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US Non-Hydro Generation to Rise 14% in 2020: Stocks in Focus

Archan Sarkar

Over the last decade, electricity generation from non-hydropower renewable sources, particularly wind and solar, has grown steadily in the United States. This is evident from the fact that nearly 90% of the increase in renewable electricity between 2008 and 2018 came from wind and solar generation, per a report by the U.S. Energy Information Administration (EIA).

Per the EIA, wind power generated 6.5% of the total electricity in 2018. Wind generation rose 400% to 275 million megawatt-hours (MWh) from the 2008 levels. Meanwhile, solar generation increased to 96 million MWh in 2018 from 2 million MWh in 2008 and accounted for 2.3% of the total electricity generated in 2018.

Factors Driving Non-Hydro Power Generation

Over the past few years, the U.S. wind energy market witnessed considerable growth on several factors like increasing corporate investments, reduced component costs and favorable tax credits. Per a report by National Renewable Energy Laboratory, wind energy investment in the United States has averaged nearly $13.6 billion annually in 2018, since 2006.

Moreover, improving project economics and favorable state policies have boosted offshore wind activities of late. Notably, these developments contribute a great deal to the growth of wind power generation in the country.

Meanwhile, deployment of utility-scale projects continues to be a major growth driver for the U.S. solar market. Favorable federal and state policies, declining solar module costs, among others, are factors contributing to solar power generation.

Non-Hydro Sources Growth in 2020 and Beyond

In 2016, renewables accounted for around 15% of the net U.S. electricity generation, with the bulk coming from hydropower sources. However, things are likely to change as wind power is expected to emerge as the leading source of renewable electricity by 2020, per EIA. Notably, the EIA currently expects wind, solar and other non-hydropower renewables to provide 10% of the total utility-scale generation in 2019 and 12% in 2020.

Solar power generation is on the rise as the number of solar installations in the United States surpassed 2 million in May this year. It is now expected to go beyond 3 million installations in 2021 and 4 million in 2023, per a report by the Wood Mackenzie Power & Renewables.

Per the EIA, electricity generation from renewables, principally wind and solar, is expected to grow 14% to 467 billion kWh in 2020 from 409 billion kilowatt hours (kWh) in 2019.

Stocks to Consider

Considering the abundant prospects of wind and solar power, we have zeroed in four stocks from the Utility - Electric Power industry that investors might want to keep a tab on. While these utilities are expanding their renewable generation portfolio, they also have favorable Zacks Rank and earnings prospects.

NextEra Energy NEE, the world’s largest producer of wind and solar energy, has a Zacks Rank #3 (Hold). It has an average earnings surprise of 2.92% for the last four quarters and an estimated long-term earnings growth rate of 8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Avangrid, Inc. AGR, a developer of wind projects in the United States, carries a Zacks Rank #3. It has a year-over-year earnings growth estimate of 8.55% for 2020 and an estimated long-term earnings growth rate of 7.5%.

Alliant Energy Corporation LNT, a developer of U.S. solar projects, has a Zacks Rank #3. It has a year-over-year earnings growth estimate of 7.74% for 2020 and an estimated long-term earnings growth rate of 5.5%.

Xcel Energy XEL, a developer of wind and solar energy projects, carries a Zacks Rank #3. It has a year-over-year earnings growth estimate of 6.55% for 2020 and an estimated long-term earnings growth rate of 4.9%.

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Xcel Energy Inc. (XEL) : Free Stock Analysis Report
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