As global energy systems shift toward decarbonization, a new class of utility companies is emerging—those committed to carbon neutrality while maintaining strong growth fundamentals. These carbon-neutral energy utilities generate electricity from renewable sources, invest in clean infrastructure, and often provide energy storage, demand response, or grid modernization services. For investors, these companies offer exposure to long-term structural growth in clean energy with the relative stability of the utility sector.
What defines a carbon-neutral utility?
- Net-zero targets: Formal commitments to achieve carbon neutrality, often before 2050
- Renewable-heavy portfolios: Majority of generation from wind, solar, hydro, or geothermal
- Phase-out of fossil fuels: Clear plans to retire coal and minimize natural gas usage
- Grid innovation: Investment in smart grids, distributed energy, and battery storage
- Regulatory alignment: Operate in regions with strong clean energy policy and incentives
Top carbon-neutral utilities with growth potential
NextEra Energy, Inc. (NYSE: NEE)
- Headquarters: U.S.
- Generation mix: Largest producer of wind and solar energy in North America
- Growth drivers: Expanding its renewables portfolio through its subsidiary NextEra Energy Resources
- Carbon neutrality: Committed to net-zero by 2045 without carbon offsets
- Outlook: Aggressive capital investment pipeline and leadership in green hydrogen pilot projects
Ørsted A/S (CPH: ORSTED)
- Headquarters: Denmark
- Specialization: Offshore wind and green hydrogen
- Net-zero status: Became the first major energy company to fully transition from fossil fuels to renewables
- Growth: Expanding globally in offshore wind, including the U.S. and Asia-Pacific markets
- Competitive edge: Deep engineering expertise in large-scale renewable infrastructure
Brookfield Renewable Partners L.P. (NYSE: BEP / TSX: BEP.UN)
- Portfolio: Hydropower, wind, solar, and storage assets across the Americas, Europe, and Asia
- Carbon neutrality: Operates one of the world’s largest publicly traded renewable energy platforms
- Growth potential: Consistent expansion through acquisitions and greenfield development
- Investor appeal: Offers dividend income with long-term ESG-aligned capital growth
Iberdrola S.A. (BME: IBE)
- Region: Spain (global operations)
- Focus: Wind, solar, hydro, and smart grids
- Net-zero goal: By 2040, with interim carbon intensity reductions
- Investment plan: Over €40 billion in clean energy infrastructure from 2024 to 2026
- U.S. exposure: Owns Avangrid, active in Northeast U.S. renewable development
Enel SpA (BIT: ENEL)
- Headquarters: Italy
- Subsidiaries: Enel Green Power, active across Europe, the Americas, and Africa
- Clean energy mix: Leading global wind and solar capacity holder
- Carbon strategy: Targets net-zero across scopes 1, 2, and 3 by 2040
- Innovation: Major investments in grid digitalization, EV infrastructure, and green hydrogen
Clearway Energy, Inc. (NYSE: CWEN)
- Focus: U.S.-based utility-scale solar, wind, and energy storage
- Business model: Contracts long-term power purchase agreements (PPAs) with strong counterparties
- Carbon profile: Operates nearly exclusively clean energy assets
- Growth outlook: Backed by Global Infrastructure Partners and TotalEnergies with capital for expansion
TransAlta Renewables Inc. (TSX: RNW)
- Region: Canada, U.S., Australia
- Assets: Wind, hydro, and solar generation
- Decarbonization: Operates independently from its fossil-heavy parent (TransAlta Corporation), focusing only on renewables
- Attractiveness: Defensive cash flow and long-term contracts provide yield stability
Algonquin Power & Utilities Corp. (NYSE: AQN / TSX: AQN)
- Business mix: Renewable generation and regulated utility operations
- Clean capacity: More than 75% of power generation from renewables
- Sustainability focus: Net-zero by 2050, with interim science-based targets
- Expansion: Acquisitions in water utilities and international renewable platforms
ETFs with exposure to carbon-neutral utilities
- iShares Global Clean Energy ETF (ICLN)
- Invesco WilderHill Clean Energy ETF (PBW)
- First Trust NASDAQ Clean Edge Green Energy ETF (QCLN)
- SPDR S&P Kensho Clean Power ETF (CNRG)
These ETFs hold positions in many of the utilities listed above, along with manufacturers and service providers in the renewable energy ecosystem.
What to look for when evaluating carbon-neutral utilities
- Capex alignment: Percentage of capital spending allocated to renewables and grid upgrades
- Regulated vs. unregulated revenue: Balance between steady utility returns and higher-growth renewable businesses
- Geographic risk: Favor utilities in jurisdictions with supportive climate policies and grid stability
- Dividend sustainability: Clean utilities often pay steady dividends, but leverage and payout ratios should be monitored
- Project pipeline: Future revenue visibility depends on buildout of contracted and permitted renewable projects
Risks to consider
- Interest rate sensitivity: Like all utilities, clean energy companies can be negatively affected by rising rates
- Commodity price exposure: Some utilities still maintain legacy gas or coal operations; transition risk must be assessed
- Regulatory shifts: Incentive programs like tax credits or feed-in tariffs can change with political cycles
- Weather variability: Renewable output may fluctuate, affecting earnings if not fully hedged or contracted
Investing in carbon-neutral utilities offers a blend of sustainability, infrastructure resilience, and dividend income. With global energy policy trending green, these companies are well positioned to benefit from the transition to a low-carbon economy.