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Utilities to Steadily Slash CO2 Emissions: 4 Stocks in Focus

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To cash in on the rapid global transition to clean energy, utilities across the United States are increasingly adopting renewable energy sources to generate electricity, with wind and solar energy gaining the maximum popularity.

As the U.S. economy continues to switch toward a greener environment, Utilities have accelerated their carbon-dioxide (CO2) emission reduction rate over the last decade, led by the expanding role of renewable sources. As a result of such efforts, carbon emissions from the U.S. power sector dropped 8% year over year in 2019, per a report by Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States.

What is Driving Decarbonization?

In the United States, most utilities have significantly reduced their CO2 emissions since 2005. This has been possible due to sustained low natural gas prices and declining costs for renewable generation along with technological innovation that has promoted energy storage. Such factors have smoothened the way for utilities to accelerate their decarbonization goals.

Further, improvements in power plant efficiency and shifts in investments within the power sector in favor of clean energy sources have been boosting decarbonization. Favorable state energy policies, government subsidies and investment tax credits have also helped utilities accelerate carbon-emission reduction goals in recent times.

COVID-19 Impact on CO2 Emission-Reduction Goals

CO2 emissions in the United States have fallen sharply during the coronavirus outbreak as business activities have slowed down, leading to a reduction in electricity demand. This served as a factor boosting utility companies’ emission-reduction goals. Notably, per an international study published in the U.K.-based journal National Climate Change, the world witnessed a sharp decline in carbon emissions between January and April 2020, compared to the average levels of 2019.

4 Stock in Focus

Let’s take a look at a few utilities, each carrying a Zacks Rank #3 (Hold), which are steadily progressing toward a carbon-free environment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On Sep 28, 2020, Ameren Corporation (AEE - Free Report) announced its goal to achieve zero carbon emission by 2050 in Missouri and Illinois. Ameren Missouri’s new goals include reducing carbon emissions by 50% by 2030, 85% by 2040 and ultimately, net-zero carbon emission by 2050, compared to 2005. Ameren also plans to retire more than 75% of its current coal-fired energy generating capacity by 2040, while closing all by 2042. Ameren’s plan also includes the addition of 3,100 megawatts (MW) of wind and solar generation by 2030.

Similarly, on Sep 24, Fortis (FTS - Free Report) announced plans of lowering carbon footprint by 75% within 2035 from 2019. It expects to achieve this by exiting coal generation and adding approximately 2,400 megawatts (MW) of wind and solar power systems, and 1,400 MW of energy storage systems during the period. These changes will help Fortis avoid more than 50 million tons of CO2 emissions over the next 15 years.

In September 2019, DTE Energy (DTE - Free Report) announced plans of achieving zero carbon emission by 2050 for DTE Electric. In June 2020, it took a major step in building a cleaner energy future for Michigan by expanding its net zero carbon emission goal to include DTE Gas as well. The inclusion will help the company cut down on annual greenhouse gas emissions by more than 6 million metric tons by 2050.

Another major utility, Duke Energy (DUK - Free Report) , updated its climate strategy plan in September 2019, with a new goal of achieving zero carbon emission from electric generation by 2050. As it has already achieved carbon reductions of 31% since 2005, the utility aims reduction of emissions by at least 50% by 2030, which was 40% as per plans presented in 2017.

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