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DTE Energy (DTE) to Raise Generation Capacity in Michigan

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DTE Energy Company DTE unveils plans to double its electricity generation capacity from renewable resources of energy in the State of Michigan by 2022. The proposal is part of the company’s 2018 Renewable Energy Plan, which was submitted to the Michigan Public Service Commission on Mar 30.  

The plan is in sync with DTE Energy’s earlier announced initiative to lower carbon emissions. Notably, the company projects to achieve this goal by reducing carbon emissions from its power plants up to 30%, 45%, 75% and more than 80% by early 2020s, 2030, 2040, and 2050, respectively.

If approved, these projects will enable DTE Energy to produce 2,000 megawatts (MW) of renewable electricity along with boosting investments of more than $1.7 billion in Michigan. The entire work is scheduled to be completed by 2022, post regulatory nod.

2018 Renewable Energy Plan

Per the recently submitted Renewable Energy Plan, DTE Energy intends to generate additional 1,000 MW of electricity from new wind and solar projects in Michigan. These projects include the company’s Pine River and Polaris wind parks, which have the combined capacity to generate 330 MW. While Pine River is expected to commence commercial operations later in 2018, Polaris will be operational in 2019.

The company plans to build two wind parks by 2022 that will produce around 375 MW of electricity and begin operations in 2021 and 2022. This includes a wind project with a capacity to generate 300 MW for large commercial customers.

The plan has provisions for the installation of approximately 15 MW of new Michigan-based solar capacity over the next three years, which will enhance DTE Energy’s solar capacity by almost 25%. This includes the launch of a pilot program for battery storage technology to improve the overall reliability of energy resources.

Our View

The recent filing outlines DTE Energy’s efforts to meet Michigan's Renewable Portfolio Standard (RPS) that requires the state’s electricity providers to generate 15% of their retail electricity sales from renewable energy resources by 2021. Notably, the company successfully lowered its carbon emissions in the last decade up to 25%, courtesy of investments worth $2.5 billion in Michigan and the addition of 1,000 megawatts of wind and solar capacity.

In fact, DTE Energy is investing steadily to enhance its renewable generation assets. Over the next 15 years, DTE Electric plans to lower coal-fired generation and boost natural gas-fired generation and renewables mix. In this context, DTE Electric retired four coal-fired generation units at its Trenton Channel, River Rouge and St. Clair facilities and announced plans to retire by 2023. The units at the Belle River and Monroe facilities are expected to be retired by 2040. These facilities will be replaced with natural gas-fired generation and renewables.

Moreover, the recent tax reform has compelled the company to reduce electricity and gas rates. On Jan 23, 2018, DTE Energy announced that it has reduced its electricity and gas rates by 3% to pass on the tax savings to its customers. This is expected to widen the company’s customer base. The gains from lower tax rate will enable it to upgrade its infrastructure and invest in clean energy generation.

We expect the recent developments to enable DTE Energy to achieve its target of reducing, carbon emissions by 80% in 2050 by incorporating new renewable energy projects and eventually transitioning its power sources from coal to natural gas as well as renewable.

Price Performance

DTE Energy’s shares have gained 2% in the last 12 months, against the broader industry’s decline of 2.9%. The outperformance can be attributed to the company’s disciplined capital spending program and investments to enhance renewable generation assets.

Zacks Rank & Key Picks    

DTE Energy carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are CenterPoint Energy CNP and Dynegy DYN and Exelon Corporation EXC. CenterPoint Energy and Dynegy sport a Zacks Rank #1 (Strong Buy), while Exelon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CenterPoint Energy recorded an average positive earnings surprise of 11.50% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 9.9% to $1.55 in the last 90 days.

Exelon’s long-term earnings growth rate is 5%. The Zacks Consensus Estimate for 2018 earnings has risen by 7.7% to $3.07 in the last 90 days.

Dynergy recorded a positive earnings surprise of 103% in the last reported quarter. The Zacks Consensus Estimate for 2018 earnings rose by 244.8% to $1.00 in the last 90 days.

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