Renewables to Lead US Electricity Generation: Stocks to Buy

·5 min read

In its latest Short Term Energy Outlook, the U.S. Energy Information Administration (EIA) projected that renewable energy will be the fastest-growing source of electricity generation in 2020. Notably, electricity generation from renewable energy sources is estimated to rise from 17% in 2019 to 21% in 2020.

On the other hand, coal’s share of electricity generation is expected to fall from 24% in 2019 to 17% in 2020.

Factors Driving Renewables’ Prospects

The projected increase in the share of renewables as a source of electricity generation in the United States can be attributed to expected additions to wind and solar generating capacity. EIA expects the electric power sector to add 23.2 gigawatts (GW) of new wind capacity and 12.6 GW of utility-scale solar capacity in 2020.

It is imperative to mention in this context that while the need for adopting clean energy to avoid the adversities of green house effect has been the primary catalyst driving renewables’ popularity as the fastest electricity generation source, rapidly plummeting cost of electricity generation has also been a reason. Such notable cost deceleration can be attributed to improved product design. For instance, wind turbines are now much larger and have much higher capacity factors. Another reason for the cost decline is improvement in manufacturing efficiency, which has lowered the cost of producing solar PV panels dramatically.

Specific to the United States, alongside more and more states enhancing their renewable standard portfolio, favorable federal tax incentives have been the primary policy driver for the growth of wind and solar during the past decade. Extension of the Production Tax Credit (PTC) and the federal Investment Tax Credit (ITC) for offshore wind energy are bolstering adoption of wind energy in the United States. Per a report by the Solar Energy Industries Association (SEIA), residential and commercial solar ITC has helped the U.S. solar industry grow by more than 10,000%  since it was implemented in 2006.

All these factors must have set the stage for analysts to predict that renewables will be America’s fastest growing source of electricity generator in 2020.

Stocks to Buy

Considering the aforementioned discussion, let us focus on a handful of companies that are working relentlessly to promote clean energy in the United States and hold a favorable Zacks Rank. Since solar and wind energy are dominating the U.S. renewable space right now, we have focused more on companies that are involved in generating power from these two energy sources. This along with their impressive earnings surprise history makes them worthy of addition to  investors’ portfolio.

Ameresco Inc. AMRC is a leading independent provider of comprehensive energy services, including energy efficiency, infrastructure upgrades as well as renewable energy solutions for businesses and organizations throughout North America and Europe.It is currently designing and constructing a wide range of renewable energy plants using LFG, wastewater treatment biogas, solar, biomass, other bio-derived fuels, wind and hydro sources of energy. This Zacks Rank #2 (Buy) company delivered average four-quarter positive earnings surprise of 26.84%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enphase Energy ENPH has revolutionized the U.S. solar industry by pioneering a semiconductor-based microinverter, which converts energy at the individual solar module level. It also manufactures and sells home energy solutions, which connect energy generation, energy storage and control and communications management on one intelligent platform.This Zacks Rank #2 company came up with an average four-quarter positive earnings surprise of 23.85%.

Canadian Solar Inc. CSIQ is a vertically integrated manufacturer of silicon ingots, wafers, cells, solar modules (panels) and custom-designed solar power applications. It has one of the world’s largest utility-scale solar project development platforms, with a track record of bringing into commercial operation over 5.6 GWp of solar power plants across six continents, as of Mar 31, 2020. This Zacks Rank #2 company has an average four-quarter positive earnings surprise of 79.89%.

Bloom Energy Corp. BE: This company’s proprietary solid oxide fuel cell technology, Bloom Energy Server is a stationary power generation platform capable of delivering highly reliable, uninterrupted, 24x7 power that is clean and sustainable. It converts fuel into electricity without combustion at the highest efficiency of any power solution available in the world today. This Zacks Rank #1 company has an average four-quarter positive earnings surprise of 75.40%.

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