NextEra seeing signs of wider renewable energy recovery, company leaders say

Source: By Emma Penrod, Utility Dive • Posted: Thursday, July 27, 2023

Solar panel and battery prices have begun to decline, and renewables stand to gain a third class of customers as the U.S. establishes a hydrogen industry, NextEra Energy CEO John Ketchum said.

  • Renewable energy has made it through a challenging 18-month period and now seems on track for growth and recovery, NextEra Energy CFO Kirk Crews told investors during a Tuesday earnings call.

  • Second quarter adjusted earnings for NextEra Energy Resources, the company’s energy development subsidiary, grew to $781 million from $683 million a year ago, according to the parent company. Florida Power & Light earnings grew to $1.2 billion from $989 million in the year-ago period. However, net income at NextEra Energy Partners, which owns and operates primarily renewables energy assets, plunged to $49 million in the second quarter, down from $219 million in the same period last year.

  • While Crews and CEO John Ketchum touted the renewable market recovery and the sector’s future, investors did not appear to share their optimistic sentiments, as the company’s stock price fell 1.4% the day following the call.

Dive Insight:

Investors follow NextEra as something of a bellweather for the entire renewable energy sector, Paul Patterson, an analyst who covers the power sector for Glenrock Associates, said after the company’s second quarter earnings call.

But while much of what company executives had to say on Tuesday may bode well for the renewable energy second writ large, NextEra may be finding it difficult to drum up more excitement among investors for a company that is already leading the energy transition.

“I don’t think people are really soured on the renewable market,” Patterson said. “But it’s a question of if you were already excited about the renewable market, you’re not going to get any more excited.”

The effects of the Inflation Reduction Act are now likely in full play now, Patterson said, and realistically, there isn’t going to be another IRA any time soon. So while there was nothing in Tuesday’s call to suggest a clear reason for why NextEra’s stock did not perform well with investors the next day, it is possible, Patterson said, that the stock is simply falling victim to exceedingly high expectations.

Ketchum noted what he described as a return to stability for the renewable sector after several months of struggle. Prices for solar panels and batteries have begun to come down in recent months, he said, and many of the projects delayed by supply chain constraints in 2022 are now coming online.

Ketchum also pointed to hydrogen as a potential source for as-yet unrealized growth in the renewable energy sector. Traditionally, he said, renewables have always had two potential categories of customers — utilities, and the private commercial and industrial market. But hydrogen, he said, could create a third class of buyers for renewable energy.

NextEra has been a vocal participant in the debate around qualifying criteria for the green hydrogen tax credits created by the IRA, Ketchum said, advocating for an industry proposal that would require hydrogen producers to match their energy use to hourly emissions data by 2028, but not before. The transition period, Ketchum said, will be necessary to encourage a larger, more rapid buildout of the industry, which in turn will drive demand for the large-scale production of electrolyzers that will be necessary to bring down green hydrogen costs.

But while the industry has come up with what Ketchum characterized as a very constructive compromise position, he also said that the company had hoped the Treasury Department would release guidance on the hydrogen tax credit by August. Now, he said, it appears the guidance release date has been delayed to September or even October.

For Patterson, NextEra’s interest in hydrogen is a wait-and-see issue. On the one hand, hydrogen has clear support from policymakers, he said. But on the other, it’s difficult for investors to see and understand the business case for hydrogen.

Interconnection has also become an issue for investors, Patterson said. Ketchum dismissed concerns about the potential for growing interconnection backlogs to affect the company’s development plans, citing NextEra’s superior position in key interconnection queues relative to other developers. But interconnection is such a technical issue that is difficult for investors to verify these claims independently, Paterson said.