Stocks to play long-term power demand, Wells Fargo says

A sector of the stock market beloved by income investors could ride the wave of rising energy consumption over the long run, according to Wells Fargo. Artificial intelligence, manufacturing and electrification will drive demand for electricity in the U.S. in the approaching years, according to a team of the firm’s analysts led by Neil Kalton. After 15 years of relatively flat power demand, Wells Fargo sees a compound annual growth rate of 2.6% through 2030 and 80% growth by 2050. “We project U.S. electricity demand will grow from 4,000 [terawatt hours] in ’23 to 7,300 TWh by 2050,” Kalton’s team wrote in a May 30 report. “With decarbonization goals in mind, we continue to project wind & solar will account for ~65% of power supply by 2050.” The development bodes well for a group of utilities – and Wells Fargo called out some of its overweight-rated plays on the power trend for the long run. Duke Energy is among the firm’s top ideas under “vertically integrated electric utilities in high growth areas.” In particular, Duke has its ” Carolinas Resource Plan ,” a framework proposed last August that aims to supply cleaner energy to North and South Carolina, calling for more than $90 billion in infrastructure investments. “By 2038, the Carolinas Resource Plan projects a load growth of 35 GWh (more than DE, ME & NH combined) as compared to 2024 primarily driven by manufacturing/industrial and population growth (1.5% & 1.4% CAGR, respectively),” Wells analysts wrote. The plan aims to balance on-demand resources, such as advanced nuclear and natural gas with a growing number of complementary renewables. Back in January, Duke updated its resource plan to include the potential for wind generation off the coast of North Carolina, subject to regulatory approvals. Shares are up 6.6% in 2024, and the stock has a dividend yield of 4%. Renewable energy play NextEra also caught Wells’ attention, as analysts said it’s “well-positioned to capitalize on the growing demand” for core products, including wind, solar and battery storage. The stock is up 27% in 2024, and it yields 2.7%. Wells called out the 10-year site plan NextEra subsidiary Florida Power & Light submitted to the state’s public service commission. In particular, the plan calls for 21,000 megawatts of solar capacity installations and 4,000 megawatts of battery storage, as well as retiring coal, Wells analysts said. “The combined solar and nuclear fuel mix delivered to customers is projected to grow from 27% in ’23 to ~56% in ’33,” the analysts added. Finally, Constellation Energy made the grade. Though the company pays a modest dividend yield of 0.7%, its share price has surged 78% in 2024. Earlier this year , Constellation Energy announced a plan to hike its dividend by 25%, and kicked off its next $1 billion in share repurchases. Last year, Constellation reached an agreement with Microsoft to power one of the company’s data centers in Virginia, using the utility’s hourly carbon-free energy matching platform. The stock’s price “[reflects] a level of optimism,” Wells Fargo analysts said, but “we think there is a case for further outperformance.” Other overweight-rated names in Wells Fargo’s list include NRG Energy and Entergy .