The electricity industry is transforming, according to Morgan Stanley, and multiple power producers, grid operators and utilities are set to benefit. “Power demand is booming, prices are inflecting, and cost to produce clean power has fallen by a third around the world since 2023, and more so in Asia,” the investment bank’s analysts outlined in an Oct. 23 note. “Global power markets have surprised on multiple fronts, and investors are navigating a new normal in the power value chain,” they added. The analysts noted that although power demand has risen around the world, investors have “yet to agree this is the new normal” and so have not factored it into their investment decisions. Morgan Stanley said it is also eyeing renewables, which it describes as “interesting” but “more risky than before in multiple geographies due to competition from consumers and grid constraints.” Morgan Stanley’s analysts named three overweight-rated global stocks in the electricity sector which they give more than 40% potential upside. RWE RWE : Morgan Stanley notes that the German power giant, which generates and trades electricity, is exposed to “tight electricity markets rewarding flexibility + value creation in renewables in Europe & US.” RWE is listed on the Frankfurt Stock Exchange and trades as an American Depository Receipt (ADR) in the U.S. under the RWEOY ticker. The investment bank has a price target of 50 euros ($54) on the stock, giving it around 60% upside. AES Corp. AES Corp.: Morgan Stanley highlighted the company’s “expanding renewable portfolio” as a theme to watch. The U.S.-headquartered energy player is in the business of utilities and power generation. The investment bank has a price target of $25 on the stock, giving it around 46.4% upside potential. Tenaga Nasional Tenaga Nasional : The Malaysian state-owned utility company is on Morgan Stanley’s radar given its exposure to “single grid operator benefits from power demand + renewables grid capex.” Tenaga is listed on the Bursa Malaysia and trades as an ADR in the U.S. Shares in Tenaga are also included in the iShares MSCI Malaysia ETF (6.7% weight) and Global X FTSE Southeast Asia ETF (2.3%) Morgan Stanley’s price target of 20.60 Malaysian Ringgit ($4.74) on the stock gives it nearly 46.5% upside potential. — CNBC’s Michael Bloom contributed to this report.