Why This Renewable Energy Sector Could Be the Best Long-Term Investment

Renewable energy assets are strong future investments, but this one type looks like it’s getting a lot of investment from across the border.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 2, 2023 4:50 pm EDT

Renewable energy is the future. There really is no longer any doubt about that. However, there are many versions of this future as this point. While there are many renewable energy solutions out there, it’s likley that the world will end up sticking to very few.

That’s because these few will need to prove they can create the most power, for the lowest cost. And that means if you’re an investor, you’re going to need to start following the money moving towards these projects. One such project has received a lot of government money.

A solar cell panel generates power in a country mountain landscape. — Source: Getty Images

Big government money

Canada has some cash, sure, but the biggest and best money is going to come from the United States. President Biden created an economic platform built around creating clean energy solutions. A whopping US$370 billion of incentives were passed in Congress through the Inflation Reduction Act last year. This was to reach the goal of generating half of carbon emissions by 2030, compared to 2005 levels.

Part of this incentive program included the approval of an offshore wind project in Virginia. It’s the fifth offshore wind project approved by Biden’s administration, with 176 wind turbines set to be up and running 2,600 megawatts by 2026.

Yet despite the funding from the government and government approval, inflation and interest rates remain an issue for offshore wind farms. Even so, it could be a strong long-term investment for today’s investor.

A great investment, for a great reason

Offshore wind farms are a strong solution to the renewable energy crisis. They create clean energy, and tons of it. This is because the winds on the open water are far higher than those on land. What’s more, we need land. The world is only getting more populated, and we will continue to need land available to both house and feed individuals.

This is why Canadians should consider investing in companies that create offshore wind farms. While these companies aren’t doing well now, they certainly should be in the near future. Especially with so much cash coming their way.

NPI stock

If there was one then I would consider today, it should be Northland Power (TSX:NPI). NPI stock is facing the same issues of high inflation and interest rates right now. Plus, it’s been fixing its turbines out east, providing a reason for investors to drop the stock in a volatile market.

Even so, once this is all said and done, NPI stock will be attractive in the years to come. Offshore wind farms could be the way of the future of clean power sources. Ones that provide large amounts of power, while taking up little room on land. Meanwhile, right now you’ll get access to a monthly paying dividend stock with a 6.16% dividend yield, trading at just 11.5 times earnings as of writing.

So while the world continues to adjust to the economic volatility of today, continue to think of the future. This future should seriously consider NPI stock as a huge win, that will provide you with massive passive income if you wait for its recovery.