According to Goldman Sachs, utility stocks are poised to capitalize on a clean energy future. Utilities have lagged behind the market this year, with the SPDR Fund picking utilities down 5% so far in 2023 compared to the S&P 500’s 11.5% gain. Carly Davenport, an analyst With the rapid adoption of renewable energy over the past decade, mountain utilities XLU YTD are entering a new phase as decarbonisation facilitators, says Goldman analyst. The companies are now uniquely positioned to facilitate the transition to renewable energy as the US grid undergoes transition, she added. Going forward, we see an attractive investment opportunity established, mitigated by the Inflation Reduction Act (which created incentives for utilities to switch from fossil fuels to renewables). generating), with the potential to transform earnings growth and shareholder base across Utilities, driving the potential for even stronger premiums over time,” she wrote in a note Wednesday. The move to clean energy, Davenport said, requires a “significant amount of capital investment,” which will contribute to attractive earnings and base growth. She pointed out that the industry’s estimated capital investment from 2023 to 2027 is about $93 billion, 27% higher than capital expenditure in the previous five-year period. Goldman started covering some stocks in the utility sector, looking at how these names are exposed to clean technology, nuclear production, grid reliability and natural gas. In addition, affordability and regulatory considerations were considered. Among the names Goldman ranks to buy are American Electric Power, NextEra Energy, Sempra and Southern Company. American Electric Power and NextEra Energy both hit some Goldman themes. Davenport said the former would benefit from exposure to renewables, nuclear and maintaining the reliability of the US power grid. “With around 60% of AEP’s five-year capital plan allocated to managed transmission and renewables, we see earnings growth and an attractive interest rate base, in addition to actions taken. actions to optimize business operations and improve regulatory lag drive our positive view on the stock,” she wrote. Davenport said NextEra Energy is exposed to renewables, nuclear power and affordability/favorable regulation. “Strong renewable energy growth record, constructive outlook and management at FPL [Florida Power & Light]and relatively attractive valuations after the underperformance drive our positive view of NEE,” she wrote. Shares of both stocks are down about 11% year-to-date. American Electric Power is up nearly 16% from Goldman’s price target as of Wednesday.It also has a 3.9% dividend yield.NextEra Energy offers a 21% gain over Goldman’s price target. , plus a 2.5% dividend yield, she noted that Sempra Infrastructure and its Texas utility, Oncor, continue to benefit from strong consumer growth. Sempra’s shares have fallen about 4% this year and are up 20% above Goldman’s price target, Davenport said. “Ultimately, Southern Company will be reassessed in value after units #3 and 4 at the company’s Vogtle nuclear plant coming into operation.” value-added opportunities were not in our base case around energy conversion investments, as SO presented. expressed interest in renewables but have so far allocated limited capital to them,” she wrote. Southern shares will be down about 2% in 2023 and up 14% from Goldman’s price target. It also pays a 4% dividend yield. – Michael Bloom of CNBC contributed reporting.