These stocks could benefit as Texas and other states remake energy infrastructure
A confluence of factors led to Texas' electric grid failing last week in the wake of a unusual winter storm that paralyzed the state's infrastructure. Texas is not the only state that's grappled with a grid that can't manage, and the state's struggles could spark a greater buildout of energy infrastructure across the U.S. Wall Street analysts say there are a number of companies that will likely take part in the energy infrastructure upgrade, which President Joe Biden has said is a priority of his administration. And others will benefit as consumers take their energy needs into their own hands off the grid. The implications will span sectors, touching on everything from renewables to traditional oil and gas companies to names involved in electric transmission. "The longer-term regulatory, political and systems implications are profound," Citi analysts wrote in a note to clients following the severe winter weather in the Midwest and South. Texas bore the brunt of the damages. Wintery conditions affected power production from natural gas, coal, renewables and other sources, just as consumers turned up their thermostats amid frigid temperatures. The grid couldn't match supply and demand dynamics, and had to shut off power for millions of customers. State and federal officials have called for investigations into what happened, and heavy spending could come next. At the national level, as blackouts become more commonplace the Federal Energy Regulatory Commission on Monday announced that it plans to examine the threat that climate change poses to electric reliability. "The effects of climate change are already apparent," FERC Chairman Richard Glick said in a statement. "We must do everything we can within our statutory authority to ensure that the electric grid is capable of keeping the lights on in the face of extreme weather." Grid vulnerabilities could lead to greater adoption of distributed power generation and energy storage, according to Morgan Stanley. "Many consumers (residential, commercial and industrial) may increasingly seek to take reliable energy supply into their own hands by procuring distributed generation (solar and fuel cells) and/or energy storage," the firm said in a recent note to clients. Morgan Stanley pointed specifically to Sunrun , Sunnova and SunPower as beneficiaries since all three have residential solar and energy storage offerings. SunPower CEO Thomas Werner said that after California's rolling blackouts last summer demand for the company's storage option outstripped supply, and he expects much the same scenario playing out in Texas. "I think we're going to see investment in the grid and aggressive investment in renewables, as a result of [the storm], especially distributed renewables on rooftops," he told CNBC. Morgan Stanley's analysts, led by Stephen Byrd, added that with momentum behind ESG investing, utilities focused on incorporating a greater share of renewables should attract the most investment dollars. The firm counts American Electric Power , FirstEnergy and AES Corporation as utilities undergoing changes that are also attractively priced. Another company that could see its stock rise in the wake of the Texas storm is backup generator company Generac . The CEO recently told CNBC that with demand spiking, the company can't get its products to market fast enough. Generac also has battery storage products and energy management systems. Analysts at research firm William Blair said these portions of Generac's business should drive long-term growth. "We believe the company's association with the long-term trends of grid deterioration, home security, climate change, and clean energy will support maintenance of a multiple in this range," the firm said while reiterating its outperform rating on the stock. "We believe the company is positioned to generate strong revenue growth for an extended period." One of the reasons Texas' equipment failed was because it wasn't equipped to function in cold weather. But power equipment, of course, operates in places that are much colder than Texas, so officials are calling for Texas' infrastructure to be winterized. With "significant upgrades needed," analysts at RBC Capital Markets said names like General Electric , Eaton Corp. and Emerson Electric could benefit. The latter could also see upside from oil and gas companies spending more on maintenance and repair operations. Critics of green energy were quick to point to frozen wind turbines as the cause of Texas' blackouts. In reality the lion's share of the outages were caused by natural gas production moving offline, although the rise of renewables does create challenges for the grid. Electricity is a game of supply and demand, and under typical circumstances gas and coal plants can immediately change the supply side of the condition to match changing demand. But renewables alter the supply picture since they can't be ramped up at will. Additionally, during peak conditions they might send an abundance of power to the grid. Making the grid smarter can help utility companies have an accurate view of the current supply and demand picture. This is particularly important as more and more things, including vehicles, move onto the grid. Raymond James noted that better utilization of demand response programs could have mitigated the severity of Texas' outages. Put simply, these programs can temporarily curtail power during times of peak demand rather than simply pulling the plug on large areas. Washington-based Itron offers solutions to measure, manage and analyze energy and water usage. Raymond James has an outperform rating on the stock - CNBC's Michael Bloom contributed reporting.

Workers repair a power line in Austin, Texas, U.S., on Wednesday, Feb. 18, 2021. Thomas Ryan Allison | Bloomberg | Getty Images