Green hydrogen important for decarbonizing US power sector: NextEra CEO

Green hydrogen will be a critical component of fully decarbonizing the US power sector and broader economy once the technology scales up to the point it can be used for industrial applications like ammonia production and petroleum refining, a US utility executive said May 26.

"The exciting thing about making green hydrogen from electricity is you can also decarbonize huge swaths of the industrial carbon footprint as well," Jim Robo, chairman and CEO of investor-owned utility NextEra Energy said during a virtual fireside chat at the S&P Global Sustainable 1 Conference.

"Once you decarbonize the US electric grid and can create green hydrogen," then it can be used it to replace diesel fuel in the transportation sector, Robo said. It can also be used as a jet fuel, used to make ammonia, and used in refineries, which consume significant volumes of hydrogen, he said.

The US power sector accounts for about 30% of the country's carbon dioxide emissions, and transportation is about 35% or 40%, with the industrial sector making up the balance, he said.

Economics drove renewable shift

Robo explained that 20 years ago NextEra had a small wind-power business that made renewable energy investments, but during the combined-cycle natural gas turbine buildout of the late 1990s to early 2000s, the company purchased 66 gas turbines.

"We kind of ran out of steam around number 34 and realized it was really bad capital allocation to keep building combined-cycle plants in a market that really didn't need them," he said. As a result, NextEra renegotiated its deal with GE and swapped gas turbines for wind turbines.

"We made that pivot because we like the economics of the wind business, ... and we ended up doing 1,000 MW of wind in 2003 as a result and that started the real growth of renewables at the company," Robo said.

Reiterating comments made during recent corporate earnings calls, Robo said new wind and solar power installations with battery storage have cheaper operating costs than any coal-fired power plant, and based purely on economics, there should not be a coal plant operating in the US today.

Coal fueled roughly one-third of US power generation last year and accounted for 60% or 70% of greenhouse gas emissions, so shutting down the coal plants and replacing them with wind, solar and batteries can result in a dramatic emissions reduction, he said.

Role of nuclear power

Asked about the role of nuclear power in decarbonization, Robo said it is "clearly very important" as a zero-carbon resource that supplies about 20% of US power output, while wind power currently supplies about 10% and he expects it will reach 50% by 2030.

Nuclear is needed because decarbonization go backwards for every nuclear power unit closed, Robo said, adding he has become more positive about the nuclear business because the Biden administration recognizes the importance of decarbonization and the role nuclear power plays in it.

However, much US nuclear energy policy has been playing out at the state level, where lawmakers have provided subsidies to keep nuclear power plants operating when their owners have announced early retirement plans, citing lower wholesale power prices in recent years.

Absent action by the Illinois General Assembly to provide financial support, Exelon will proceed with plans to close its Byron and Dresden nuclear power plants in the state this fall, the company's President and CEO Chris Crane said May 5. Byron-1 and -2 and Dresden-2 and -3 have a combined capacity of 4,354 MW.

The Illinois situation, along with the recent permanent closure of the Indian Point nuclear plant in New York, has received mixed reactions from the market, Grace Parker, power pricing analyst with S&P Global Platts, said during the virtual Platts Northeast Power and Gas Conference on May 26.

These events have "amplified the ongoing debate about whether nuclear plants should get subsidies," Parker said.

These plant closures are unlikely to result in immediate power-price impacts, but over the longer term, reduced nuclear power supply could leave the market to find ways to replace that capacity, and the question is how those replacement resources will impact emissions levels, she said.

Robo sees green hydrogen as a potential future power generation fuel, saying "with renewables costs coming down and electrolyzer costs coming down, we've become very excited about the ability to use green hydrogen to decarbonize that last 20% of the US electric grid."

By 2030 or 2035, NextEra believes green hydrogen on its own will be cost competitive with natural gas and will be able to replace gas in combined-cycle plants, he said.

The company is starting to see the technology mature and has a pilot project scheduled for 2023 at one of its gas-fired power plants, where solar power will be used to generate hydrogen that will replace 10% to 20% of the gas used in one of the turbines, Robo said.

"Green hydrogen plus renewables is a game-changer for the US economy," he said.