According to Goldman Sachs, stock companies are poised to benefit from the clean energy future. Utilities have lagged the market this year, with the Utilities Select Sector SPDR Fund down 5% so far in 2023 versus the S&P 500’s 11.5% gain. XLU year-to-date mountain Utilities Select Sector SPDR Fund With the rapid adoption of renewables in the last But over the past decade, utilities are entering a new phase as enablers of decarbonization, said Carly Davenport, a Goldman analyst. The companies are now uniquely positioned to facilitate the transition to renewable energy as the United States’ grid undergoes transformation, she added. “Going forward, we see an attractive investment opportunity that the Deinflation Act (which created incentives for utilities to transition from fossil fuels to renewables) has the potential to transform earnings growth and the shareholder base across utilities, driving potential. for stronger multiple premiums over time,” she wrote Wednesday. The shift to clean energy will require a “significant” amount of capital investment, which will contribute to attractive earnings and base rate growth, Davenport said. Industry capital spending estimates for 2023 to 2027 are about $93 billion, or 27% higher than capital spending over the previous five-year period, she pointed out. Goldman initiated coverage of several stocks in the utilities sector, tracking the names’ exposure to cleantech, nuclear generation, maintaining grid reliability and natural gas. In addition, affordability and regulatory aspects were considered. Among the names Goldman has rated as a buy are American Electric Power, NextEra Energy, Sempra and Southern Co. American Electric Power and NextEra Energy both hit multiple Goldman themes. The former should benefit from its exposure to renewables, nuclear power and maintaining the reliability of the U.S. grid, Davenport said. “With approximately 60% of AEP’s five-year capital plan allocated to transmission and regulated renewables, we see an attractive rate base and earnings growth, in addition to actions taken to optimize the business and improve regulatory backlog, leading to our positive view on the stock,” she wrote. NextEra Energy has exposure to renewables, nuclear and favorable pricing/regulatory outcomes, Davenport said. “Robust renewables growth profile, constructive regulatory and execution outlook at FPL [Florida Power & Light]and an attractive relative valuation after underperformance drives our bullish view on NEE,” she wrote. Shares of both stocks are down roughly 11% year to date. American Electric Power shares are up nearly 16% from Goldman’s price target as of Wednesday’s close. It also has 3, 9% dividend yield. NextEra Energy offers more than 21% upside to Goldman’s price target plus a 2.5% dividend yield. Meanwhile, Sempra is also an attractive growth opportunity, Davenport said. It has a significant LNG project at its Sempra Infrastructure business and its Texas Oncor continues to benefit from strong consumer growth, she noted. Sempra shares are down about 4% this year and have a 20% upside to Goldman’s price target. 3.2% dividend yield. Finally, Southern Co. will see a revaluation once it units 3 and 4 at its Vogtle nuclear power plant online, Davenport said. upside opportunities that are not in our base case around energy transition investments, given that SO has expressed interest in renewables but has so far committed limited capital to them,” she wrote . Southern shares are down 2% in 2023 and have 14% upside to Goldman’s price target. It also pays a 4% dividend yield. — CNBC’s Michael Bloom contributed reporting.