We recently published a list of the 12 Best Electrical Infrastructure Stocks to Buy According to Analysts. In this article, we are going to take a look at where Clearway Energy Inc. (NYSE:CWEN) stands against the other best electrical infrastructure stocks to buy according to analysts.
The United States is witnessing a notable surge in electricity demand, driven by unprecedented electrification, the rapid expansion of AI-driven data centers, and a resurgence in industrial reshoring and manufacturing. As of September 2024, electricity demand rebounded with a 1.8% increase, reversing a 1.7% decline during the same period in 2023, aided by favorable weather conditions. This uptick signals a sustained period of growth, marking a departure from two decades of stagnant demand and potentially reshaping the electricity landscape in profound ways.
According to Deloitte, this demand has spurred a corresponding increase in power generation. By September 2024, utility-scale power generation reached approximately 3,287 billion kWh, reflecting a 3% year-over-year growth. Renewable energy, particularly solar, led the charge, with a 30% increase compared to 13% during the same period in 2023. In that same vein, solar energy is expected to be the fastest-growing energy source by year-end, potentially achieving a 34% growth rate. Moreover, the rapid adoption of digitalization and AI has significantly heightened the demand for data centers across the United States. To keep pace with this adoption, McKinsey projects that data center power requirements might triple by 2030, increasing from 3–4% of the nation’s total electricity demand to approximately 11–12%. This will necessitate a substantial rise in electricity production, signaling a dramatic shift in a country where power demand has remained relatively flat since 2007. By 2030, data centers could account for 30–40% of all net new electricity demand, alongside rising needs from domestic manufacturing, electric vehicles, and electrolyzers.
Furthermore, in response to escalating climate-driven disasters and an electricity grid increasingly reliant on intermittent renewable energy, the U.S. is rapidly deploying large-scale battery systems to help prevent power outages. From minimal installations just a few years ago, the country has now added over 20 gigawatts of battery capacity to its electric grid, with 5 GW installed in the first seven months of this year alone, according to the EIA. This rapid expansion is equivalent to adding the output capacity of 20 nuclear reactors to the grid in just four years. The EIA forecasts that this capacity could double to 40 GW by 2025 if planned expansions proceed as expected.
On the other hand, transformations in policy, market dynamics, and technological advancements are also driving significant shifts in electricity generation, presenting new challenges for the US electric grid. Much of the country’s high-voltage transmission infrastructure dates back to the 1960s and 1970s, leaving it ill-equipped to handle current and future grid demands. Policy changes could further shape the landscape. For instance, Bernstein analysts have highlighted potential risks to electrical infrastructure stocks if the incoming Trump administration repeals the $7,500 electric vehicle tax credit. Such a move, reportedly under consideration as part of broader tax reform, would eliminate a key driver of electrical distribution infrastructure investment. EV charging typically occurs at home, and a growing EV installed base has been a significant catalyst for grid investments. Bernstein estimates that repealing the tax credit would lower electricity demand growth from EVs, reducing the compound annual growth rate from 0.6% to 0.4% over the next five years. To illustrate the potential impact, they pointed to Germany’s rollback of EV subsidies in 2023, which led to a 30% drop in EV-related demand year-to-date in 2024.
All things considered, leading electrical infrastructure stocks are poised for substantial gains, supported by the approval of over 46,000 infrastructure projects spanning a wide range of industries, and a monumental $1.2 trillion investment allocated by the U.S. administration.
15 Most Advanced Countries in Renewable Energy
A wind farm in motion, its many turbines spinning in the breeze.
To compile our list of the best electrical infrastructure stocks to buy according to analysts, we analyzed various stock screeners and ETFs, selecting stocks based on their upside potential as of December 16. The stocks are ranked by their average upside potential, from lowest to highest, based on price targets. Additionally, we included the number of hedge funds holding stakes in these stocks, using Insider Monkey’s Q3 hedge fund data.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Average Analyst Upside: 23.79%
Number of Hedge Fund Holders: 29
Clearway Energy Inc. (NYSE:CWEN) is a leading renewable energy company in the United States, managing a portfolio of 6,000 MW of installed capacity across various wind and solar projects. Back in 2022, the company sold its thermal business, raising $1.35 billion in cash to fuel the growth of its renewable energy assets, which are boosting its ability to increase its dividend, providing greater visibility into its future growth potential. Since then, the company has been actively investing in renewable energy, and as a result, expects to increase its dividend toward the upper end of its 5% to 8% annual target range through at least 2026.
Back in October, Clearway Energy Inc. (NYSE:CWEN) announced it had secured financing and started construction on two standalone solar and energy storage projects in Hopkins County, Texas. These projects—the 300-MW Pine Forest Solar and 200-MW Pine Forest Storage facilities—represent a $665 million investment aimed at enhancing Texas’ alternative energy infrastructure. Additionally, the company is advancing large-scale initiatives like the Daggett Storage I Project in San Bernardino County, featuring a 113.5 MW battery storage facility within a larger 482 MW solar and 394 MW storage complex.
On November 25, BofA Securities initiated coverage on Clearway Energy Inc. (NYSE:CWEN) with a Buy rating and a $33 price target, projecting a 22% total return. The firm highlighted Clearway’s strong relationship with its sponsor, Clearway Energy Group, which holds a 41.8% economic interest in the company. This partnership provides Clearway with access to a 30 GW development pipeline, ensuring a consistent flow of new acquisitions.
As of Q3 2024, 29 hedge funds held positions in Clearway Energy Inc. (NYSE:CWEN), with total stakes valued at $174.2 million.
Overall, CWEN ranks 2nd on our list of best electrical infrastructure stocks to buy according to analysts. While we acknowledge the potential of CWEN, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CWEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
