Though the mainstream media has consistently fact-checked President Donald Trump throughout his tumultuous administration, the incumbent caught his rival, former Vice President Joe Biden in a flat-out lie in the second and last presidential debate that should be a boon for NextEra Energy (NYSE:NEE). Trump accused Biden of saying that he was against fracking, and despite rapid denials, it turned out that indeed he verbally opposed the practice. How does that help NextEra Energy stock?
And in my opinion, it is does. Due to the myriad events that have followed the initial strike from the novel coronavirus, millions of Americans are reexamining their exposure to polluting fossil fuels.
In particular, the massive wildfires that we’ve seen in the west coast has bolstered the argument for NextEra Energy stock. Before you send me hate mail, please note that I’m merely repeating what California Gov. Gavin Newsom stated.
Really, don’t send me hate mail because I can assure you that I will be voting for Newsom’s Republican opponent, whoever that might be. One of the reasons is that California Democrats never let a good crisis go to waste. Following his climate change remarks, Newsom issued a sweeping executive order to phase out new gasoline-powered cars by 2035.
Essentially, California’s initiative mimics that of the so-called Biden Plan, which calls for the U.S. to achieve a 100% clean energy economy and reach net-zero emissions no later than 2050. On the surface, this should be encouraging for NextEra Energy stock. With so much public sentiment pushing society toward sustainable living, NEE has much upside.
On the other hand, it’s not looking good if you’re a stakeholder in Exxon Mobil (NYSE:XOM) and other traditional energy giants. Not surprisingly, the New York Times reported that the oil industry expressed concerns with Biden’s policies following the second presidential debate.
However, the traditional energy sector isn’t worried about a potential Biden-run White House. That’s because the momentum driving up NextEra Energy stock, though powerful as it is, gets its fuel source from perception.
NEE Is an Additive, Not an Alternative
Perhaps one of the comical elements of the 2020 election cycle is that Trump’s campaign team believed that Biden’s lie about fracking was materially significant. Sure, it was embarrassing for Biden, but it honestly didn’t do much damage. It’s not as if Trump has been 100% clean with his facts.
More importantly, the oil industry recognized the political wording behind Biden’s proposed transition away from oil and gas. Deep down, the executive class behind big oil knows all too well that NextEra Energy stock will not be an entity that will replace the fossil fuel investment infrastructure. Instead, clean and renewable energy sources will play an additive role to the broader energy equation.
First, global direct primary energy consumption data reveals that the lion’s share of our power source comes from a combination of oil and gas at 58.5%. Furthermore, coal alone accounts for nearly 28% of our consumption.
On the other hand, alternative energy sources represent a very small allocation of our consumption volume. Strikingly, wind and solar combined accounted for only 1.36% of global energy sources. That’s despite wind and solar energy accelerating rapidly their infrastructure.
Now, before you get down on NextEra Energy stock, do know that technology for renewable infrastructure is constantly improving. Further, wind farms may take up much vertical space but the equipment to keep them running requires minimal real estate. Therefore, these properties could be used for other purposes, maximizing overall efficiency.
At the same time, the biggest con for both wind and solar is that their underlying “fuel” source is intermittent. It’s not so much how much power they can generate as it is when they can generate the power. Therefore, energy generation and storage capacity are both critical issues that the green industry must resolve economically for the sector to be truly viable.
With time and technology, renewable energy sources could start eating into fossil fuels. But it will probably not be in time to meet Biden’s deadline given the snail’s pace of the clean, green industry.
Next Era Energy Stock Is Politically Insulated
Although NextEra Energy stock is presently mired in the electoral race, in reality, the underlying company is politically insulated. Yes, a Biden victory would boost sentiment toward NEE substantially in the nearer term. As well, many Democrats have already pushed for legislation that is favorable for the renewables industry.
On the flip side, another surprising Trump victory probably wouldn’t be the greatest thing for NextEra Energy stock. However, that wouldn’t necessarily mean that you should abandon NEE. The reality is that the U.S. population will continue to expand due to natural births and immigration.
For instance, Biden may provide a pathway to citizenship for over 11 million undocumented people. But those people are already here, consuming energy like everyone else. And there are millions more on the way. Thus, the current energy infrastructure may not be enough to handle the increased consumption, particularly because consumption doesn’t occur neatly but in acute spikes of demand.
Therefore, NextEra Energy stock will be relevant, no matter who wins in 2020, 2024, 2028 … you get the idea. And that goes for big oil as well. Until we have a true technology paradigm shift, renewables will work with other energy sources cooperatively, not competitively.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.