If Wall Street is in love with a company or a sector, I tend to shy away from it. So I don't own anything that would be confused with a renewable power stock right now. But that doesn't mean I don't have exposure to the sector, with a couple of utilities, a transitioning oil giant, and giant North American pipeline operator Enbridge (ENB -0.03%). That last one is my favorite "renewable power" holding right now, and it's still on sale. Here's why.

It's a pipeline stock, sort of

Roughly 83% of Enbridge's earnings before interest, taxes, depreciation, and amortization (EBITDA) is derived from oil and natural gas pipelines. Another 14% comes from a natural gas distribution business, which is basically utility-like in nature. A "huge" 3% comes from renewable power. Most investors would look at those figures and tell me that I'm crazy to view this as a renewable power play. But hear me out.

Three offshore wind turbines in heavy seas.

Image source: Getty Images.

First off, as much as environmentalists would like to see carbon fuels banished from the power picture, that's just not possible. In fact, growing demand for energy from developing nations is likely to result in an increase in the absolute demand for oil and gas over the next 20 years or so. Sure, oil and gas may shrink as a percentage of the total pie as investment in renewable power options expands, but that's a different conversation.

Essentially, Enbridge's pipeline operations are still valuable cash cows.   

What about clean energy?

But how much cash are we talking about? In 2022 the company is expecting $2 billion in free cash flow above what it has already planned to invest in its operations. There's a lot the company can do with that, but one key thing is use it to support its continued investment in clean energy.

Right now renewable power is a tiny 3% of EBITDA. But Enbridge has plans to spend heavily in the space and by the end of 2022 it expects this segment to reach 4% of EBITDA. On an absolute level that's tiny, but percentage wise, it will have increased its renewable power business by a massive 33% in one year.

However, don't let that 4% fool you about the size of Enbridge's renewable power business -- it's pretty big. Right now the company has 48 assets (in operation or under construction) in four countries. Since 2002 it has spent CAD $8 billion on these investments. The development and construction it has underway right now will increase its power production by roughly 50%, with a similarly sized set of opportunities being examined for the future. In other words, the company is looking to double its capacity.

In the near term offshore wind in Europe is going to be a big piece of the puzzle. Enbridge has projects coming on line in each of the next three years that will increase its offshore wind capacity from 1 gigawatt to 2.4 gigawatts. Total spending here will be around CAD $2.5 billion. Management thinks there's more deals to be had across the pond, as well, in the years ahead. In addition to these projects, Enbridge is adding solar to its own pipeline systems, reducing its reliance on the electric grid. These are modest investments right now, at around CAD $300 million, but the company thinks there's a billion-dollar opportunity here.

There's more than wind and solar going on here, as well. For example, Enbridge is also working on renewable natural gas, hydrogen transportation, and carbon capture. All these efforts, roughly CAD $1.5 billion through 2025, are within its oil and natural gas businesses. So even within its carbon business the Canadian midstream giant is looking for opportunities to shift toward cleaner alternatives, an effort that could lengthen the lifespan of these assets. And, of course, the cash flow they provide.

What's most interesting here, however, is when you look at all of Enbridge's go-forward spending plans. Roughly a third of its capital spending is earmarked for its renewable power division. Moreover, it doesn't have any major projects planned in its oil-related business, with the other two-thirds of its investments slated for its natural gas operations -- a power source that's expected to aid the world in its transition from dirtier coal and oil to cleaner renewable power.

ENB Chart

ENB data by YCharts

That spending, meanwhile, is what is planned. Remember that Enbridge has another $2 billion in cash with which it has to do something. For 2022 most of the excess cash is likely to go to stock buybacks. However, buybacks aren't mandatory and things can always change if a good opportunity arises. The thing is, management tends to be value-conscious, so the current clean energy zeitgeist is likely to keep it on the sidelines until it can find a deal with a strong enough risk/reward profile. But, with ample cash flow available, and decades to go before its cash cow carbon businesses are obsolete, it has ample time to be picky. In fact, I'd prefer management be picky instead of chasing a hot sector that may be getting ahead of itself. A pure-play clean energy investment probably doesn't have that luxury.

I'll wait and collect the quarterly check

Here's the thing: Enbridge's carbon ties have left it deeply out of favor on Wall Street. The yield is a hefty 7.1%, near the top end of its historical yield range. In short, I get to collect that hefty dividend while I wait for management to calmly invest in the clean energy assets it believes represent the best long term opportunity. The end goal is to provide the energy that the world needs in whatever form that takes, while still making a decent return. That sounds better to me than jumping on the clean energy bandwagon and hoping that Wall Street's whims never turn against me. And someday, judging by the outsized investment the company is making in clean energy, Enbridge might even make a complete transition away from carbon fuels if that makes financial sense for the company and its shareholders.