NextEra investing in hydrogen; rapidly expanding renewables, storage

NextEra Energy executives are bullish about long-term opportunities for hydrogen to help achieve US decarbonization goals, along with associated market opportunities for the rapid development of renewable energy, the officials said July 24l.

Based on ongoing analysis of the long-term potential for low-cost renewables, "we remain confident as ever that wind, solar and battery storage will be hugely disruptive to the country's existing generation fleet," Rebecca Kujawa, NextEra Energy's executive vice president of finance and CFO, said on a second-quarter earnings cal

But additional technologies will be needed to achieve an emissions-free future and the investor-owned utility holding company is "particularly excited about the long-term potential of hydrogen," Kujawa said.

Utilizing the same "toe in the water approach" that NextEra used with solar power and battery storage, the company plans to propose a roughly $65 million hydrogen pilot project at its utility Florida Power & Light that is expected to be in service in 2023, pending Florida Public Service Commission approval, Kujawa told the investors and analysts on the call.

The project will use solar energy that would otherwise have been curtailed to produce 100% green hydrogen through an approximately 20-MW electrolysis system, she said.

The hydrogen would be used to replace "a portion" of the natural gas consumed by one of the three gas-fired turbines at the Okeechobee Clean Energy Center, a 1,622-MW, combined-cycle power plant located in central Florida, Kujawa said.

NextEra views the project as complimenting its solar and battery storage development efforts and continues evaluating other hydrogen opportunities across its businesses. The company is excited about the technology's long-term potential which should further support future demand for low-cost renewable energy and could help accelerate decarbonization of transportation fuels and industrial feed stocks, she said.

In response to an analyst question about the path for hydrogen at NextEra Energy Resources, the competitive energy subsidiary, NextEra's chairman and CEO Jim Robo said he would be "disappointed" if the subsidiary did not make some kind of pilot investment in the next year.

And while the company does not plan to get into manufacturing electrolyzers, Robo said he would not rule out owning them as part of an integrated system to manufacture hydrogen.

It is early, but there is clearly an opportunity five or ten years from now to displace the last 10% of carbon emissions out of the electric sector, Robo said.

"This is going to drive gigawatts and gigawatts and gigawatts of renewable [energy] demand in this country," he said, adding that hydrogen is a big strategic initiative for NextEra over the next five years.

Similar to the company's approach to batteries, Robo said NextEra does not expect to make money from hydrogen for several years, but next year NextEra plans to deploy a billion dollars of batteries ten years after entering that market.

Renewable energy growth

In June, FPL said it plans to retire the 847-MW, coal-fired Scherer 4 plant in early 2022, its last remaining coal unit, according to a statement. The plant's retirement is the final step of a coal phaseout strategy FPL launched in 2015 and will complete the closure of approximately 2,700 MW of coal capacity.

NextEra Energy Resources capitalized on the "terrific market opportunity" for low-cost renewables, adding 1,730 MW to its backlog since the first-quarter results call in April, the statement said.

Specifically, Energy Resources' renewables backlog consist of 708 MW of wind, 844 MW of solar and 178 MW of battery storage, according to an investor presentation. The total backlog stands at 14,400 MW.

From 2019 to 2020, the subsidiary signed contracts for 7,980 MW of wind, solar, energy storage and wind repowering, and from 2021 to 2022 has signed contracts for 6,554 MW of wind, solar and storage, according to the presentation.

Despite the coronavirus pandemic, Energy Resources' planned 2020 renewables construction projects remain on track to reach their in-service dates this year, the statement said.

NextEra Energy reported 2020 second-quarter net income on a GAAP basis of $1.275 billion, or $2.59/share, compared with $1.234 billion, or $2.56/share, for Q2 2019. NextEra Energy Resources reported a Q2 2020 contribution to net income attributable to NextEra Energy on a GAAP basis of $481 million, or 97 cents/share, compared with $672 million, or $1.39/share, in the prior-year quarter.