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NextEra, a major renewables player, says it will keep betting on gas

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Last year, natural gas plants accounted for about 35% of U.S. power generation. About 8% came from wind and solar.
Source: American Wind Energy Association

NextEra Energy Inc. said it will continue investing in natural gas infrastructure even as it promotes renewables as a disruptive force that could make those investments uneconomic sooner rather than later.

"We see renewables plus battery storage, without incentives, being cheaper than natural gas and cheaper than existing coal and existing nuclear," NextEra Chairman, President and CEO James Robo told investors Oct. 2.

NextEra claims to be the largest developer of renewable generation resources in the world. At the same time, the company is still placing new bets on natural gas, arguing that the fossil fuel will be an irreplaceable part of the U.S. power system for decades to come. NextEra affiliate NextEra Energy Partners on Sept. 30 said it is buying a natural gas pipeline company in a deal valued at $1.37 billion.

Asked Oct. 2 about the seeming contradictions in his company's dual focus on natural gas and renewables, Robo said it is infeasible for the country to move off of fossil fuels entirely — or to eliminate greenhouse gas emissions from the power sector entirely.

"If we get to 70% or 75% [renewables penetration] with the balance being natural gas, you're going to cut U.S. electric emissions by 80 or 90%, which is what we need to do," Robo said. "But you're not going to get to zero."

Last year, natural gas plants accounted for about 35% of U.S. power generation, according to the U.S. Energy Information Administration. About 8% came from wind and solar.

The question, Robo said, is, "what's the right economics while decarbonizing the environment?"

Many analysts and state regulators have started raising concerns about the wisdom of investing in new gas projects, saying those assets risk being stranded as the costs of renewables and batteries continue to fall.

The Rocky Mountain Institute, which advocates for low-carbon energy, in September said that by 2035 it will be more expensive to continue operating approximately 71% of the country's planned new gas capacity than to build equivalent clean energy portfolios.

But investors evidently approve of NextEra's strategy. The company's shares are up 31.8% in 2019 compared to a 15.2% increase in the value of the S&P 500.

"I don't think you're going to see enormous growth in natural gas penetration over the next 15 to 20 years, but I think you're also not going to see it decline enormously, either," Robo said Oct. 2.