This Renewable Energy Stock Plugs Into 2 Potentially Massive Market Opportunities
Brookfield Power (NYSE: BEPC)(NYSE:BEP) started as a hydroelectric power producer. It has since grown into a utility scale renewable energy company adding onshore wind, utility scale solar, distributed generation (e.g. rooftop solar) and energy storage platforms. The company currently has an operational capacity of 21 gigawatts (GW), making it one of the largest producers of renewable energy in the world.
Brookfield also has a significant backlog of renewable energy development projects in all of these technologies and offshore wind. At last count, it had 69 GW of projects under development. However, this large backlog hasn’t stopped Brookfield from looking to tap into new sources of growth. Recently, the company added two potentially massive new long-term growth drivers into the green hydrogen and carbon capture.
A multi-trillion dollar market opportunity
Wind and solar power can go a long way in reducing carbon emissions. However, they cannot completely solve the climate issue. The economy needs a versatile fuel like natural gas help manage seasonality and renewable energyintermittency issues. Many believe that green hydrogen could be the solution. If so, it could be a $1 trillion annual market.
Brookfield is looking to exploit the hydrogen opportunity. At the end of 2020, he agreed to supply renewable energy to fully energize a green hydrogen plant planned in Plug hole (NASDAQ: PLUG). The two companies hope to strengthen this relationship in the years to come, driven by Plug Power’s goal of obtaining more than half of its hydrogen from renewable energy by 2024. Providing renewable energy to producers hydrogen could allow Brookfield to maximize the value of its existing assets and continue to build new capacity.
Brookfield Renewable also partners with energy infrastructure giant Enbridge (NYSE: ENB) build a green hydrogen plant in Canada. Brookfield will supply the plant with electricity from nearby hydroelectric plants, while Enbridge will inject hydrogen into its natural gas distribution network. The project represents the first phase of creating what they hope will be a regional green economy ecosystem that produces, distributes and uses green hydrogen. Further expansion into the hydrogen value chain by building and operating production facilities could significantly improve Brookfield’s long-term growth prospects.
Looking to grab this huge potential opportunity
Another potentially huge market opportunity is carbon capture and storage (CCS). According to the oil giant ExxonMobil (NYSE: XOM), there will be a $4 trillion market by 2050 to capture carbon dioxide from the air and store it underground. This leads Exxon to invest $15 billion in CCS and other low-carbon energy solutions like hydrogen and biofuels over the next few years.
Brookfield Renewable also sees a bright future in carbon capture. This recently led her to invest in a major North American supplier of modular carbon capture solutions. It has pledged to fund up to C$300 million ($234.6 million) for projects that meet its return thresholds. He has already started financing the construction of the first project of this company. Depending on the terms of the agreement, Brookfield could hold a majority of this company in the future.
Brookfield sees a bright future for providing decarbonization solutions. The company noted that it would take trillions of dollars to decarbonize hard-to-reduce industrial sectors like steel and chemicals in the coming decades. It therefore sees significant potential for increasing its carbon footprint in the years to come.
These emerging industries could be major growth drivers
Brookfield already has huge growth to develop more wind, solar and hydroelectric capacity. However, this does not prevent him from looking for new opportunities for expansion. Its recent investments in hydrogen and carbon capture could pay huge dividends in the future, given the massive potential size of these industries. This reinforces its appeal as one of the best ways to play on the global megatrend of decarbonization.
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Matthew DiLallo holds positions at Brookfield Renewable Corporation Inc., Brookfield Renewable Partners LP and Enbridge. The Motley Fool fills positions and recommends Brookfield Renewable Corporation and Enbridge. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.