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NextEra continues US renewables push, expects accelerated shift away from coal

Highlights

Renewables challenged by ISO transmission planning

Regulated coal plants not economic in US: CEO

New York — NextEra Energy is pushing ahead with its aggressive renewable energy development strategy, executives said Jan. 26, adding that clean energy development in independent system operator markets is challenged by outdated interconnection processes and coal-fired power is uneconomic in regulated markets.

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"NextEra Energy remains well positioned to capitalize on the destructive forces reshaping our industry, which have expanded and accelerated over the past two years even beyond what we anticipated," Jim Robo, NextEra's chairman and CEO, said during the company's fourth quarter and full-year 2020 earnings conference call.

"The combination of low-cost renewables with low-cost storage in the form of batteries today and hydrogen in the longer term has substantially increased the total addressable market for NextEra Energy," Robo said. The company now believes a substantial and economic decarbonization of the electricity, transportation and industrial sectors is possible and represents a potential investment opportunity of trillions of dollars in the coming decades, he added.

NextEra expects in the US power sector that older, less efficient generation resources will continue to retire and be replaced with cleaner and more affordable alternatives and in the transportation sector it will be "increasingly economic" to replace fossil fuel vehicles with vehicles powered by fuel cells and batteries charged with renewable energy, he said.

In the industrial sector, grey hydrogen and other high-carbon feedstocks will be replaced with green hydrogen and the company believes these trends have already been put into motion driven by economics, Robo said.

Additionally, the Biden administration's potential action to address climate change may further accelerate these shifts, he said.

However, in response to an analyst question about NextEra's transmission business, Robo said "the biggest inhibitor to renewables" in this country is not consumer demand or interest from federal or state government to get renewables built, it is "fundamentally broken processes" with the way the ISO's manage interconnection queues and transmission planning more broadly.

With the incoming Biden administration and a new leadership at the Federal Energy Regulatory Commission, "there is an opportunity to fix that," and every bit of transmission NextEra builds is incremental and helpful to the company's renewable energy business and helps bring renewables onto the power grid faster, he said.

US coal headwinds

In responding to another analyst's question about the regulated coal-fired power business being supported by regulated returns in many parts of the country, despite being less efficient than other potential generation resources, Robo said that was "being kind to the regulated coal fleet."

"There is not a regulated coal plant in this country that is economic today ... when it's dispatched on any basis, not a single one," he said.

If you run a utility you do not want to retire an asset that you will have to write off or not be able to earn money on, Robo said. Additionally, "there is no question" the Biden administration will use the Environmental Protection Agency and other means to make the continued operation of coal plants "very difficult," so there is going to be more federal pressure to accelerate the transition away from coal, he said.

Those expected policy challenges, along with the fact that the economics of operating coal plants are higher than the new-build costs of renewables and storage, will likely accelerate the shift way from coal-fired power in the US, he added.

As a result, NextEra's regulated Florida utilities -- Florida Power & Light and Gulf Power -- have no coal in their generation systems for the first time in 70 years, Robo said.

And the company's renewable energy development subsidiary, NextEra Energy Resources, commissioned roughly 5,750 MW of renewables during 2020 and added a net of nearly 7,000 MW to its backlog, according to an investor presentation given by the executives.

The parent company expects Energy Resources to construct about 23 to 30 GW of renewables from 2021 to 2024, the presentation said. Additionally, 1,646 MW of energy storage capacity is expected to come online from 2021 to 2022 and 955 MW of storage capacity is expected from projects completed from 2023 to 2024.

NextEra Energy reported Q4 2020 net losses on a generally accepted accounting practice basis of $5 million, or $0.00/share, compared with net income attributable to NextEra Energy of $975 million, or 50 cents /share, for Q4 2019.