Capitalizing on Tailwinds in the Power Industry: 4 Electric Utilities to Watch in 2026

The power industry stands at an inflection point, driven by a convergence of favorable macroeconomic conditions, regulatory support, and structural demand growth. For investors seeking exposure to this resilient sector, understanding the key growth catalysts and identifying well-positioned operators is essential. The electricity generation, transmission and distribution landscape is undergoing profound transformation, reshaping investment opportunities across the power industry ecosystem.

The Convergence of Three Major Growth Drivers

Today’s power industry benefits from three simultaneous tailwinds that are rarely aligned. First, the Federal Reserve’s shift toward rate cuts—bringing benchmark rates from their 5.25-5.50% peak down to 3.75-4.00%—creates a favorable financing environment for capital-intensive operations. Further rate reductions are anticipated throughout 2026, meaningfully improving the economics of large infrastructure projects. Second, the structural transition toward clean energy continues accelerating, with U.S. renewable electricity generation projected to expand from 23% in 2025 to approximately 25-28% by 2027, supported by the Inflation Reduction Act and grid modernization investments. Third, electricity consumption is surging—the U.S. is expected to see demand increase 1% in 2026 and 3% in 2027, driven by electric vehicle adoption, reshoring of manufacturing, and critically, the explosive growth of data centers and artificial intelligence workloads, which consume substantially more electricity than traditional internet activities.

Interest Rate Relief Opens the Infrastructure Investment Floodgates

Lower borrowing costs directly benefit utilities’ capital deployment strategies. Most operators in the power industry maintain multi-year investment programs requiring billions in external financing. NextEra Energy plans to deploy over $74 billion through 2029, while Ameren has committed to more than $26.3 billion between 2025 and 2029. Alliant Energy is allocating $13.4 billion during 2026-2029, and Pinnacle West Capital has earmarked $8 billion for the 2026-2028 period.

The rate environment shift from restrictive to accommodative enhances the return on these capital programs. When borrowing costs decline, the net present value of long-duration infrastructure assets—power plants, transmission lines, distribution networks—improves substantially. This creates a powerful incentive for utilities to accelerate previously delayed projects and greenlight new ventures that enhance system reliability and capacity.

Renewable Energy Transition Reshapes the Power Industry Landscape

The pivot toward decarbonization represents a fundamental restructuring of the power industry itself. U.S. electric power operators are progressively shifting generation toward cleaner sources, with solar and wind capacity expanding rapidly. Battery storage projects are emerging as critical enablers, solving the intermittency challenge that previously limited renewable integration.

The Inflation Reduction Act provides long-term certainty around federal renewable energy incentives, reducing execution risk and enhancing earnings visibility for utilities committing to clean energy investments. This regulatory tailwind transforms what was once viewed as a compliance burden into a genuine competitive advantage for forward-thinking operators. Companies that lead this transition will strengthen customer relationships, improve regulatory relationships, and position themselves advantageously for future policy support.

Electricity Demand Surges Amid AI and Electrification Boom

Beyond macroeconomic and regulatory drivers, the power industry faces a supply-demand imbalance favoring higher electricity prices. Industrial, commercial, and residential electricity prices are projected to rise 1.9%, 2.3%, and 3.8% respectively in 2026, with similar trends continuing in 2027. This pricing power directly boosts operator revenues without requiring volume growth.

Demand itself is expanding faster than supply infrastructure. Data centers and AI computing facilities are voracious electricity consumers, orders of magnitude beyond streaming or social media applications. Electric vehicle charging infrastructure is proliferating. Manufacturing reshoring is relocating production to the United States, increasing domestic electricity demand. Residential consumption is also climbing. This multi-pronged demand surge creates structural tailwinds that extend well beyond current market cycles.

Why the Power Industry Ranks Among Top Performers

The Zacks Utility-Electric Power industry comprises 56 stocks and currently holds a Zacks Industry Rank of #87, placing it in the top 36% of over 244 tracked industries. This positioning reflects positive near-term earnings momentum across constituent companies. The sector’s recent stock performance underscores this thesis: over the past 12 months, the industry gained 24.2%, outpacing both the broader S&P 500 (+16.5%) and the Utilities sector (+21%).

From a valuation perspective, the power industry trades at 13.24X EV/EBITDA compared to the S&P 500’s 18.9X and the Utilities sector’s 12.48X. This valuation discount to broader market multiples, combined with superior growth prospects, suggests the power industry remains attractively priced relative to intrinsic value expansion potential. Over the past five years, the industry has ranged from 12.27X to 21.31X, with a median of 15.21X, indicating current valuations rest near historical lows.

4 Utilities Positioned to Capture Industry Growth

All four recommended utilities carry approximately $11 billion in market capitalization and hold Zacks Rank #2 (Buy) ratings, reflecting analyst confidence in near-term performance.

NextEra Energy (NEE): Based in Juno Beach, Florida, NextEra Energy operates generation, transmission, and distribution assets while actively expanding its clean power portfolio. The company’s strategic capital deployment plan targets infrastructure modernization and renewable energy acceleration to reduce carbon emissions. With long-term earnings growth projected at 8.08% and a current dividend yield of 2.67%—superior to the S&P 500’s 1.35%—NEE offers both growth and income. Consensus estimates suggest modest earnings-per-share growth of 0.5% in 2026 after recent estimate revisions.

Ameren Corporation (AEE): St. Louis-based Ameren generates and distributes electricity and natural gas across Missouri and Illinois to residential, commercial, industrial, and wholesale markets. The company’s growth trajectory reflects disciplined investment in infrastructure upgrades and strategic projects totaling over $26.3 billion through 2029. AEE’s long-term earnings growth rate stands at 8.52%, with a 2.78% dividend yield. Similar to NEE, AEE shows 0.5% expected earnings growth in 2026 following recent estimate adjustments.

Alliant Energy Corporation (LNT): Madison, Wisconsin-based Alliant Energy operates regulated electric and natural gas services, benefiting from expanding customer demand across its service regions. The company expects capital expenditures of $13.4 billion during 2026-2029, supporting system expansion and modernization. LNT’s long-term earnings growth is projected at 7.15% with a 3.04% dividend yield. Unlike its peers, LNT’s 2026 consensus estimate suggests more robust earnings-per-share growth of 6.92%.

Pinnacle West Capital Corporation (PNW): Phoenix-based Pinnacle West operates a diversified generation portfolio spanning coal, nuclear, gas, oil, and solar assets across the Metro Phoenix service region. The company is benefiting from solid commercial activity expansion and improving economic conditions in Arizona, driving customer growth and service demand. With an $8 billion capital investment plan for 2026-2028, PNW expects to enhance service reliability while capturing growth opportunities. PNW’s long-term earnings growth stands at 3.56% with an attractive 3.95% dividend yield. 2026 consensus estimates project 0.86% earnings-per-share growth.

The Investment Case: Why Now Matters

The power industry offers a rare combination of macroeconomic support, regulatory tailwinds, and structural demand growth. Lower interest rates reduce financing costs for essential infrastructure. Renewable energy transition creates new investment opportunities and customer value. Surging electricity demand—particularly from AI and electrification—ensures sustained revenue and pricing power. These four utilities are strategically positioned to capitalize on these converging trends while delivering consistent dividends and long-term capital appreciation to investors seeking quality exposure to the power industry’s transformation.