Demand for renewable energy is growing exponentially. Falling costs and rising climate change concerns are among the many factors driving accelerating growth in new wind, solar, and battery storage capacity additions worldwide. According to a new report by the Rocky Mountain Institute, wind and solar generation will grow by 15% to 20% annually. That has them on track to produce a third of the world's power by the end of the decade, up from the current level of 12%.
As more renewable energy capacity gets deployed, costs will decline even further, creating an unstoppable force for even more deployment. That trend will benefit companies leading the development of renewable energy projects. Brookfield Renewable (BEP 0.19%) (BEPC 0.09%) and NextEra Energy (NEE -1.36%) are two of those leaders. That makes them great stocks to buy for those seeking to capitalize on the high-powered renewable energy megatrend.
A global decarbonization leader
Brookfield Renewable operates one of the world's largest publicly traded renewable power platforms. It currently has 32 gigawatts (GW) of operating renewable energy assets, including hydro, wind, utility-scale solar, and distributed generation (i.e., rooftop and community solar). That is equivalent to removing 8.8 million vehicles from the road or offsetting all the annual emissions of a country the size of Belgium. Brookfield sells most of this electricity under long-term power purchase agreements (PPAs) with electric utilities and corporate buyers, providing predictable cash flow.
The company has a 132 GW pipeline of assets under various stages of development, nearly double the capacity it had under development last year. That's enough to offset 95% of Australia's annual emissions and power 18 million homes for one year.
Brookfield's extensive and growing development pipeline gives it lots of visibility into future growth. The company estimates that a combination of inflation-linked rate increases on its existing PPAs, margin enhancement as it continues to scale, its development pipeline, and M&A activities will power more than 10% annual earnings-per-share growth through at least 2027. Meanwhile, the company and its partners have committed to investing more than $8 billion over the past year to enhance their ability to capitalize on accelerating demand for renewable energy.
Leading the decarbonization charge in the U.S.
NextEra Energy operates one of the country's largest and cleanest electric utilities. In addition, it has a vast and growing energy resources business. Together, the company is the world's biggest wind and solar energy producer. It's also a leader in battery storage. It has a combined 67 GW of power generating capacity, including nuclear, natural gas, and other sources.
The company's Florida utility is investing heavily in solar energy to capitalize on the Sunshine State's vast resources. It's also investing in battery storage and green hydrogen, which uses renewable energy to produce an emission-free replacement for natural gas. By 2045, the utility expects to deploy up to 92 GW of new solar capacity, 50 GW of new battery storage capacity, and 16 GW of green hydrogen capacity to completely decarbonize its operations.
Meanwhile, the company's energy resources segment builds renewable energy capacity for other utilities and corporate buyers. It currently has 31 GW of clean energy generation capacity in operation and another 20 GW of commercially secured wind, solar, and storage contracts in its backlog. It sees the potential of developing more than 40 GW of new capacity by 2026.
NextEra Energy estimates that these investments will enable it to grow its earnings at or near the top-end of its 6% to 8% annual range through 2026. That's a fast pace for a large utility. That rate also doesn't include the impact of accretive acquisitions, which NextEra has a knack for completing. Meanwhile, growth could accelerate post-2026, powered by the vast opportunity to build renewable-powered green hydrogen capacity.
Plugged into a powerful megatrend
Renewable energy is becoming an unstoppable force. As renewable energy leaders, Brookfield Renewable and NextEra Energy are exceptionally positioned to continue capitalizing on accelerating growth. They're great stocks to buy to cash in on the upside ahead as renewables rise in power.
