Solar and wind are set to produce a third of global electricity in 7 years. How to invest behind it

Published Mon, Jul 17 20233:26 PM EDTUpdated Mon, Jul 17 20233:52 PM EDT

Solar and wind power generation is set to triple by 2030, according to a new report from the Rocky Mountain Institute, leading to a disruption in the global electricity sector. It also would create a promising renewable energy trade for investors. "The fossil fuel era is over," RMI said in a report published last week. "Fast growth will lead to a tripling in solar and wind generation by 2030 while faster growth will mean a quadrupling in generation, to produce more than 14,000 terawatt hours (TWh) and overtake fossil fuel supply," the organization continued. According to the report, solar and wind power will fuel 33% of electricity generation in 2030, up from 12% in 2022. RMI predicts solar energy, which is already the cheapest energy source in history, will halve in price by 2030, continuing the dramatic downward trajectory of solar and wind energy costs. The levelized cost of energy (LCOE) for solar and wind was around $40 per mega-watt hour in the first half of 2023, RMI noted, which is approximately half the cost of coal and gas. CNBC Pro used FactSet data to screen for companies that are well-positioned to outperform from the rise of solar and wind energy production. The companies on the list met the following criteria: Obtained a buy rating from 60% of analysts or more Has at least 30% upside to average price target Covered by at least seven analysts Listed on the New York Stock Exchange or Nasdaq Shares of Sunrun could surge more than 77%, according to the average price target on shares. Morgan Stanley analyst Andrew Percoco said in a Monday note that he has a "fairly constructive update on the demand outlook" for the company's new residential rooftop offering Sunrun Shift . About 64% of analysts covering the stock have issued a buy rating, according to FactSet data. Other residential solar companies on the list include Sunnova and Maxeon Solar Technologies . Percoco said despite seeing slight downside to Sunnova's earnings and profit estimates for the second-quarter compared to the Street, his estimate is still relatively in-line with the company's guidance. "We expect the company to reiterate its customer growth guidance and highlight continued strong growth trends despite recent weakness in market origination data, highlighting market share gains," said Percoco. According to the consensus price target on Sunnova, shares could surge almost 63% from their current levels. More than three-quarters of analysts covering shares have given it a buy rating. Shares are up 27.3% in 2023. Maxeon shares have popped 68% in 2023 and could jump another 50%, per the average price target on shares. Percoco noted that the decline in solar panel market prices due to oversupply could pressure the company's margins in 2024. To be sure, he noted that "MAXN has largely locked in pricing for the remainder of 2023 and carved a niche with its premium DG product." According to FactSet data, 71.4% of analysts covering the stock have issued it a buy rating. Other stocks highlighted in the screen include Array Technologies , SolarEdge Technologies and Enphase Energy . —CNBC's Michael Bloom contributed to this report.