec’s innovative solutions in the burgeoning RNG and hydrogen markets position it as a potential leader in sustainable energy technologies, offering investors a chance to be part of this transformative sector.

Atlantica Sustainable Infrastructure plc (TSX: AY)

Atlantica Sustainable Infrastructure plc offers a diversified investment opportunity in the renewable energy sector, with assets spanning solar, wind, hydroelectric power, and energy storage. This diversification across various green energy sources and geographies mitigates risk and provides growth opportunities, especially as global demand for renewable energy sources intensifies. Atlantica’s commitment to sustainable infrastructure development aligns with global environmental goals, making it an attractive option for investors seeking both ethical and financial returns in the renewable energy space.

Why Invest in Green Energy Stocks in Canada

Investing in green energy stocks in Canada is increasingly attractive due to the sector’s potential for growth, driven by global shifts towards sustainable energy sources. These investments offer financial returns and align with environmental and social governance (ESG) principles, appealing to socially conscious investors. The Canadian renewable energy market, backed by supportive government policies and technological advancements, presents a promising landscape for investors. Why not invest in renewable energy stocks that pay you monthly dividends in the future rather than investing in oil?

Market Trends and Analysis

  • Increasing Demand: There’s a growing global and domestic demand for renewable energy, driven by the need to combat climate change and reduce reliance on fossil fuels.
  • Technological Advancements: Continuous solar and wind power improvements make renewable energy more efficient and cost-effective.
  • Government Policies: Canadian government policies bolster the sector’s growth, including incentives and subsidies for renewable energy projects.

Environmental and Regulatory Factors

  • Environmental Policies: Canada’s commitment to the Paris Agreement and its ambitious climate targets shape a favourable environment for green energy investments.
  • Sustainability Practices: Renewable energy companies increasingly adopt sustainable practices in their operations, enhancing their appeal to environmentally conscious investors.
  • Regulatory Changes: The evolving regulatory landscape, focusing on reducing carbon emissions, creates opportunities for renewable energy companies and Carbon Capture Companies in Canada.

Global Trade Dynamics

  • International Trade Agreements: These agreements can impact the renewable energy sector, especially equipment imports and exports.
  • Tariffs Impact: Tariffs on imported materials, like solar panels, can affect the cost and development of renewable energy projects in Canada.

Technological Advancements

  • Solar Panel Efficiency: Advances in solar technology are increasing the efficiency and reducing the cost of solar panels.
  • Wind Turbine Technology: Innovations in wind turbines are enhancing their power generation capacity and efficiency, making wind energy more viable.
  • Nuclear Fission: Look out for new green energy from Canadian Uranium Stocks

Diversification Strategies

  • Product Line Diversification: Companies are expanding their range of renewable energy sources, including solar, wind, hydro, and bioenergy, like biomass companies, to mitigate market risks.
  • Market Diversification: Expanding into international markets allows Canadian renewable energy companies to tap into new opportunities and reduce dependence on domestic market fluctuations.

Investing in Canadian green energy stocks offers financial, environmental, and social benefits. The sector’s growth is underpinned by favourable market trends, technological advancements, supportive environmental policies, and strategic diversification. As the world increasingly turns towards sustainable energy solutions, Canadian renewable energy stocks present a compelling investment opportunity for those looking to contribute to a greener future while potentially reaping financial rewards.

Which Renewable Energy Stocks Will You Choose?

Due to its increasing economic appeal and rise in global climate awareness, renewables are one of the most dominant investment themes globally over the next decade, so they must make up a part of every investor’s portfolio. Moreover, due to their predictable economics, capital markets love renewables, and there are ample opportunities to invest in such companies.

The simplest way to invest in renewables is to buy equities of sector companies or renewable-themed energy ETFs in Canada, where equities are left to expert fund ETF managers.

Renewable energy is gaining more and more traction as we see the need for cleaner and non-exhaustive energy to power our nations. The best renewable energy stocks have one thing in common: they provide innovative tech or modifications to existing tech to secure clean and renewable power sources.

It is no secret that renewables are becoming increasingly prevalent worldwide because of environmental concerns, but what about Canada?

The Best Renewable Energy Stocks in Canada

Significant progress in renewable energy growth requires the industry to develop technology and invest heavily in research, development, and infrastructure.

Considering the above and other factors, we have compiled a list of the most attractive renewable energy stocks to buy. The Renewable Energy Basket includes companies specializing in the following sectors: hydropower, wind, solar, geothermal, hydropower, natural gas, biomass and nuclear. We have some energy stocks for you, with some of our most promising energy stocks including renewables and the oil and gas industry.

Large / Medium Cap Renewable Energy Stocks

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Renewable Energy Penny Stocks in Canada

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Check out more penny stocks Canada has.

Canadian Renewable Energy ETFs

Renewable energy stocks are linked to companies that produce the ability to use this type of energy. The ETF tracks the US Energy Information Administration’s Renewable Energy Index (EIA) and covers companies that produce and distribute renewable energy such as wind, solar, geothermal, hydro, biomass and hydropower. This ETF covers many manufacturing companies worldwide, including power generation players. It has a portfolio of many solar and wind energy companies and hydropower and wind.

iShares Global Clean Energy ETF (ICLN)

The iShares Global Clean Energy ETF (ICLN) offers investors a comprehensive exposure to the global renewable energy sector. This ETF tracks the S&P Global Clean Energy Index, encompassing companies that are primarily involved in the clean energy industry, including solar, wind, and other renewable sources. It’s an ideal choice for investors looking to diversify their portfolio internationally with a focus on clean energy. The ETF’s global reach means it benefits from the growth of renewable energy markets around the world, making it a suitable option for those seeking exposure to the international clean energy landscape.

BMO Clean Energy Index ETF (ZCLN)

The BMO Clean Energy Index ETF (ZCLN) provides investors with exposure to a diversified portfolio of companies engaged in clean energy production and technology development. This ETF tracks the performance of the S&P Global Clean Energy Index, which includes companies from developed markets worldwide. ZCLN is designed for investors seeking to capitalize on the growth potential of the clean energy sector, including areas like solar, wind, and other renewable technologies. Its diversified approach across various companies and geographies helps mitigate risk while offering the potential for growth as the global demand for clean energy solutions increases.

Why Renewable Energy Stocks?

What are the best renewable and alternative energy stocks in Canada?”. Look at the top ten renewable energy stocks in your portfolio tracker Canada has and boost your earnings despite the relative underperformance of the past year. Best Renewable Energy Stock Canada “is a comprehensive guide to adding good renewable energy stocks to a dividend portfolio. It is characterized by high growth potential and strong dividend growth prospects.

Invest your money in renewables – energy stocks can speed up your research and give oil companies a run for their money and they can provide them with a run.