The UK’s approval of the One Earth solar farm, alongside a wave of government backed clean energy projects, is shining a spotlight on companies exposed to this surge in large scale renewables activity. With up to 740MW planned to power around 200,000 homes, this project and others like it are helping to channel fresh capital, policy attention and grid capacity into solar and green infrastructure. This article walks through 3 stocks from the UK Solar Farm Expansion Beneficiaries and Renewable Energy Plays screener that are closely tied to these developments, helping you decide which exposures might fit, or not fit, your portfolio.

NextEnergy Solar Fund (LSE:NESF)

Overview: NextEnergy Solar Fund is a UK listed investment company that owns and finances mainly ground based, utility scale solar power plants and related energy storage assets, focusing on operating projects but with some exposure to developments still being built. It typically seeks controlling stakes in UK solar infrastructure, using a mix of equity and shareholder loans to back assets across agricultural, industrial and commercial sites.

Operations: NextEnergy Solar Fund currently generates about £33.3m in revenue from investments in solar and energy storage infrastructure assets, all from the United Kingdom.

Market Cap: £270.1m

NextEnergy Solar Fund sits within the UK’s push for large scale renewables, including projects like the One Earth solar farm, and offers pure play exposure to solar and battery assets at a time when the government is backing more clean energy capacity. Revenue is forecast to grow strongly and the fund has shifted to dividends based on 75% of operating free cash flow. However, it remains loss making with a recent net loss of £61m and a history of declining earnings, an 18% headline yield that has raised questions about sustainability, and a relatively high P/S that suggests investors are already paying a premium. The key issue is whether sector support and the new dividend approach can balance these risks over time.

NextEnergy Solar Fund’s high yield and new cash flow based dividend policy raise big questions about what is really driving returns here, and the 1 key reward and 2 important warning signs (1 is major!) could reveal the twist investors are missing

SolarEdge Technologies (SEDG)

Overview: SolarEdge Technologies is an energy technology company that supplies power optimizers, inverters, storage systems, EV chargers and energy management software that sit behind solar panels in homes, businesses and large sites. Alongside the hardware, it sells monitoring and configuration apps and grid services that help installers and end users manage how much solar power they generate, store and consume.

Operations: SolarEdge generates about US$1.28b in revenue from electric equipment, with around US$744.2m from the United States, US$378.6m from Europe and US$152.6m from other international markets.

Market Cap: US$3.22b

SolarEdge Technologies sits at the intersection of large scale projects like the UK’s One Earth solar farm and rooftop solar growth, supplying the inverters, storage and software that turn panels into usable power. The company is still reporting losses. Analysts expect earnings to grow and for SolarEdge to become profitable within three years, helped by potential benefits from a proposed US ban on new Chinese made solar inverters and policy support in Europe. At the same time, investors need to weigh a very high forward P/E multiple, ongoing cash burn, intense price competition and an inexperienced management team. The tension between these growth drivers and the risks is central to the investment debate on SolarEdge.

SolarEdge’s mix of high growth hopes, losses and a rich forward P/E suggests investors might be missing a crucial tension between upside and risk. The 2 key rewards and 1 important warning sign could surface the factor that flips the story.

Canadian Solar (CSIQ)

Overview: Canadian Solar is a global solar and battery energy storage company that designs and manufactures panels, storage systems and inverters, and also develops, builds and operates large scale solar and storage projects under its Recurrent Energy arm for utilities, corporates and other energy buyers.

Market Cap: US$1.03b

Canadian Solar gives you exposure to both the hardware behind large projects and the pipelines that feed them, at a time when approvals like the UK’s One Earth solar farm and Canadian Solar’s own Tillbridge mega project are helping to support demand for panels and storage. A large global development and storage pipeline, strong policy support in multiple regions and a wide valuation gap versus peers are key attractions. However, current losses, heavy use of borrowing and leadership changes at Recurrent Energy mean the path to more stable earnings is not straightforward. The real question is whether today’s risks and volatility are fairly reflected in the price or whether investors are underestimating how this pipeline could re-rate Canadian Solar over time.

Canadian Solar’s global pipeline and wide valuation gap suggest the market may be missing a key angle on risk versus reward, and the 3 key rewards and 2 important warning signs (1 is major!) could highlight a turning point many investors are overlooking

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.