Two Easily Investable Energy Companies Worth Purchasing to Benefit from the Upcoming Energy Boost
The American power sector is at a critical juncture. After barely expanding during the past two decades, electricity consumption in the nation is projected to skyrocket over the next couple of decades. This explosion in demand is expected to drive substantial growth in renewable energy sources.
A handful of organizations are ideally situated to capitalize on the anticipated growth in U.S. power consumption, including NextEra Energy (NEE 0.55%) and Brookfield Renewable (BEPC 0.64%) (BEP -0.17%). In light of this, they are smart investment options to profit from the revitalization of the U.S. power sector.
Staggering statistics
Electricity usage in the U.S. has inched up marginally over the past two decades, increasing by 9% from 2000 to 2020 to 3.8 terawatt-hours (TWh). As per a recent projection by IHS, power consumption in the country will expand by a remarkable 2.1 TWh, or 55%, by 2040. Several factors will fuel this surge, such as the electrification of transportation, reshoring of manufacturing, and increased digitalization, including the expansion of energy-intensive AI data centers.
The country will likely need to establish a significant quantity of new electricity-generating capacity in the future, driven primarily by lower-carbon sources due to environmental concerns. According to one estimate, the country will require building 375 to 400 gigawatts (GW) of new renewable energy capacity over the next seven years alone. This is three times the amount of capacity built during the past seven years.
The preeminent U.S. renewable energy company
NextEra Energy is one of the few companies with the capacity and knowledge to develop substantial renewable energy capacity in the coming years. The company currently operates 38 GW of renewable energy and storage capacity across its electric utility, Florida Power & Light (FPL), and energy resources segments. This makes it one of the largest renewable energy-generating portfolios in the world.
The company's energy resources segment has 24 GW of projects in its pipeline that it anticipates completing over the next few years. Furthermore, it recently secured contracts to construct another 10.5 GW of projects for two significant corporate clients through 2030. While FPL is working to double its solar panel installation from 15 million (4 GW) in 2022 to 30 million panels by the following year.
NextEra Energy plans to more than double its renewables and storage capacity to 81 GW by 2027. In the long term, the company has over 300 GW of renewable and storage projects in its development pipeline. It also intends to install hundreds of millions of solar panels at FPL to generate 90 GW of power by 2045.
These investments should yield strong total returns for investors. NextEra Energy expects to grow its adjusted earnings per share at or near the upper limit of its 6% to 8% annual growth target range through 2027 while increasing its dividend (nearly 3% yield) by around 10% annually through 2026. In total, the company could generate double-digit total returns annually in the coming years.
A global influential player in clean energy
Brookfield Renewable is also among the few companies with the scale to be a major player in capitalizing on the anticipated surge in power demand. The company has 37 GW of operational capacity worldwide. While it has a global presence, Brookfield has a significant focus on the U.S. following several renewable energy developer acquisitions in recent years. It agreed to invest up to $2 billion in Scout Clean Energy and Standard Solar in 2022 and bought Duke Energy's commercial renewable energy platform for $1.1 billion in 2023.
The company currently has an astounding 200 GW of projects in various stages of development, including 65 GW in its advanced-stage pipeline. Brookfield expects to commission an average of 10 GW of capacity annually over the coming years. This includes 10.5 GW for Microsoft in the United States and Europe between 2026 and 2030.
These projects support its impressive growth profile. It expects development projects alone to increase its funds from operations (FFO)d per share annually by an average of 5% over the next several years. Add in higher power prices and accretive acquisitions, and Brookfield believes it can grow its FFO per share by more than 10% annually over the next decade. This should enable it to raise its dividend (nearly 5% yield) by 5% to 9% per year. In total, Brookfield Renewable could produce annual total returns in the mid-teens from now on.
Investors looking for opportunities in the booming renewable energy sector might considerNextEra Energy and Brookfield Renewable, two companies expected to benefit significantly from the anticipated growth in U.S. power consumption. WithNextEra Energy's ambitious plans to more than double its renewable energy and storage capacity and Brookfield Renewable's focus on capitalizing on the surge in demand through its extensive projects in various stages of development, these companies promise attractive total returns for investors interested in the finance and investing of money in sustainable energy solutions.
