Biden has an ambitious climate policy — Here's what it means for alternative energy stocks

Published Sat, Oct 31 20208:00 AM EDT

(CNBC PRO is looking at the most important investing angles surrounding the election. For the complete investor's guide, see here .) Alternative energy stocks are on a tear this year as falling costs drives adoption of renewables, and while former Vice President Joe Biden's supportive environmental policies would help the sector, Wall Street analysts say these stocks will continue to outperform no matter who takes the White House on Tuesday. "Momentum across clean tech is epic," Raymond James succinctly summed up in a recent report. President Donald Trump and Democratic nominee Joe Biden's differing stance on the environment and environmental policy is well documented. Trump has rolled back dozens of environmental policies during his four years in the White House, including withdrawing the U.S. from the Paris Agreement. He has continuously praised the U.S. oil and gas sector, and declared the coal industry was back, although that hasn't panned out. Biden, on the other hand, has outlined a $2 trillion climate proposal that would make the U.S. power sector carbon free by 2035, while pushing the country to net zero emissions by 2050. At the second presidential debate, Biden said he intends to "transition away from the oil industry." While Biden's policies are certainly more supportive for clean energy, analysts are quick to note that renewables have boomed over the last four years under the Trump administration due to favorable economics. The International Energy Agency noted in its annual report that solar is now the "cheapest source of electricity in history." "Ignore the President's rhetoric for a moment; Donald Trump is the greenest President in U.S. history measured by the pace at which the nation's electricity grid has de-carbonized during his first term in office," noted JPMorgan analysts in a recent report. "U.S. Presidents come and go, but wind and solar (and BEVs and Hydrogen) are here to stay owing to declining unit costs and sustainability." "We think all names under our coverage (including renewable energy, electric vehicle, and smart grid) will work regardless of who wins the 2020 election," added equity research firm Baird. For investors looking to capitalize on the burgeoning space, there's no shortage of options. Solar Solar has bounced back following a tough first half of the year as the coronavirus pandemic shut down the economy, and adoption is poised to continue accelerating. The most recent analysis from research firm Wood Mackenzie predicts global solar PV installations to hit 115 gigawatts direct current this year, up 5% from 2019's total. If elected, Biden has outlined a plan to install 500 million solar panels, including eight million solar roofs and community solar energy systems, which would benefit distributed solar players, among others. This includes names like SunPower , Sunrun and Sunnova , the latter two of which Bank of America recently said are breaking out based on the prospects of a Biden administration. Biden would also be more likely to extend the solar Investment Tax Credit, which would further support solar adoption. Baird's Ben Kallo noted that while solar's fundamentals will ultimately remain strong, there's likely to be short-term volatility around the election, with "headline risk" under a Trump win and a jump from a Biden victory. Electric Vehicles Electric vehicles have garnered much investor enthusiasm this year, and a Biden administration could accelerate the transition to electric cars, boosting key players in the space. Cowen said in a recent note that this could benefit stocks like Cree , Aptiv , BorgWarner and Workhorse Group . "We continue to see disruption in the broader mobility landscape no matter who wins the upcoming election, but we see a potential Biden victory serving as an accelerant of the megatrends already underway," the firm wrote in a note. Biden has said he would create one million new well-paying jobs in the automobile industry, as well as accelerating the upgrade of the three million vehicles the government uses, thereby hastening the shift to electric vehicles. His plan also outlines major public investments in automobile infrastructure, including 500,000 electric vehicle charging stations. This is key since range anxiety has traditionally been a hurdle for widespread electric vehicle adoption. ChargePoint, the world's largest electric vehicle charging network, in September announced its intention to go public through a reverse merger with special purpose acquisition company Switchback Energy Acquisition. The deal is expected to close in the fourth quarter. "In addition to being a rare example of a charging pure-play that straddles continents - it has a footprint in both North America and Europe - ChargePoint is also among the few vertically integrated players," Raymond James said in a recent note to clients. Hydrogen Biden has also outlined initiatives that would make so-called green hydrogen, which is produced from renewable energy, cost competitive with regular hydrogen by 2030, and analysts say the market opportunity is large. Hydrogen has been promised for decades, but much like with solar and wind, falling costs is making it an increasingly viable fuel source. Bank of America estimates the total market potential could hit $11 trillion by 2050. "Hydrogen … could supply our energy needs, fuel our cars, heat our homes, and help to fight climate change," the firm said in a recent note to clients. "We believe we are reaching the point of harnessing the element that comprises 90% of the universe, effectively and economically." The implications will span industries and sectors. Utility companies involved in green hydrogen production, for example, including NextEra Energy and AES Corporation stand to benefit, according to Morgan Stanley. Further out, there's opportunity for companies that make fuel cells, since they are required to convert stored hydrogen back into electricity for use in vehicles, among other things. Bank of America noted that companies leading the charge in this arena include Bloom Energy , Ballard Power Systems and Plug Power . Of course Biden's $2 trillion plan remains just a plan at this moment, and some have noted that while ambitious in scope it's light on specifics. How much he would realistically be able to get done also depends on whether or not Democrats take Congress. But with a greater focus on the impacts of climate change worldwide, as well as falling costs for renewable energy sources, the sector should continue to outperform. - CNBC's Michael Bloom contributed reporting.

Democratic 2020 U.S. presidential candidate and former Vice President Joe Biden walks past solar panels while touring the Plymouth Area Renewable Energy Initiative in Plymouth, New Hampshire, U.S., June 4, 2019.

Brian Snyder | Reuters

(CNBC PRO is looking at the most important investing angles surrounding the election. For the complete investor's guide, see here.)

Alternative energy stocks are on a tear this year as falling costs drives adoption of renewables, and while former Vice President Joe Biden's supportive environmental policies would help the sector, Wall Street analysts say these stocks will continue to outperform no matter who takes the White House on Tuesday.

"Momentum across clean tech is epic," Raymond James succinctly summed up in a recent report.

President Donald Trump and Democratic nominee Joe Biden's differing stance on the environment and environmental policy is well documented.

Trump has rolled back dozens of environmental policies during his four years in the White House, including withdrawing the U.S. from the Paris Agreement. He has continuously praised the U.S. oil and gas sector, and declared the coal industry was back, although that hasn't panned out.

Biden, on the other hand, has outlined a $2 trillion climate proposal that would make the U.S. power sector carbon free by 2035, while pushing the country to net zero emissions by 2050. At the second presidential debate, Biden said he intends to "transition away from the oil industry."

While Biden's policies are certainly more supportive for clean energy, analysts are quick to note that renewables have boomed over the last four years under the Trump administration due to favorable economics. The International Energy Agency noted in its annual report that solar is now the "cheapest source of electricity in history."

"Ignore the President's rhetoric for a moment; Donald Trump is the greenest President in U.S. history measured by the pace at which the nation's electricity grid has de-carbonized during his first term in office," noted JPMorgan analysts in a recent report. "U.S. Presidents come and go, but wind and solar (and BEVs and Hydrogen) are here to stay owing to declining unit costs and sustainability."

"We think all names under our coverage (including renewable energy, electric vehicle, and smart grid) will work regardless of who wins the 2020 election," added equity research firm Baird.

For investors looking to capitalize on the burgeoning space, there's no shortage of options.