NextEra says customers are clamoring for energy storage 

Source: Kristi E. Swartz, E&E reporter • Posted: Friday, May 1, 2015

NextEra is getting “a steady request” from its customers about potential options to store wind and solar power with upcoming projects, the CEO of the company’s robust renewable energy power unit said yesterday.

Armando Pimentel, president and CEO of NextEra Energy Resources LLC, said traditional and commercial customers are starting to ask about behind-the-meter storage as part of a new wind plan or utility-scale solar plan.

NextEra Energy Resources is responding to bid requests and other project proposals that include storage options, Pimentel told investors during NextEra Energy Inc.’s first-quarter earnings conference call.

NextEra Energy Resources plans to spend roughly $100 million a year to explore and develop storage technology, Pimentel said. He expects that amount to increase and become “a more significant part” of what the company spends each year starting around 2020.

“We have a lot of folks on it, looking at the technology, but I don’t expect there to be a lot here in the next couple of years,” he said.

This is in part because storage is expensive, Pimentel said. Outside states such as California, which has a mandate for 1.3 gigawatts of grid energy storage by 2020, he doesn’t think energy companies are going to put a lot of capital behind storage for a few years.

Investors’ questions about storage came one day before electric car giant Tesla Motors Inc. is set to make a major announcement regarding battery storage.

One analyst asked Pimentel whether he had any insight on what Tesla might say and whether that would affect NextEra Energy’s plans on battery storage.

Pimentel said he had no idea what the company plans to announce.

“Unfortunately, I didn’t get my pre-earnings Twitter feed,” he said.

Tesla is developing a new generation of batteries to store wind and solar electricity, according to Bloomberg.

A spokesman for Hawaiian Electric Co. told Bloomberg that whatever the company announces “is just the beginning.”

That comment actually does have an effect on NextEra. The Juno Beach, Fla.-based company is buying Hawaiian Electric Industries Inc. — parent of Maui Electric Co., Oahu-based Hawaiian Electric and Hawaii Electric Light Co. — in a deal that executives say should close by the end of the year (ClimateWire, Dec. 4, 2014). Solar represents 20 percent of the power mix for HEI.

More from the sun

Besides storage, NextEra Energy Resources also is getting questions about something else company executives find promising: solar projects after 2016. That is the year federal investment tax credits for solar projects are set to expire.

NextEra Energy Resources has entered into a long-term agreement for an 80-megawatt solar project that will start producing electricity after that, signaling future demand for solar even after the 30 percent tax credits go away.

“We are seeing interest in the 2018 and 2019 time frame from our traditional customers,” Pimentel said.

NextEra Energy Resources doesn’t expect to sign any additional solar and wind projects that would be ready to start producing electricity in 2016, Pimentel said. Some companies are asking, but he said it’s a little late to get those deals done in time.

Right now, the focus is completing all of the backlogged wind and solar projects for 2015 and 2016 and then seeing what’s next.

“What I like to see is that people are asking and inquiring about what we can do in that time frame,” he said, referring to 2018 and 2019.

Company executives expect Congress to reduce the investment tax credit (ITC) for solar to 10 percent after 2016. They support that change, said Jim Robo, chairman and CEO of NextEra Energy.

“We think that solar is going to be cost competitive in the back half of this decade without the ITC,” he told investors during the company’s first-quarter earnings conference call.

The lucrative production tax credit (PTC) for wind projects also hangs in the balance. Robo said he thinks Congress will issue a one-year extension for the tax credit and “kick the can down the road.”

But he’s hoping Congress moves more quickly than before, signing a so-called tax extenders bill right before adjourning for the year (E&E Daily, Dec. 17, 2014). The bill included reinstating the wind PTC for the last two weeks of 2014.

“I think there’s clear understanding on the leadership in the Senate and the House [that doing that] is not optimal and does not accomplish anything,” he said.

Adding renewables

NextEra Energy Resources expects to add between 4,700 and 5,100 MW of renewables between 2015 and 2018. If the tax credits for wind and solar are extended in some way, that figure should closer to 5,100, executives said.

The company added 200 MW of wind projects and roughly 300 MW of solar projects to a growing backlog of renewable energy projects during the first three months of the year, said Moray Dewhurst, vice chairman and chief financial officer for NextEra Energy.

He added that amount may be growing in the next several weeks.

NextEra Energy Resources’ first-quarter net income also jumped to $278 million, or 62 cents a share, from $86 million, or 20 cents a share, during the same time a year ago. Executives said the additional renewables projects led to the significant growth.

Last year’s extreme cold weather and so-called polar vortex also caused some portions of its business to do worse than expected, Dewhurst said.

The growth at NextEra Energy Resources helped earnings overall. Parent company NextEra Energy reported a first-quarter profit of $650 million, or $1.45 a share, up from $430 million, or 98 cents a share, during the same time a year ago.

NextEra Energy formed a separate company for its renewable portfolio last year. The yield company, or “yieldco,” would allow NextEra Energy to quickly raise capital to support additional growth in the renewable energy industry (EnergyWire, June 25, 2014).

During the first quarter, NextEra Energy Partners LP (NEP) bought a 250-MW wind project in Texas and agreed to buy a 20-MW solar project in California. The board also agreed to buy four additional assets totaling roughly 664 MW from NextEra Energy Resources.

Investors asked company executives what other projects they are looking to buy.

Pimentel said there are individual assets and small portfolios of projects in the market. NEP will buy those assets “if they make some sense,” he said.

“If none happen this year, that’s fine, I don’t think anybody is going to be really disappointed,” he said. “There hopefully will be some assets that work for our portfolio.”

One analyst also asked whether NEP would consider buying a regulated utility. Robo said that would be unlikely given the amount of regulatory approvals and other industry constraints.

“It’s very hard to put a utility asset in a yieldco without a significant amount of regulatory risk,” he said.

NextEra’s regulated utility, Florida Power & Light Co., plans to add 223 MW of solar to its output by the end of 2016 (EnergyWire, Nov. 3, 2014). Clean energy advocates continue to criticize Florida’s largest utility for dragging its feet on adding more solar and blocking any changes to regulatory policies to make it easier for residents and businesses to install rooftop solar panels.

A ballot initiative to open up the state’s solar market has made its way to the state Supreme Court to review.