Few companies in the world have bet bigger on renewable energy than NextEra Energy (NYSE:NEE). The electric utility is already the global leader in producing electricity from the wind and sun and is a leader in the battery storage market. Meanwhile, its current backlog of renewable energy development projects is bigger than the entire existing operating portfolios of all but two companies in the world.
So when NextEra says it’s excited about an emerging renewable energy technology, investors should take notice. Here’s what the company’s leadership team had to say on its second-quarter conference call about one technology they believe could be key to achieving an emissions-free future.
Getting excited about this emerging technology
NextEra’s CFO Rebecca Kujawa took the lead on the second-quarter call. After running through the numbers, she pivoted toward what the company sees ahead. She stated that:
Based on our ongoing analysis of the long-term potential of 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, while reducing cost for customers and helping to achieve future CO2 emissions reductions. However, to achieve an emissions-free future, we believe that other technologies will be necessary, and we are particularly excited about the long-term potential of hydrogen.
Most utilities believe that the currently available renewable energy technology (e.g., wind, solar, and battery storage) won’t be enough to achieve the aspirational goal of being emissions-free. Because of that, leaders like Xcel Energy (NYSE:XEL) have stated that “we will need new carbon-free dispatchable technologies — technologies not yet commercially available at the cost and scale needed to achieve our 2050 aspiration” of being completely emissions-free. Because of that, Xcel and others are pouring money into research and development to “ensure we have these technologies to deploy in the coming decades.” One of the many technologies that the sector is researching is hydrogen, which has NextEra “particularly excited.”
Planning a pilot program
Kujawa then discussed the company’s first investment in hydrogen. She stated that:
Consistent with the toe-in-the-water approach, we have previously utilized with solar and battery storage, we are planning to propose a hydrogen pilot project at Florida Power & Light (FPL). It is an approximately $65 million pilot project, which, subject to Florida Public Service Commission approval, is expected to be in service in 2023. We will utilize solar energy that would have otherwise been clipped to produce 100% green hydrogen through a roughly 20-megawatt electrolysis system. The hydrogen will be used to replace a portion of the natural gas that is consumed by one of the three gas turbines at the Okeechobee Clean Energy Center. We believe that the project is a complement to our ongoing solar and battery storage development efforts and highlights FPL’s continued innovative approach to further enhance the diversity of the clean energy solutions available for its customers.
As Kujawa points out, the company plans to invest in a small pilot project at one of its generating stations in Florida to test the use of hydrogen as a replacement for a portion of the natural gas consumed at the Okeechobee Clean Energy Center. That’s worth noting because the facility, which started up in 2019, is already one of the cleanest and most fuel-efficient power plants of its kind. However, if successful, the company could eventually wean the plant off that cleaner fossil fuel by replacing it with emissions-free hydrogen.
Kujawa then noted that the company plans to “continue to evaluate other potential hydrogen opportunities across our businesses. And while our near-term investments are expected to be small in context of our overall capital program, we are excited about the technology’s long-term potential, which should further support future demand for low cost renewables, as well as accelerate decarbonization of transportation fuel and industrial feedstocks.”
The company tends to make several small bets on new technologies before scaling up as costs come down. That has been the case in battery storage. In 2018, the company’s Pinal Central Solar Energy Center was the first project pairing solar energy with an on-site battery storage system. A year later, the company announced plans to build the Manatee Energy Storage Center, the world’s largest solar-powered battery system. If the company’s hydrogen pilot proves successful, it could quickly scale that technology, just as it has with battery storage.
An exciting project to keep an eye on
NextEra Energy is a leader in the renewable energy sector, which is why its excitement to start investing in hydrogen is notable. While it will take a few years to develop this pilot project, which is way too small to move the needle, it is an important step for the future of emissions-free energy. If this technology proves successful, the industry will be another step closer to having the tools needed to deliver on its ambition of being carbon-free within the next 30 years.