Alternative Energy Sector: Renewables and Their Growth

In this episode of the Cents of Security podcast, Cassidy Clement speaks with Scott Bauer, CEO of Prosper Trading Academy LLC, about the rise of alternative and renewable energy. From solar and wind to nuclear and biomass, we explore what’s driving this sector’s rapid growth—and how investors can gain exposure.

Summary – Cents of Security Podcasts Ep. 108

Cassidy Clement

Welcome back to the Cents of Security podcast. I’m Cassidy Clement, Senior Manager of SEO and Content at Interactive Brokers, and today I’m your host for the podcast. Our guest is Scott Bower, CEO of Prosper Trading Academy, LLC.

Alternative and renewable energy have gained much momentum in the past several years. But what exactly are the drivers of this space? How can one invest in the sector? In this episode, we’re going to discuss all that and more.

Welcome back to the program, Scott.

Scott Bauer

It is a pleasure to be here. Thanks for having me.

Cassidy Clement

Yeah, of course. So, in the wild world of energy—and I guess you could say the hot topic of AI and semiconductors—the correlating topic is energy. How do we do this? How do we actually map out how much energy is needed? And how do we work in a way that’s actually going to incorporate alternative routes and renewables?

That was the main inception of this podcast: looking at commentary and going, “Wait a second. How do we power this?”

Scott Bauer

Isn’t that the $100,000 million question? And as you said, AI and the like are just going to be taking up more and more energy.

When we look at the alternative energy sector, we’re looking at things such as solar and wind, hydro, geothermal, biomass—which I don’t even know what that is—and then obviously, the real hot button recently has been nuclear. There is a lot of resources that make that up, and hopefully, we’ll be able to accommodate all of the need that we are going to see not just in the coming months but in the coming years, as AI really expands.

Cassidy Clement

So, from your experience and your background, how exactly do you see the energies of the alternative sector in the day-to-day of the financial market?

Because I think a lot of people listening—they may have taken maybe an environmental science course in college, or maybe they’re just familiar with it because of current events or what’s in the zeitgeist now. So, what exactly makes up the energies of that sector? And what are those that are aligned with the financial aspect, which is the investment?

Scott Bauer

Sure. You know, what we have to understand is right now, renewables or alternative energy accounts for about 13% of the world’s energy. We can look at that one of two ways and say, “Wow, has this been growing and growing recently over the last couple years?” or “Wow, there’s a lot more room for this to go.”

So, the switch to clean energy sources like wind and solar, hydrogen—they not only help reduce the impact of climate change, but they also address air pollution, health challenges, and the like. Anybody that wanted to look at this sector, not just for the feel-good nature of it—right, like we’re doing something really good to help the environment—but from a money-making standpoint or an investment standpoint, there’s a lot of opportunity out there.

Cassidy Clement

So, when we’re talking about the investment standpoint, what are the ways that investors could get exposure to the energy space? A lot of people may initially think ETFs, but what are the other elements or ways of entry to gain exposure to the sectors?

Scott Bauer

Yeah, I actually think that for someone casually looking into this, the ETFs are the way to go because you don’t have to then necessarily choose just one individual stock or one or two different stocks. So, if you’re really excited about investing in wind, in solar, you can look at one of these mutual funds or an ETF.

And for those that don’t know, these funds are like baskets of stocks. So, one fund, you get exposure to many companies all at once. And ESG funds—they’re graded in terms of their performance when it comes to Environmental, Social, and Governance factors.

That’s a hot topic.

That is a really hot topic. Now, there’s upside to doing that. There’s also some downside—that maybe if you’re in one of these funds, it doesn’t include the next big stock that maybe takes off, whether it’s nuclear, solar, whatever it is. So that’s probably the easiest entry for someone that wants to get into this space.

Otherwise, you’ve got to do your due diligence and really look at the stocks that make up this sector. As I mentioned earlier, the nuclear stocks right now are the ones that are on everyone’s hot button.

Cassidy Clement

So, in the past 25 years, it seems—based on my research—that’s where there’s been a real hotbed of growth. We mentioned AI and semiconductors. You also mentioned ESG. But another area that I found interesting was the energy independence area, which is countries realizing, “Okay, we’re moving towards a very technologically forward growth, and what we need to do is make sure that we have the energy to sustain this,” and finding a way to do this—we’ll say in-house.

But what are the other drivers that you’ve seen within these spaces or this sector?

Scott Bauer

Sure. So, as you just said, technology is first and foremost. And technological innovation—that does play a key role in this energy transition. And the developments that we have seen in solar panels, wind turbines, battery storage—boy, that has just grown and grown.

The economic landscape worldwide really is shifting towards renewables, which are becoming more cost-competitive than fossil fuels. Just like any sort of new product or new transition, things get cheaper and cheaper along the way.

Investment patterns—places that people are putting their money—they’re increasingly favoring sustainable energy projects for long-term benefits, lower environmental impact.

There is definitely concern about policy and regulatory frameworks. It’s actually in the news right now—some of the tax incentives that are out there that may get taken away. But this is definitely a place that I believe has a ton of long-term growth still.

Cassidy Clement

So, when somebody is looking to incorporate alternative energy or renewables, or even just consider it as part of a driver—something that’s an impact, something that’s a blocker—of their current financial strategy, what are some things to keep in mind? I know you mentioned cost and you mentioned legislation, but it seems like it goes a little bit deeper than that, especially when you look at it at a broad scope.

Scott Bauer

Absolutely. And nobody can look at this as “You’re going to make a fortune overnight.” Even though I believe there’s so much growth to this sector, it’s going to take a while.

If it’s really something that I look at—and what I would tell someone, whether it’s one of my kids or anybody looking to invest—think about the long term. Don’t say, “Hey, how am I going to make X% over the next 3 months, 6 months, year?”

So, there’s a lot of consumer enthusiasm around energy. And energy companies are finally now seeing their initial investment in renewables starting to pay some dividends, which means they’re making some money and they’re going to keep putting that into capital expenditures—bigger projects.

So, this is definitely something that I look at with a five-year, maybe even a ten-year time horizon. So, if you’re looking for a sector that could be the next Mag 7 or the next AI sector, I really think this has some possibility here. But it’s not going to happen overnight.

Cassidy Clement

Yeah, those are some great points. I think a lot of people initially look at these types of topics—especially when it comes to ESG—because of how it’s been about a 5-to-10-year time where it’s morphed into what it is now. It took time for people to understand the terminology, understand what was associated to it.

And there’s elements of FOMO because now the need is higher than ever. At least from what I’ve come to know as reality as a young adult, there’s more need now more than ever for certain companies to have a large amount of energy at their disposal—especially these companies that are in areas that have large valuations.

Because when you start to get a valuation, the idea is you want to meet and exceed it consistently. So, if you don’t have the correct amount of energy for your product to expand, for people to be able to utilize it, there’s going to be a little bit of a concern there.

So, it’s definitely interesting to look at it—how it’s morphed over the years, especially with the push and pull of adoption in this space.

Scott Bauer

Oh, no doubt about it. And while the cost of equipment such as solar panels continues to go down—just as technology matures in any area, those prices come down—the cost of actually harnessing renewable energy, that’s still very expensive.

And that, to me, is a place that over the next— the time horizon I was talking about—three years, five years, that’s really where I think big economies of scale can come into this sector. And that’s where I really think some nice investment returns could possibly be down the road, as those costs of harnessing that energy become cheaper and cheaper.

Cassidy Clement

Yeah, you hit on some great points today, Scott. Thanks for joining us.

Scott Bauer

My pleasure. Thank you so much for having me.

Yeah, sure. And as always, listeners can learn more about an array of financial topics for free at interactivebrokers.com/campus. Follow us on your favorite podcast network and feel free to leave us a rating or review. Thanks for listening, everyone.