Renewable stocks in focus as government subsidises onshore and solar projects

The UK government has decided to double the capacity of renewable energy projects which can ask for support in the next round of subsidy auctions scheduled next year after it consented to include solar power and onshore wind projects for the first time since 2015. According to the announcement, 12 GW of additional renewable energy capacity would be awarded contracts in Britain’s fourth contract-for-difference (CfD) auction to be held next year. This quantum would be sufficient to supply power to 20 million electric cars on the country’s roads in a year.

In 2019, a corresponding capacity totalling 5.8 GW was attained in the auction held during September. The government holds these subsidy auctions once every year.

The contract for difference (CfD) for renewable energy technologies such as offshore wind will open in late 2021. Under the auction, a qualifying project is guaranteed a minimum floor price at which it may sell power.

All About the Project

As announced in March, it will be the first time in six years that the solar and onshore wind projects will be allowed to bid and also in a first, floating offshore wind projects can bid for contracts. The coal-burning power stations that have been transformed to generate biomass will not be allowed to bid for future CfD round.

The next round of subsidy auctions will consist of three auctions called pots, which are designed for separate renewable energy technologies to bid for the contracts. There will be one pot, i.e., Pot 1 which will consist of offshore wind projects which are well established.

The less established and advanced conversion technologies such as energy-from-waste plants, floating offshore windfarms, and tidal stream projects will be placed in the next pot, i.e., Pot 2.

Finally, the third pot will permit the onshore wind and solar farms to bid for the subsidy contract. Early this year, the government had consented to set down its opposition to the projects. UK energy minister Kwasi Kwarteng had said that the new auction would contribute to the 10-point climate plan of PM Boris Johnson to help the UK in achieving its net zero carbon emissions by 2050. The climate plan talks about increasing the UK offshore windfarm capacity by four times to 40GW in the next 10 years and plans to run millions of electric vehicles on British roads and also of green hydrogen.

Since the UK government is focusing on renewable energy projects and unfolding so many plans for the sector, investing in renewable energy stocks could be a good option for the investors.

Below, we will be putting limelight on some prominent energy sector stocks which have been delivering a good return:

Powerhouse Energy Group Plc: 1-year return of 827.54

Incorporated in 2000 in the UK, Powerhouse Energy Group PLC has successfully developed a process technology known as Distributed Modular Generation, which enables conversion of non-recyclable plastic waste and tires into synthetic gas. The gas so produced can be used to generate power. 

In the H1 results for the period ending 30 June, the company completed the planning approval process of the Protos Energy Park application of the DMG® technology.

The stock of Powerhouse Energy Group PLC (LON:PHE) was trading at GBX 3.19 on 27 November at 2:05 PM. The company had a market capitalisation of £118.88 million. A positive return on price of 527.45 was delivered by the AIM stock on a YTD basis. 

ITM Power PLC: 1-year return of 453.21

UK-based ITM Power PLC is engaged in designing and manufacturing integrated hydrogen energy solutions for production of clean fuel and storage of energy.

The company has entered into a commercial partnership agreement with Snam S.p.A. with a £30 million strategic equity investment in the company in the full year period ending 30 April. The company incurred a loss in the adjusted EBITDA to £18.1 million (2019: loss £7.3 million). The cash position of the company stood at £39.9 million (2019: £5.2 million).

The ITM Power PLC (LON:ITM) stock was trading at GBX 370.00 on 27 November at 2:14 PM. It had a total market capitalization of £118.88 million. A positive return on price of 368.52 per cent was delivered by the AIM stock on a YTD basis.

EQTEC PLC: 1-year return of 428.57

Established in 2008, EQTEC PLC is a clean energy developer which develops, identifies, and operates power plants in Ireland and the UK with the use of clean energy tools. 

The group reported a revenue of €0.77 million (H2 2019: €1.56 million) in the half yearly result for the period ending 30 June. The company witnessed an increase in the cash generation, standing at €1.7 million (31 December 2019: €0.5 million).  An agreement was signed by EQTEC with Agrigas Energy SA, a Greek project developer for the construction of a 0.5 MWe gasification installation in Larissa, Greece.

The EQTEC PLC (LON:EQT) stock was trading at GBX 0.77 on 27 November at 2:19 PM. It had a total market capitalisation of £50.83 million. A positive return on price of 322.86 per cent was delivered by the AIM stock on a YTD basis.