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Best Solar Energy Stocks? 2 That Could Blaze, Thanks to Biden
Stock Analysis & Ideas

Best Solar Energy Stocks? 2 That Could Blaze, Thanks to Biden

Story Highlights

The Joe Biden government has taken serious but necessary steps related to the U.S. solar industry. It will be interesting to see how the decisions will impact established players in the industry.

In the event of climate changes visible worldwide, the growing need for cleaner sources of energy cannot be avoided. Advanced technologies are being developed across the globe to curtail the impact of greenhouse gases on the environment.

In the United States, the Joe Biden government has invested heavily in offshore wind, nuclear and clean hydrogen technologies. Also, the government is giving importance to solar power. By 2024, the Biden government aims to increase its in-house manufacturing capacity of solar energy to 22.5 gigawatts from the present 7.5 gigawatts.

To accomplish this target, the White House made critical announcements related to the solar industry on June 6, 2022 (Monday).

Firstly, the Biden government has decided to let go of certain duties on the import of solar parts, including cells and modules, from Vietnam, Cambodia, Thailand, and Malaysia.

This relaxation, which aims to support the country’s existing solar projects, has been allowed for just 24 months. It is worth mentioning that this move will not interfere with the Commerce Department’s investigation of whether China is foul playing by routing its production through the four Asian countries mentioned above.

Secondly, the government has implemented the Defense Production Act to boost the domestic manufacturing of solar panels and parts. It is also working to get Congress’ support on tax cuts and investments related matters for the clean energy industry.

At this juncture, it will interesting to know how the decisions impact energy companies in the United States, especially when some resentments seem to be surfacing from domestic manufacturers of solar parts. However, these could be only short term.

Now, let us discuss two U.S. utilities — NextEra Energy, Inc. (NYSE: NEE) and Xcel Energy Inc. (NASDAQ: XEL) — that have significant exposure to the solar energy space in the U.S.

NextEra Energy

The Florida-based utility is one of the leading providers of clean energy in the United States. It conducts its operations mainly through Florida Power & Light Company and NextEra Energy Resources, LLC.

At the end of Q1 of 2022, FPL’s total solar portfolio was >3,600 MW. It is also working on further strengthening its portfolio by 9,500 MW. 

NextEra Energy Resources, LLC — one of the largest producers of the sun- and wind-dependant renewable energy — expects to add 11.8 GW to 14.4 GW of solar energy by 2024.

Following the announcements on Monday, NextEra Energy’s President and CEO, John Ketchum, said, “The Biden administration’s announcement of a two-year pause on new solar tariffs is an important step to help the solar industry recover from the uncertainty of the last three months.”

As per the TipRanks Risk Analysis tool, NEE’s Legal & Regulatory risk category contributes 11 risks to the total 50 risks identified for the stock. Under this category, the company is exposed to risks related to regulations and environmental or social.

Despite its risks, NextEra Energy has a Strong Buy consensus rating based on 10 Buys and three Holds. NEE’s average price target of $92.15 suggests 14.91% upside from current levels. It has a ‘Perfect 10’ smart score on TipRanks, indicating that the stock is likely to outperform the market. Shares of this $157.5-billion utility have grown 10.7% over the past year.

Xcel Energy

The $40.7-billion utility generates electricity through multiple sources, including solar, nuclear, coal, and natural gas. It is headquartered in Minnesota.

The company plans an 80% reduction in its carbon footprint by 2030, while it anticipates eliminating the use of coal for energy by 2034. Its portfolio is forecast to include 67% renewable energy by 2030 (comprising mainly solar and wind sources), compared with just 36% in 2021.

As per TipRanks, XEL is exposed to six risks under the Legal & Regulatory category. The company could face challenges related to regulations and environmental or social.

XEL has a ‘Perfect 10’ smart score on TipRanks, suggesting that the stock has strong potential to outperform the market.

Overall, the Street has a Moderate Buy consensus rating on the stock based on five Buys, three Holds, and one Sell. XEL’s price target of $77.78 implies 4.11% upside potential from current levels. Shares of XEL have climbed 6.6% over the past year.

Conclusion

Monday’s announcements by the Biden-led government are expected to benefit clean energy providers in the United States, especially those who rely heavily on the imports of solar parts.

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