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Our 10-Year Utilities Forecast: Renewable Energy to Triple by 2032

Plus, our picks for undervalued utilities stocks.

Securities In This Article
Entergy Corp
NiSource Inc
NextEra Energy Inc
Duke Energy Corp

We estimate that 45% of U.S. power generation will be renewable energy by 2032. If the United States enacts more-aggressive clean energy policies to meet key climate targets, these numbers could increase even more.

Our bullish outlook on renewable energy growth is a primary reason we think the sector is 12% undervalued, one of the largest discounts since the 2008-09 global financial crisis. Utilities that can accelerate growth by uniting renewable energy stakeholders—investors, developers, and policymakers—deserve premium valuations.

Public Policy, Economics, and Investor Support Feed Our Renewable Energy Growth Forecast

Public Policy, Economics, and Investor Support Feed Our Renewable Energy Growth Forecast
Source: Morningstar.

We also share our analysis on top picks for investing in utilities stocks. Our top picks are ones that we think don’t get credit from the market for their ability to unite stakeholders and execute long-term clean energy growth plans.

10-Year Outlook: U.S. Renewable Energy Forecast

We forecast renewable energy in the U.S. will grow 12% annually during the next decade because of favorable economics, policymaking, and consumer demand.

Key takeaways from our 10-year forecast include:

  • Renewable energy will climb to 45% of the total U.S. generation mix by 2032, up from 16% in 2022. This includes wind, solar, geothermal, and biomass energy.
  • Renewable energy growth primarily replaces coal power generation, which we expect to decline 13% annually on average and fall to just 4% of the U.S. generation mix, down from 19% in 2022.
  • Renewable energy growth also helps serve growing electricity demand. We expect 1.4% average annual U.S. electricity demand growth through 2032 owing to economic growth and increasing electrification of vehicles and buildings.
  • Natural gas, hydro, and nuclear generation remain mostly flat through our forecast. Carbon-free generation—including renewable energy, nuclear, and hydro—grows 6% annually and reaches 66% market share by 2032.

Renewable Energy (Green) Mostly Takes Market Share From Coal (Yellow) During the Next Decade

Renewable Energy (Green) Mostly Takes Market Share From Coal (Yellow) During the Next Decade
Source: Morningstar.

Overall, we forecast 11% more renewable energy generation in 2032 than the consensus average and less fossil fuel generation than the consensus. This bullish renewable energy outlook in part supports our view that the market underestimates utilities’ long-term growth and valuation.

Our 10-Year Forecast I s More Bullish on Renewable Energy

What the Market is Saying
How We’re Differentiated
CoalCoal generation will fall 59% during the next decade.We forecast a 76% drop in coal generation during the next decade.
Nuclear and HydroThis stays mostly flat with no plant closures or additions during the next decade.Operating performance improvements and updates result in a slight increase in nuclear generation.
Natural Gas and Other Fossil FuelsOn average, forecasts show gas and other fossil-fuel generation falling 21% by 2032.We forecast a 17% decline in natural gas and other fossil-fuel generation.
Renewable EnergyRenewable energy generation will nearly triple by 2032.Renewable energy generation will more than triple by 2032. Solar is by far the fastest-growing technology.
Electricity DemandThese growth forecasts range from less than 1% average annual growth to nearly 2%.We forecast 1.4% average annual electricity demand growth during the next decade.
U.S. Utilities GrowthConsensus forecasts 5%-7% annual earnings growth for most U.S. utilities during the next three to five years.We think most utilities can continue growing earnings and dividends 6% for much longer than the next three years.

Solar Energy on the Rise

We forecast solar will be the fastest-growing clean energy technology during the next decade owing to falling costs, location flexibility, and reliability. We expect solar energy to grow from 2% of U.S. power generation in 2018 to 22% by 2032, including distributed generation.

In total, solar represents almost two thirds of the renewable energy growth in our forecast. By 2032, solar is half of all U.S. renewable energy in our forecast, up from 21% in 2018.

Solar projects are by far the largest type of generation technology in the U.S. electric grid queues. In total, developers are planning or have already begun development of more than 90 gigawatts of new solar capacity, according to Rystad data, a near-doubling of current U.S. solar capacity.

Growth is spread throughout the country, which gives us confidence that solar will drive much of the growth in our renewable energy forecast.

Our Top Picks for Investing in Utilities

Morningstar Rating
Morningstar Economic Moat Rating
Fair Value Estimate (as of Oct. 11, 2023)
Duke EnergyDUK4 StarsNarrow$105
EntergyETR4 StarsNarrow$120
NiSourceNI4 StarsNarrow$33
NextEra EnergyNEE4 StarsNarrow$82

3 Cheap Dividend Stocks to Buy with Growth Potential

These dividend stocks are trading at rare discounts to our fair value estimates.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Travis Miller

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Travis Miller is an energy and utilities strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers energy and utilities. Previously, Miller was director of the utilities equity research team at Morningstar.

Before joining Morningstar in 2007, he was a reporter for several Chicago-area newspapers, including the Daily Herald in Arlington Heights, Illinois.

Miller holds a bachelor’s degree in journalism from Northwestern University’s Medill School of Journalism and a master’s degree in business administration from the University of Chicago Booth School of Business, with concentrations in accounting and finance. He is a Level III candidate in the Chartered Financial Analyst® program.

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