Why did Plug Power, SunPower and Brookfield Renewable stock prices fall today?

Monday is shaping up to be a bad day to own renewable energy stocks. Shares of the operator of hydro, wind and solar power plants Brookfield Renewable Energy(NYSE: BEPC) fell 4.1% by 11:20 a.m. ET, while the smaller hydrogen company Connect the power(NASDAQ: PLUGIN) and solar energy supplier Solar power(NASDAQ: SPWR) decreased by 6.3% and 8.7%, respectively.

To find out why, let’s open the pages USA todayin Sunday’s edition, which reported that “US counties are blocking the future of renewable energy.”

The enormous potential of American renewable energy

This story begins happily, with USA today reminding readers that America is a potential renewable energy powerhouse (so to speak). Of the 2.9 million square miles that constitute America’s territory, if we covered just 10,424 square miles – or about one-third of 1% of America – with solar panels and wind turbines, it would generate enough clean energy to cover 100% of our electricity needs . The Biden administration has proposed just that, setting a goal of generating 100% of America’s energy from non-fossil renewable energy sources by 2035 – less than a decade from now.

And now the bad news: According to the U.S. Energy Information Administration (EIA), we will not achieve this goal.

Despite data showing that the cost per megawatt hour of producing utility-scale wind and solar power is now cheaper than producing power from coal, natural gas, and even nuclear power, a NIMBY (not in my backyard) movement is sweeping the country. In 2023, almost as many counties adopted regulations blocking new photovoltaic farms as started the production of solar energy in their area, while in 2022 more counties blocked wind farms rather than start producing them.

As of today, through a combination of moratoriums, bans, project permit regulations, and other restrictions, new utility-scale solar and wind projects are effectively banned in 15% of U.S. counties. These include counties best located for solar power generation (i.e. the sunny Southwest) as well as those best located for wind power generation (i.e. the windy Midwest).

What does this mean for renewable energy stocks?

This is not the case now All bad news. While NIMBY movements limit green energy development in 15% of U.S. counties, it still leaves the vast majority of the country open to development and new projects If announced all the time. What’s more, what can be banned can also be unblocked if voters are convinced that clean and cheap electricity can actually be a good thing – so good that they don’t mind building a power plant right next door.

However, for today, renewable energy investors may (so to speak) feel that the wind has been taken out of their sails. If, for example, you bought shares of Brookfield Renewable on the assumption that it was a renewable energy company and that in just 11 years the entire United States would be running on renewable energy, well, it would probably be depressing to hear that from the EIA that it didn’t actually happen standing. This undermines the investment thesis a bit – or at least delays it. You’ve probably had similar worries if you’ve been betting exclusively on the sunny side of this thesis and buying SunPower stock.

I’m not very clear why USA todayan article on renewable energy would worry Plug Power shareholders today. After all, there was no mention of hydrogen energy or fuel cells in the newspaper. On the other hand, unlike Brookfield and SunPower – which were profitable in 2022 and could become profitable in 2022 – Plug Power is a paper stock that has not had a single profitable year whenever in its 27-year history.

In terms of buying opportunities, if you’re willing to look at today’s trading action as an overreaction and a buy-and-hold opportunity, of the three stocks mentioned here, I think Brookfield probably has the most potential.

Even with significant debt, the company’s stock trades at an enterprise price of just 17 times its 2022 earnings. And while Brookfield was (barely) unprofitable in 2023, Brookfield still managed to generate positive free cash flow of 572 million dollars, which was equal to more cash than it generated during its “profitable” period in 2022 (and growth is good). Additionally, with a portfolio of energy assets ranging from hydropower to solar to wind, Brookfield provides a more diversified approach to renewable energy overall.

I think this is the safest way to take advantage of the current situation.

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Rich Smith has no position in any of the companies mentioned. The Motley Fool holds positions on and recommends Brookfield Renewable. The Motley Fool has a disclosure policy.