Monday is shaping up to be a bad day to own renewable energy stocks. Actions of the operator of hydroelectric, wind and solar power plants Brookfield Renewable Energy (NYSE:BEPC) fell 4.1% through 11:20 a.m. ET, while the small hydrogen company Plug in the power (NASDAQ: CAP) and solar energy supplier Solar power (NASDAQ:SPWR) sank 6.3% and 8.7%, respectively.
To find out why, let’s open the pages of USA todayThe Sunday edition of , which reported that “U.S. counties are blocking the future of renewable energy.”
The vast potential of American renewable energy
This story begins happily, with USA today reminding readers that America is a potential renewable energy powerhouse (so to speak). Of the 2.9 million square miles that make up the United States, if we were to cover just 10,424 of those square miles – about a third of 1% of America’s landmass – with solar panels and wind turbines, this would generate enough clean energy. to cover 100% of our electricity needs. And that’s exactly what the Biden administration has proposed doing, setting a goal of producing 100% of America’s energy from non-fossil renewable energy sources by 2035, just ten years from now. years.
Now here’s the bad news: According to the U.S. Energy Information Administration (EIA), we won’t meet that goal.
Despite data showing that the cost per megawatt hour of large-scale wind and solar power generation is now cheaper than coal-fired power generation, natural gas, or even nuclear power, a NIMBY (not in my backyard) movement is sweeping the country. In 2023, almost as many counties passed laws blocking new solar farms as began generating solar power within their borders, while in 2022, more Counties blocked wind farms before they started producing them.
Currently, through a combination of moratoriums, bans, project permitting regulations, and other restrictions, new large-scale solar and wind projects are effectively prohibited in 15% of U.S. counties. And these include some of the counties best located to produce solar power (i.e. the sunny southwest), as well as those best located to produce wind power (i.e. i.e. the windy Midwest).
What does this mean for renewable energy stocks?
Now it’s not all bad news. While NIMBY movements are holding back green energy development in 15% of U.S. counties, that still leaves the vast majority of the country open to development — and new projects. are being announced all the time. Moreover, what can be banned can also be banned, if voters can be convinced that cheap, clean electricity might actually be a good thing – good enough that they won’t be bothered by building electricity. ‘a power station right next door.
But today, renewable energy investors may feel like the wind has taken their sails out of their sails (so to speak). If you bought stock in Brookfield Renewable, for example, under the assumption that it is a renewable energy utility, and that in just 11 short years the entire United States will be renewable , well, it’s probably depressing to hear the EIA tell you that in fact, it’s not going to happen. This blows up the investment thesis a bit – or at least delays it. Similar concerns would likely plague you if you were betting solely on the solar side of this thesis and buying SunPower stock.
I don’t really understand why USA todayThe article on renewable energies would worry Plug Power shareholders today. The paper doesn’t say a word about hydrogen energy or fuel cells, after all. Then again, unlike Brookfield and SunPower — both of which were profitable as recently as 2022, and could become profitable again — Plug Power is something of a fantasy stock that hasn’t had a profitable year. Never over its 27-year history.
As for buying opportunities, if you’re inclined to view today’s trading action as an overreaction and a chance to buy and hold, of the three stocks mentioned here, I think Brookfield probably has the most potential.
Even with its significant debt load, the stock sells at an enterprise value only 17 times the profit it made in 2022. And although (barely) unprofitable in 2023, Brookfield still managed to generate positive free cash flow of $572 million last year – which was even more more cash than it generated when it was “profitable” in 2022. (And growth is good.) Plus, with a portfolio of energy assets ranging from hydro to solar to wind , Brookfield offers you a more diversified bet on renewable energy in general.
This seems to me to be the safest way to take advantage of the situation that presents itself today.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions with and recommends Brookfield Renewable. The Mad Motley has a disclosure policy.
Why shares of Plug Power, SunPower and Brookfield Renewable all fell today was originally published by The Motley Fool
