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Xcel Energy to Invest in Wind Energy to Lessen Emission

Zacks Equity Research

Xcel Energy XEL has announced an ambitious plan to add 3,380 megawatts (MWs) of wind generation to its existing system. The company aims to build 11 new wind firms in seven states to supply more clean energy to its customers.

The above project is a part of the company’s target to invest about $3.5 billion in renewables over the next five years.

Plan in Details

The company intends to add new wind firms in states in the Southwest, the Upper Midwest and Colorado. These firms are expected to come online by 2021 and increase Xcel Energy’s wind generation contribution to 35% of its total energy mix.

Apart from being a clean source of energy, these projects will also lead to substantial savings in customer energy bills. The 1,230 MW wind projects in the Southwest states—Texas and New Mexico—will save $2.8 billion for customers over a 30 year period.

The 1,550 MW projects in Upper Midwest states—Minnesota, North Dakota, South Dakota and Iowa—will save $4.0 billion in customer energy bills over the life of the project, while the 600 MW project in Colorado will similarly save $1.1 billion.

The company expects at least a 45% companywide reduction in carbon emissions levels by 2021, if it is able to fully implement approved and proposed renewable energy plans.

Production Tax Credits

Production Tax Credit (PTC) is a federal performance-based incentive that has helped the U.S. wind industry to lead the clean energy market. Nearly 18 gigawatts of wind power capacity are now under construction or in advanced development in the U.S, primarily due to the extension of this tax credit.

Xcel Energy will benefit from utilizing PTCs to secure low wind energy prices.

Increase in Renewable Projects

We have noticed a gradual increase in renewable source usage to produce power in the U.S. The gradual drop in expenses from emission-less as well as renewable-source power generations are the primary reasons behind the higher usage of renewable energy sources.

As per the U.S. Energy Information Administration (EIA), wind energy capacity at the end of 2016 was 81 gigawatts (GW), which is expected to go up to 95 GW by the end of 2018.

Price Movement

Xcel Energy shares gained 7.9% over the last one year, compared with the Utility-Electric Power industry loss of 0.0%.

The Zacks rank #3 (Hold) company continues to substantially invest in its utility assets to provide reliable services to its customers and effectively meet rising electricity demand. The company’s capital expenditure of $18.4 billion (for 2017 through 2021) is directed toward transmission, distribution, electric generation and renewable projects. Sizeable investments are expected to drive rate base growth of 5.4% compounded annually, thereby aiding the top line.

Stocks to Consider

Some better-ranked operators in the Utility–Electric Power industry are NextEra Energy NEE, Entergy Corporation ETR and CenterPoint Energy Inc. CNP.

All the above-mentioned companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NextEra Energy surpassed earnings estimates in three out of the last four quarters, with an average positive surprise of 4.32%. Its 2017 Zacks Consensus Estimate moved by 1.1% to $6.66 per share in the last 60 days.

Entergy Corporation, a Zacks Rank #2 stock, surpassed earnings estimates in the last four quarters, with an average positive surprise of 104.4%. Its 2017 Zacks Consensus Estimate moved by 9.1% to $5.02 per share in the last 60 days.

CenterPoint Energy Inc., another Zacks Rank #2 stock, surpassed earnings estimates in two out of the last four quarters, with an average positive surprise of 0.4%. Its 2017 Zacks Consensus Estimate moved by 1.6% to $1.29 per share in the last 60 days.

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CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
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