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16 June 2022

NextEra renewables explosion will crush emissions by 2045

People are used to sitting up and taking notice when NextEra in the US talks about renewables – it is by far the largest US native owner and developer of renewables – but these have broadly been ad-hoc opportunities to develop solar and wind farms, to offer energy to other utilities. This week NextEra really brought its net zero planning to its original parent utility Florida Power and Light (FPL), along with its Gulf Power acquisition from 2018 – two companies which are have remained almost as entrenched in coal, gas and other fossil fuels as any other regulated utilities in the US. This company is responsible for over 12 million people’s electricity and FPL insists that it is already 28% lower in emissions than most other US utilities, but that’s still miles from being clean.

The plan is being called Real Zero or alternatively its Zero Carbon Blueprint– to emphasize that no offsets are being considered, and involves the elimination of all NextEra emissions by 2045. It will need to control a total of 90 GW of solar, 50 GW of battery, keep 3.5 GW of nuclear alive, and convert of 16 GW of existing natural gas units to run on green hydrogen. Where would the green hydrogen come from? Excess solar power is the clear and obvious answer, driving local electrolyzers.

The company has been an exemplar across the US for years in making money out of renewables, and has been promising to re-orient FPL for the past 3 years, and in this announcement finally has a very clear blueprint in place, very similar to a classic IRP (Integrated Resource Plan), which most US States use to regulate their utilities asset base and to set customer pricing. The company emphasizes that none of this will find its way onto customer bills and NextEra will presumably fund this through debt, and it will lead to dramatic savings in fuel costs going forwards – savings which will be passed onto FPL customers and shareholders equally – and remember Florida already has some of the cheapest electricity tariffs across the US.

Today FPL has 4 GW of solar using 15 million solar panels. By 2045 it hopes to expand to 90 GW with hundreds of millions of solar panels. At this time of a solar panel crisis in the US, it is quite unclear precisely where FPL will get that many panels from, given the current “supply and demand” crisis in Polysilicon and other component costs of building solar plants – and the current political mess whereby panel maker Auxin Solar of Texas is holding the entire solar industry to ransom, in triggering uncertainty around its tariff circumvention case being brought against Asia Pacific companies and their solar imports. The presumption is that the US cannot be prevented from installing solar panels for long and this NextEra plan goes all the way to 2045.

Battery storage right now has the same question marks over it, as the Russia-Ukraine war, which has highlighted all manner of rare earth metals currently used in cathodes, anodes and electrolytes in lithium ion, and the fraction of these supplied from Russia. Prices of key metals have rocketed in the past few months and remain unpredictable. But that’s not the biggest danger to battery storage pricing, given that lithium ion batteries are clearly unstable in the handful of large sites they are installed in to date, and that the US car industry will eat up supply through 2027, ensuring more “supply and demand” economics driving up prices. Today FPL has just 500 MW of battery installed and it wants 50 GW.

Having said all that, as a power buyer in this market phones are always answered when FPL calls, and bulk orders from it would certainly underwrite new manufacturing plants where they are needed and new supply lines and even new technologies. But more detail would be really helpful.

FPL is really well placed to use spare solar energy, which might typically be curtailed in the current environment and therefore become worthless, and send it to electrolyzers within its territory – so look for contracts of that type – buying electrolyzers – in the mid-term future. Every gas turbine maker on the planet is offering new turbines designs which they promise will work with hydrogen one day in the future – the biggest issue here is the amount of NOx (Nitrous Oxide and Nitrogen dioxide) which they will produce – many of the new designs are promising to add NOx units to the design to catalyze these dangerous greenhouse gas emissions into something harmless – but this will be a key point of scrutiny in this plan, as it will add considerable costs to this Real Zero process even if hydrogen becomes cheap enough to burn – DeNOx equipment is expensive. The message that FPL wants the market to hear here is that it will have zero stranded assets from the process.

The USA is currently the ONLY country in the world which is considering this approach to decarbonization, on the back of promises from Mitsubishi, GE and Siemens who all offer gas turbines that will be able to swing to hydrogen. The proof will be in their final emissions once they are working with hydrogen. But if any US company can do this, NextEra can and the likely outcome will be that rival utilities will borrow from this FPL playbook, and come up with their own Real Zero plans.

Its other subsidiaries such as NextEra Energy Resources (NEER) around the US will be sure to push identikit plans to partner utilities that it has helped with solar and wind, and support the science and measurement process. So too will international players like Iberdrola and Enel, which are just as big and just as experienced with renewables.

This is the outline for ridding FPL of Scope 1 and 2 emissions, but it defines Scope 3 emissions merely as those in its supply chain, unlike an oil company where Scope 3 is defined as what happens when oil is used by a consumer, which makes up the bulk of oil company  emissions. FPL says it will help suppliers with its definition of Scope 3 emissions too.

All of this will result in more jobs – it reckons some 150,000 jobs could be added and around $15 billion in annual GDP for Florida by 2045. NextEra also says that taking this approach to decarbonize the US economy, is a $4 trillion market opportunity, which it wants in on.

CEO John Ketchum said, “We are building on our decades of innovation and investments in low-cost renewable energy to decarbonize our company while keeping bills affordable for our customers. Attaining Real Zero will be one of those achievements that provides lasting value to our customers and the communities where we do business. We’ve been working on this for a long time and will take our extensive experience, industry-leading development platform and scale to help accelerate the decarbonization of the US economy.”

NextEra says the company will cut carbon-emissions by 70% by 2025, 82% by 2030, 87% by 2035 and 94% by 2040 and hit Real Zero before 2045.

NextEra Energy Resources operates what it calls the world’s largest clean energy portfolio – generating capacity of 24,000 MW – although other non-US companies boast higher amounts than this, it is still impressive in an economy which is behind on the decarbonization issue. For a more detailed view of its plan go here www.nexteraenergy.com/realzero.