3 Top Energy Stocks to Buy Right Now

The energy industry is in the midst of a tectonic shift away from fossil fuels and toward renewables, fueled by growing climate change worries and a dramatic drop in costs. Because of those factors, renewable energy companies are growing briskly and appear poised to continue doing so for years to come. Given the growth that's up ahead, now is a great time to buy clean energy stocks, with Tesla (NASDAQ: TSLA), TerraForm Power (NASDAQ: TERP), and SunPower (NASDAQ: SPWR) being three that we believe have the power to outperform from here.

Tesla is about more than just cars

Rich Smith (Tesla, Inc.): There's a non-zero chance that I'm going to regret this, but I think I'll pick Tesla as my top energy stock to buy right now. (And no, not just because Elon Musk is opening a roller rink).

Solar panels with wind turbines and an electricity pylon at sunset.
Solar panels with wind turbines and an electricity pylon at sunset.

Image source: Getty Images.

Rather, as I explained last week, I think there's a good chance 2018 will be a breakout year for Tesla. First off, there's the thing that everybody knows about, and everybody is waiting for: Tesla's Model 3 sedan. Tesla's failure to get Model 3 produced at promised production rates weighed heavily on the stock last year. But now Musk has given himself another six months in which to try to get production unstuck. Given time, I think he'll succeed.

What interests me more about Tesla, though, is its role in energy infrastructure. Last year, Tesla succeeded in building a backup battery system for Australia for $50 million. It did so just in time to (a) win a bet that Musk made, and (b) head off not one, but at least two separate electricity blackouts before they could knock South Australia's grid offline.

Here in the U.S., power outages cost Americans an estimated $150 billion a year in spoiled food, lost productivity, damage to and from burst and frozen water pipes, and so on. If Tesla markets its new Powerpack utility-scale batteries as a solution to this problem, I see that as a strong argument in favor of more utilities -- not just abroad, but right here in the U.S. -- hiring Tesla to build them backup battery systems. At $50 million apiece, success in this one venture could make up for a lot of unsold Model 3s.

A plan to outperform

Matt DiLallo (TerraForm Power): Wind and solar power generator TerraForm Power has burned investors over the years, shedding nearly two-thirds of its value since going public in 2014. However, that's mainly because the focus of company's former parent was on expanding as quickly as possible no matter the cost instead of creating value for investors. Because of that, TerraForm issued mounds of new stock and debt to buy wind and solar facilities, often paying a high price for both capital and the assets it acquired.