China Wants to Kill this U.S. Solar Company

Briton Ryle

Written By Briton Ryle

Posted May 1, 2024

Artificial Intelligence is an energy hog and the electrical power demands from the data centers are surging. As an investor, you should be paying attention. 

Case in point: Exelon (NYSE: EXC) is the power utility serving Illinois. It is currently working through the engineering plans for 25 data center projects in the Chicago area alone. All told the power demand from Chicago area data centers is expected to grow 900%…

Right now, Chicago area data centers consume 11% of Exelon’s electricity output. That number is going higher. Exelon pays a 4% dividend and its share price is up just 7% this year.

Across the U.S., data centers consume 2% of total electrical output, roughly the amount of power consumed by Brazil. In two years, data center electricity consumption will double to roughly the amount of power that Japan uses in a year. 

This is an “all hands on deck” situation. As in: no method of electricity generation will be left out. Yes, the majority of new electricity generation is expected to come from solar and wind. But coal and natural gas will still have a place. 

The Wall Street Journal says that in the next three years, “…renewables are projected to make up 23.7% of total electrical-power generation in the U.S., while natural gas is expected to slip to 21.9% and coal to 28.9%.” 

That estimate accounts for 75%, you can pencil in nuclear and even geothermal for the remaining 25%. My colleague Christian DeHaemer says coal is particularly undervalued because it is hated. No one is building coal power plants in the U.S. anymore, but the ones in use are not going away.

Electricity Solutions

Take a look at the power generation situation in California. The state loves to tout that its electricity is generated almost entirely by renewables. Which is true.  Except California’s domestic electricity generation only meets about two-thirds of the state’s needs. The rest gets “imported” across state lines from the likes of Arizona, a state that still leans heavily on fossil fuels for electricity generation.

As for nuclear, Georgia Power (a subsidiary of Southern Co (NYSE: SO) who pays a 3.9% dividend) just brought two new reactors online on Monday. This was an expansion of its current Plant Vogtle, now the biggest nuclear power plant in the country. 

The construction cost $30 billion – double what it was supposed to, and took 7 years longer than initially thought. It’s estimated that $1,000 from each Georgia Power customer went to construction costs. Up front costs are a big reason why there aren’t any other large-scale nuclear plants in the works.

However, small nuclear reactor (SMR) technology may be a viable solution that individual companies (like Microsoft or Amazon) could implement. NuScale Power (NYSE: SMR) has devised a small water-pressurized reactor that can generate 750 megawatts of electricity. NuScale’s SMR is the only one that’s been certified by the Nuclear Regulatory Commission. 

Microsoft Renewable Deal

Brookfield Renewable Partners (NYSE: BEP) is an MLP with wind, solar, and hydroelectric power generation assets in the U.S., Colombia, and Brazil. It just signed a deal with Microsoft to supply 10.6 gigawatts of power from 2026 to 2030. 

Brookfield stock is up 5% today on the news. It pays a 6.5% dividend. And the stock has plenty of upside: 

BEP 4 yr

That’s a 4-year chart. The stock is making a double bottom at $20. Recent highs of $27 look very doable. And a run to the 2023 highs around $32 is not a stretch. 

China Would Love to Kill this Solar Company

First Solar (NASDAQ: FSLR) is the biggest U.S. solar panel company. It’s expected to grow earnings from $13.50 a share this fiscal year to over $21 a share in fiscal 2025. That’s a forward Price-to-Earnings of 8.3 for fiscal 2025. In other words, it’s cheap. 

First Solar is valued at $18 billion and should finish the year with $4.5 billion in revenue, which jumps to $5.6 billion next year. It has $1.5 billion in net cash. 

The risk for First Solar is ridiculously cheap solar panels from China. Europe is gobbling up Chinese panels because they’re so cheap, it makes building out renewable energy production really cheap. So it’s kind of ironic that the U.S. could speed up renewable builds by buying from China, but that would crush First Solar. 

It would seem that no matter who wins the White House in November, tariffs on Chinese imports to support domestic business will continue. That should keep First Solar in the clear, but you never know…

One thing is for sure: the U.S. needs a total upgrade of its electricity generation and transmission. You should be looking at these stocks, there’s a lot of money to be made.   


Briton Ryle
Chief Investment Strategist
Outsider Club



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