In September U.S. Energy Secretary Rick Perry proposed that the Federal Energy Regulatory Commission, more commonly known as FERC, create a pricing policy that analysts say would amount to a subsidy for certain coal and nuclear plants.
Some observers fear that the proposal – which FERC has until the second week of January to decide upon – will slow down growth in renewable energy projects in the U.S.
Pavel Molchanov is not so sure. In a report Dec. 27, the Raymond James analyst said that even if FERC ends up endorsing the "resilience pricing" concept – which, amid withering industry criticism and the expected threat of legal challenges, is by no means assured – it would have only a modest impact on the pace of retirements of coal-fired power plants.
"Thus, any slowdown in the share gains of gas and wind/solar would be both muted and temporary," he said.
As coal continues to decline (which Molchanov argues is due to the uncompetitive economics of older plants along with some state-level policies, with federal policy only playing a peripheral role), the analyst reaffirmed his view that wind and solar will provide two-thirds of the U.S.'s power generation on average with natural gas providing the other third. And he has selected five stocks that he thinks will help investors gain exposure to the continued growth of renewable energy in the U.S.
The first is 8point3 Energy Partners, which acquires, owns and operates solar energy generation projects in the U.S. It performed well in the third-quarter, although some analysts say it will be in limbo until its strategic review is worked through and it has a clear path to grow its business and distributions via drop-downs and acquisitions (it is owned in part by First Solar and SunPower).
Molchanov's second pick is NextEra Energy Partners, which owns interests in wind and solar projects in North America. It reported lower-than-expected third quarter results, mostly due to the lowest wind production in 30 years. But Molchanov thinks it's a quality dividend-yielding play on the growth of wind power in the U.S.
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19 December 2018
20 December 2018