Buying penny shares, however, could also give investors access to a growth hero of tomorrow. And this has the potential to turbocharge the returns made over the long term.

To Invinity and beyond

Investing in shares that play a role in the ‘green economy’ is one way investors can try to make big profits over the next decade.

I’ve sought to do this by buying renewable energy stock The Renewables Infrastructure Group. I have also invested in TI Fluid Systems, which makes lots of components for use in electric cars. I’m considering buying shares in penny stock Invinity Energy Systems (LSE: IES) too.

This UK share makes energy storage technology that ensures a constant stream of power supply. Energy production from renewable sources can fluctuate wildly according to when the wind blows and the sun shines. Invinity’s tech then can help prevent power outages from occurring.

Demand for the stock’s product, therefore, could rise strongly as the number of renewable energy farms across the world grows. But I like Invinity in particular because of its focus on vanadium flow batteries (VFBs).

Vanadium batteries

Lithium-ion batteries are the most widely used and therefore represent a threat to other technologies like VFBs. However, I’m backing interest in Invinity’s batteries to snowball given their superior durability, safety and long-term cost effectiveness.

Latest trading news from the company this week was highly encouraging on this front. Revenues soared almost 700% year-on-year in 2021, to £3.2m. And its sales pipeline had soared 152% between 2 November and 25 May to stand at 714.2 MWh.

Invinity plans to supercharge production over the next couple of years to keep sales soaring too. It’s why broker VSA Capital thinks revenues will rise more than fourfold to £14.1m in 2022 and then to £20.6m next year.

Risk vs reward

It’s important to acknowledge that Invinity isn’t tipped to turn a profit over the next 18 months at least. This can create higher risk for an investor, as share placings or taking on debt can be used by loss-making companies to soothe liquidity problems.

On balance, though, this is something I’d be happy to accept with Invinity. In my opinion, the potential rewards investors could receive more than make up for this risk.

Research suggests that the global VFB market will be worth $592.4m by 2026. That’s more that double the $237.5m that the industry is estimated to be worth today. If everything goes to plan then Invinity Energy Systems could have a big role to play in this rapidly growing market.

This particular company doesn’t actually produce power from renewable sources. But the energy storage technology it creates allows a constant source of electricity from intermittent sources like wind and solar.

Its technology is therefore essential for the widespread adoption of renewables. Our need for power doesn’t change according to whether the sun is shining or the wind is blowing. Invinity’s vanadium-based batteries allows producers to store, regulate and release electricity when conditions aren’t favourable for producing energy.

The bear case

Vanadium batteries aren’t the only way that renewable energy can be stored. Lithium-ion energy storage is also highly popular and this poses a threat to Invinity’s profits potential. 

It’s important to note too that Invinity is yet to turn a profit. And City analysts don’t think the business will move into the black until 2023 at the earliest. Any delays on this front could prove disastrous for the tech firm’s share price, and particularly if it means extra additional shares are issued to fund its work.

The bull case

Still, I’m highly encouraged by recent news flow that suggests Invinity’s route to profit remains on track. A few weeks ago, it successfully installed and energised the first part of the so-called Energy Superhub Oxford project’s flow battery. The battery will be the UK’s largest flow battery with a capacity of 5MW when finished. Completion is expected by the close of the year.

 The company’s sales pipeline continues to grow strongly and, as of mid-September, was up 18% from levels recorded since mid-May. As brokers at Canaccord noted, the pipeline is also double the levels reported since redT and Avalon merged to create Invinity Energy Systems in March 2020.

My verdict on this renewable stock

Like any UK share, Invinity carries its share of risk. Development problems can arise at any moment and competition in the energy market is huge and likely to keep growing.

That said, I think there’s a lot to like about this particular renewable energy stock. Project execution has so far been impressive, and customer interest in Invinity’s energy storage systems is growing rapidly. Analyst research suggests that the vanadium battery market will keep expanding quickly too. Analysts at Researchandmarkets.com think the vanadium redox battery market will be worth $4.8bn by 2027, up from just $235m last year.

Vanadium flow batteries have a longer life, are cheaper over the cost of the project, and are found to be safer than lithium-based equivalents. This is what could give Invinity the edge against its rivals offering non-vanadium technology and pave the way to explosive profits growth.

I think this renewable stock could help me make some sparkling returns in the coming years.

Against this backdrop, it’s no surprise that responsible investing — Environmental, Social and Governance (ESG) — is booming. According to M&G’s Pru brand, some 46% of its clients have shown an interest in ESG investing, with one in two saying their appetite for sustainable investments (such as renewable energy stocks) has grown since the Covid-19 outbreak.

Describing the “dramatic” growth in the popularity of ESG investments, M&G said the trend “has largely been fuelled by the climate emergency, growing scrutiny of company practices”. It also noted that “some governments [were] adopting carrot and stick policies to change consumers’ and companies’ behaviours in line with their commitments to the international community”.

The FTSE 100 firm also said the pandemic “has prompted a re-evaluation of ‘what matters most’.” This has prompted a change in investors’ financial priorities and has certainly boosted my interest in responsible investing.

5.4% dividend yields!

There are a number of top renewable energy stocks I’m looking to buy to ride the ESG train. One of these is Greencoat UK Wind (LSE: UKW), an investor in onshore and offshore wind farms across the country. The FTSE 250 company has a strong track record of acquisitions and its appetite for splashing the cash remains undimmed. Kepler Trust Intelligence notes that Greencoat UK Wind has “a significant pipeline of assets that it has committed to buy”.

This UK share will play a critical role in helping the government reach its goal of carbon neutrality by 2050. And despite the threat that operating in a highly-regulated environment brings, I think stock investors like me could do well with it in the process.

One final reason I love Greencoat UK Wind — today, this renewable energy stock boasts a 5.4% forward dividend yield.

Another top renewable energy stock I’d buy

Invinity Energy Systems (LSE: IES) isn’t involved in the business of producing green energy. But its role as a manufacturer of vanadium flow batteries still makes it an exciting renewable energy stock to buy.

Energy storage systems like Invinity’s are essential in the production of wind, solar and tidal energy. They can capture generated energy and distribute it when the wind stops blowing and the sun stops shining. This ensures a constant supply of power.

Lithium-ion batteries are hugely popular for this purpose, but vanadium-based ones are quickly growing in popularity. This is due to their superior durability, greater safety profile, and better cost effectiveness over the life of a project. This explains why Invinity’s commercial opportunity pipeline increased an impressive 30% between early March and late May. That said, the vanadium flow battery market is likely to face intense competition from iron flow batteries going forward.