The combined market capitalization (market cap) of publicly traded US-based regulated electric utilities is roughly US$1 trillion. NextEra Energy (NextEra) has a market cap of more than US$150 billion. A little more than 20 years ago, its market cap was just US$10 billion.
As of March 31, 2022, NextEra operated a staggering 61 GW of electricity generation assets. For context, the entire utility-scale electricity generating capacity of the United States at the end of 2021 was 1143.8 GW, according to the US Energy Information Administration (EIA). Put another way, NextEra generates or operates more than 5% of the electricity on the grid. It is also the largest solar, wind, and storage developer in the United States. Yet despite its market leading position, NextEra is far from slowing down its development.
Here’s a look at how NextEra plans to completely decarbonize its asset portfolio by 2045, the role that green hydrogen plays in its transition away from fossil fuels toward renewables, and the example the company is setting for the utility sector as well as other renewable energy operators.
From Oil And Coal To Natural Gas And Renewables
NextEra Energy operates two main business units — Florida Power & Light (FPL) and NextEra Energy Resources (NEER). FPL is the largest electric utility in Florida, serving around half of the state’s population. Meanwhile, NEER operates renewable projects in 26 US states and four Canadian Provinces and has a wide range of customers.
In 1988, 65% of NextEra’s capacity was oil, 18% was nuclear, 15% was purchased power, and 2% was coal. For the next 13 years, the company mainly invested in natural gas. In 2001, its energy mix was 41% oil, 26% natural gas, 12% nuclear, 11% purchased power, 6% wind and solar, and 4% coal. For the last 20 years, natural gas and renewable investments have grown to completely replace oil and coal. By 2021, wind and solar emerged as the largest contributor to its capacity at 44%, followed by natural gas at 43%, nuclear at 9%, and 4% for coal, oil, and purchased power.
NextEra has a far less carbon-intensive energy mix than the United States as a whole. According to the Energy Information Administration (EIA), the US utility-scale electricity generating capacity in 2021 was 43% natural gas, 18% coal, 27% renewables (16% nonhydroelectric and 9% hydroelectric), 8% nuclear, and 4% other. Put another way, NextEra relies roughly the same on natural gas and nuclear as the national average but has a far higher concentration of renewables and a virtually nonexistent coal portfolio.
Revolutionizing The Energy Mix Of FPL And NEER
In 2005, FPL’s energy mix was 42% natural gas, 19% nuclear, 18% oil, 16% purchased power, and 5% coal. In 2021, natural gas increased to 67%, nuclear was 20%, coal was only 3%, purchased power was just 6%, and solar was 4%. By 2031, FPL forecasts natural gas to drop to 60%, nuclear to slightly decrease to 19%, purchased power to decrease to just 2%, and solar to increase to 19%. By 2045, FPL forecasts 83% of its portfolio will be solar, battery storage, and green hydrogen, while 16% will be nuclear and 1% will be renewable natural gas (RNG).
FPL’s current capacity sits at around 33 GW. Its decarbonization plan doesn’t just involve converting fossil fuel sources to renewable energy. Rather, it also plans on more than quadrupling its total installed capacity. FPL believes it has a 160-GW opportunity ahead of itself, split into 92 GW of new solar capacity, 50 GW of new battery storage capacity, and 16 GW of green hydrogen capacity. FPL is wasting no time getting ahead on its goals. It has earmarked US$32 billion to US$34 billion in capital expenditures between 2022 and 2025.
Meanwhile, NEER’s existing portfolio sits at around 28 GW, 20 GW of which is wind energy, 4 GW is solar energy, 2 GW of nuclear energy, and 2 GW of natural gas/oil. However, NEER is adding capacity at a breakneck pace. It added more than 2 GW of renewable and storage to its backlog in Q2 2022 alone. Originations from 2022 to 2025 are expected to be between 27.7 and 36.9 GW, around half of which is solar, a third is wind, and the rest is energy storage and wind repowering. In sum, NEER is currently the largest renewable energy operator in the world and should continue to hold its pole position for years to come.
Between 2019 and 2021, NextEra placed 17.2 GW into service. According to NextEra internal estimates based on publicly available information, NextEra contributed the 5th most capital into the US economy of any company in 2021.
Path Toward Real Zero
A transition from fossil fuels to solar, wind, storage, and green hydrogen in terms of capacity additions is one thing. But NextEra has also set five-year goals to track its carbon dioxide (CO2) emissions and hold itself accountable. In 2025, it expects CO2 rate reductions compared to 2005 to be 70%, then 82% in 2030, 87% in 2035, 94% in 2040, and 100% by 2045. By contrast, it expects industry average rate reductions to be just 61% by 2045.
What’s unique about NextEra Energy is that it isn’t just investing in a single renewable energy technology, but rather, is leveraging decades of infrastructure and operational experience to embrace wind, solar, storage, green hydrogen, and RNG.
FPL has made significant progress on its green hydrogen rollout in recent years. In February, FPL announced that Cummins will supply a 25-MW electrolyzer system for its Cavendish NextGen Hydrogen Hub, which is Florida’s first green hydrogen plant. “At FPL, we are always looking over the horizon and focused on making smart, long-term investments to build a more modern, stronger, and cleaner energy grid that future generations can depend on,” said Eric Silagy, FPL President and CEO. “Since building our first solar energy center in 2009, FPL has constructed 50 solar energy centers, commissioned the world’s largest solar-powered battery, and embarked on innovative pilot programs to advance microgrid technology and electric vehicle [EV] charging while eliminating coal from our fleet in Florida. Now, we are helping usher in the next era of Florida’s clean energy future with a ‘green’ hydrogen pilot project that could be key to unlocking 100% carbon-free electricity.”
The Canvendish pilot plant will use solar energy to produce green hydrogen, which will be blended with natural gas and power an existing combustion turbine once connected with FPL’s Okeechobee Clean Energy Center. In total, the system will consist of five Cummins HyLYZER 1000 proton-exchange membrane (PEM) electrolyzers for a total of 25 MW or 10.8 tons (9.8 tonnes) of hydrogen produced per day.
Green Hydrogen’s Use As Long Duration Storage
Green hydrogen blends FPL’s existing infrastructure with its heavy investment in solar energy. At scale, FPL believes that green hydrogen provides a unique source of long-duration storage unmatched by solar or wind energy.
The plan is to use FPL’s utility-scale solar farms to power electrolyzers that split water molecules into hydrogen and oxygen. The hydrogen then gets fed into compressors which prepare the hydrogen for storage tanks. From there, the hydrogen can be used for myriad purposes to support FPL’s grid, power generation, industrial use cases, and even commercial and residential uses when blended with natural gas. FPL has an existing combined cycle fleet, which can burn green hydrogen for decades to come. The US$65 million investment into the green hydrogen pilot program is expected to be the first of many projects FPL will use to incorporate green hydrogen as a core part of its decarbonization strategy. FPL expects in invest between US$1.5 billion and US$2 billion between 2022 and 2025 in green hydrogen and other technology investments.
|FPL Opportunity||Projected Capital Expenditures Between 2022 And 2025|
|Transmission And Distribution||US$12.5 Billion To US$13.5 Billion|
|Maintenance Of Existing Assets, Nuclear Fuel, And Other||US$6 Billion To US$6.5 Billion|
|Transmission And Distribution For Storm Hardening||US$5 Billion To US$6 Billion|
|Solar Base Rate Adjustment (2024 And 2025)||US$2.1 Billion|
|SolarTogether Phase 1 Extension||US$2.1 Billion|
|Rate Base Solar||US$2.1 Billion|
|Green Hydrogen And Other Technology Investments||US$1.5 Billion To US$2 Billion|
|500 kV Transmission Project||US$700 Million|
|Clean Water Recovery Center||US$300 Million|
(Data Source: NextEra Energy June 2022 Investor Presentation)
In its June 2022 investor presentation, NextEra Energy said that it believes the best way to decarbonize high emitting sectors of the US economy is to either electrify operations or turn to renewable fuels such as green hydrogen. Green hydrogen has potential use cases in transportation (27% of US emissions), electric power (25% of US emissions), industry (24% of US emissions), residential and commercial (13% of US emissions), and agriculture (11% of emissions). In its June Real Zero announcement, FPL stated that it believes natural gas will be displaced by green hydrogen in some of its existing generation units. “FPL would convert 16,000 MW of existing natural gas units to run on green hydrogen,” the company said in a statement. “The conversion of these modern, efficient units to green hydrogen is expected to be a cost-effective solution for customers and their operation would serve as an important and diverse generation source. Importantly, reaching FPL’s Real Zero goal would not result in any stranded generation assets.”
Green Hydrogen And NEER
In addition to FPL, NEER will contribute to increased production of green hydrogen in the United States. As a reminder, FPL is more so in the business of producing, transmitting, and distributing electricity to Floridians, while NEER is mostly involved in producing renewable energy and then signing long-term power purchase agreements with customers who would like to use that renewable energy to decarbonize their operations. In this vein, NEER’s green hydrogen opportunity is potentially even larger than FPL’s.
NEER sees two main decarbonization pathways for the renewable energy it produces. The first is to simply use wind, solar, and energy storage to eliminate carbon from the grid. The second is to use renewables as a power source to reduce carbon from existing business operations. That’s where solutions such as green hydrogen, RNG, and EVs come into play. As the largest producer of renewable energy, NEER serves as a critical supporter of green hydrogen technology, whether that’s increased need for hydrogen compression, transmission, or distribution. NEER believes that in time, green power in front of and behind the meter can replace corporate building energy needs and supply data centers with clean power. It also believes that green hydrogen and renewable fuels can replace fossil fuels in industrial operations.
By 2050, NEER expects the total US renewables addressable market to be 7000 GW, 3550 GW of which is in the power sector, 1500 GW in other economy decarbonization, 1000 GW specifically for green hydrogen, and 950 GW for electrifying the transportation sector through solutions such as EVs. “Today, NextEra Energy Resources operates the world’s largest clean energy portfolio, with a generating capacity of 24,000 MW of renewable energy from the wind and the sun,” said NEER in a statement.
Harnessing Existing Infrastructure
When we think about decarbonizing the energy grid, we typically imagine solar and wind replacing coal and natural gas. However, integrated regulated electric utilities like NextEra Energy have a diverse set of generation, storage, transmission, and distribution infrastructure that is better suited being converted to green hydrogen than being decommissioned. FPL’s backyard in Florida is conducive to solar, while the bulk of NEER’s existing renewable capacity in is the wind farms of the US Great Plains. However, if NextEra Energy wants to become a net-zero utility by 2045, it needs to invest in storage options for renewables. Green hydrogen can be compressed and stored as a gas or compressed and cooled for storage as a liquid, giving it better storage capabilities than the expensive battery technology required for wind and solar.
NextEra’s aggressive push toward decarbonization, as evidenced by the last 20 years of investment and its 25-year spending plans for FPL and NEER, showcase how green hydrogen can pair with wind and solar for a fully carbon-neutral future across the energy mix.