2 Income Stocks Reveal Why Solar Power Isn't Here Yet

I have been digging through J.P. Morgan’s latest annual energy report. Let me tell you, it’s a bucket of cold water for anyone believing we are about to flip a switch and transform our energy system overnight.

Michael Cembalest’s 15th annual energy paper, “Heliocentrism,” offers a sobering reality check that reminds me of buying value stocks when everyone else is chasing the latest tech darling. Sometimes, the boring truth matters more than the exciting story.

Despite all the headlines and $9 trillion spent globally over the last decade on wind, solar, electric vehicles, and energy storage, the renewable transition is moving at a snail’s pace—just 0.3% to 0.6% per year in terms of final energy consumption.

Two great income stocks show why.

This is not the exponential S-curve adoption we see in technology. This old-school, grinding industrial transition takes decades, not years. Europe leads the pack with renewable share growing at 0.6% annually, followed by China at 0.4% and the US at a measly 0.3%.

At this pace, even Europe, the global leader, needs about 20 years to reach a 30% renewable share. That is not disruption; that is evolution.

Solar capacity is indeed booming, doubling over the past three years and projected to double again by 2027. Solar accounted for about 60% of new global capacity additions this year and might hit 75% by 2027.

But here is the catch that most headlines miss: due to capacity factors of just 15-20%, solar’s actual share of electricity generation is far smaller than the capacity numbers suggest.

Solar power provides about 7% of global electricity generation today.

Electricity itself?

That is only about a third of final energy consumption in most countries. The rest is direct fuel for transport, industrial production and heating.

When you boil it all down, solar power accounts for roughly 2% of global final energy consumption. Not exactly revolutionizing the system overnight, is it?

One of the tightest economic relationships is the connection between a country’s per capita GDP and energy consumption.

Human prosperity is built on steel, cement, ammonia/fertilizer, plastics, glass, chemicals and other industrial products that are incredibly energy-intensive to produce.

These industries rely on fossil fuels for 80-85% of their energy needs. This is not changing quickly, no matter what solar capacity charts show.

LinkedIn is filled with academics posting whenever wind, solar, and hydro meet most of a region’s power demand on a particular day. It is like reading a newspaper that only reports on baseball games where catchers hit home runs.

It happens sometimes, but it is not the norm.

In California, renewables plus storage met 75% or more of the load in only 26% of all hours in 2024. California still heavily relies on fossil fuels, nuclear power, and electricity imports for most of the year.

The situation is better in Europe, particularly Spain, where renewables provide at least half the load in 76% of all hours. But even there, the remaining hours require conventional power sources.

The Economics Are Not There Yet

Another cold reality: Electricity still costs 2-4 times more per unit of energy than natural gas for industrial consumers across countries. This explains why the electricity share of US industrial energy consumption has remained flat for decades despite advances in technology.

The economic gap slows electrification, which in turn slows decarbonization. Without electrification, it is hard to decarbonize energy-intensive industries using green grid electrons.

The Trump administration is clearly shifting priorities away from renewables to fossil fuels, national security, and inflation fighting.

This will likely mean scaled-back renewable subsidies, potentially reducing the energy bill by as much as $650 billion, about two-thirds of the original projected costs.

While this shift will not halt the renewable transition, it will likely slow its already gradual pace in the US.

For investors, the message is clear: Despite the excitement around clean energy, traditional energy is not going anywhere soon.

Human prosperity will remain inextricably linked to affordable natural gas and other fossil fuels for many years.

This does not mean avoiding renewable investments (they are growing steadily), but it does suggest maintaining exposure to traditional energy companies with strong balance sheets and reasonable valuations. The transition is happening on a timeline measured in decades, not years.

Remember, in markets as in energy transitions, patience and perspective are virtues that pay dividends. The infrastructure supporting our daily lives changes more like a battleship turning than a sports car—gradually, deliberately, and with tremendous momentum in both directions.

Let me tell you something that Wall Street’s green energy cheerleaders will not. Midstream oil and gas assets will be critical infrastructure for the next half-century, regardless of how many solar panels we install.

Pipelines, storage facilities, processing plants and terminals represent the circulatory system of our energy economy, and their importance will not diminish anytime soon.

With global energy demand projected to rise another 25% by 2050, according to conservative estimates, these assets will continue generating steady cash flows and dividends while the renewable transition inches forward at its glacial pace.

The beauty of midstream assets lies in their toll-road business model. They get paid based on volume, not commodity prices. While upstream producers ride the rollercoaster of oil and gas prices, these midstream workhorses collect their fees regardless of whether a barrel of oil costs $40 or $140.

This is precisely why smart investors seeking income and inflation protection should maintain significant exposure to these assets.

Companies with irreplaceable pipeline routes, long-term contracts with inflation adjustments, and strategic export terminals will continue rewarding shareholders with distributions that dwarf treasury yields for decades to come.

Perhaps most importantly, these midstream assets will serve as the bridge between our fossil fuel present and whatever energy future eventually materializes. Looking at the actual data instead of wishful thinking, it is clear that natural gas, which requires extensive midstream infrastructure, will remain critical not just for baseload power generation but as the essential backup for intermittent renewable sources.

Even as renewable capacity grows, the need for reliable gas delivery during Dunkelflaute events (those periods of low wind and solar output) becomes more critical, not less.

 The companies that own and operate this infrastructure are not dinosaurs awaiting extinction—they are adaptable energy logistics specialists whose assets will be repurposed and utilized throughout any transition, however long it takes.

Using our new Benzinga Ranking system and the scanning tool on Benzinga Pro, I found two of the best collections of midstream assets that are trading at bargain-basement prices.

Energy Transfer

Energy Transfer ET represents exactly the kind of misunderstood, undervalued asset I’ve built my career finding before Wall Street wakes up. This midstream behemoth operates over 125,000 miles of pipeline infrastructure that touches virtually every major U.S. energy basin. While the ESG crowd has been busy shunning anything with fossil fuel exposure, ET has been quietly throwing off mountains of cash flow, trading at a ridiculous 8.2x price to free cash flow ratio, a valuation you typically only see during financial crises, not economic expansions.

The company’s 7.04% dividend yield is not just substantial; it is sustainable and growing, backed by distribution coverage above 1.7x. This is not your typical yield trap; it is an ATM for patient investors.

What most analysts miss about Energy Transfer is how its integrated asset footprint creates operational synergies that standalone operators simply cannot match. From natural gas gathering in the Permian to NGL fractionation to crude and refined product transportation, ET’s diversified operations provide multiple paths to growth regardless of which hydrocarbons dominate the energy mix.

Management has learned the hard lessons of overexpansion and now focuses on optimizing existing assets, reducing debt, and returning capital to unit holders. The inevitable consequence will be multiple expansions as the market finally recognizes that ET is not just surviving the energy transition.

 It is positioned to facilitate whatever form it ultimately takes.

Plains All American Pipeline

Plains All American Pipeline PAA is North America’s premier crude oil logistics provider, with strategically positioned assets throughout the continent’s most productive basins.

With approximately 7.5x free cash flow and a robust 7.6% dividend yield, PAA offers the value proposition that has historically generated substantial returns for investors willing to look past the anti-hydrocarbon narrative.

What separates Plains from its peers is its unmatched crude oil gathering and transportation network in the Permian Basin—the crown jewel of U.S. oil production that continues defying pessimistic forecasts year after year.

This focused strategy gives PAA exceptional leverage to continued Permian growth without the capital expenditure burdens that plague many competitors.

The company’s management team has significantly transformed over the past few years, reducing debt by billions and streamlining operations to focus on its core competencies.

Unlike many midstream operators who overextended during the shale boom, Plains has right-sized its operation and balance sheet to withstand market volatility while maintaining its generous payouts. The market continues to price PAA as if U.S. oil production is on the verge of permanent decline, ignoring the reality that America’s oil output continues to set records even as renewables grow.

For income investors seeking both current yield and potential capital appreciation, Plains offers the rare combination of deep value, operational excellence, and strategically vital assets that will remain essential infrastructure regardless of how quickly or slowly the energy transition unfolds. This is not speculation—it is investing in the physical assets needed to meet energy demands for decades to come.

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