WSJ -- Power Company NextEra Plans to Cut Carbon Emissions to Close to Nothing by 2045 .......................
June 14, 2022
Power Company NextEra Plans to Cut Carbon Emissions to Close to Nothing by 2045
In an expensive gamble, owner of Florida Power & Light plans to go ‘real zero’ rather than ‘net zero’
By Katherine Blunt
While many companies have pledged to reduce greenhouse-gas emissions with “net zero” plans that involve buying carbon credits, America’s largest power company is attempting something quite different: “real zero.”
NextEra Energy Inc., the owner of Florida Power & Light and one of the world’s biggest renewable energy developers, said Tuesday that it plans to make most of its operations carbon-free by 2045, by building huge solar farms and converting its power plants to run on hydrogen fuel.
No major U.S. utility company to date has committed to near-total decarbonization without the use of offsets or carbon-capture technology. The strategy represents a big gamble for new NextEra Chief Executive John Ketchum, who earlier this year succeeded longtime CEO Jim Robo at a particularly difficult time for the U.S. electricity sector.
Utilities across the country are grappling with higher fuel and labor costs, while renewable-energy and battery-storage developers face equipment and materials shortages that have delayed billions of dollars in projects and made them more expensive to build.
“We have a massive opportunity here, not only for our industry, but for all industries,” Mr. Ketchum said in an interview.
NextEra grew from a regional utility into a renewable-energy powerhouse by using its competitive power business, which develops wholesale electricity projects around the U.S., to make early investments in wind and solar farms. It has been slower to develop renewables to supply its state-regulated utility, Florida Power & Light, following a massive build-out of gas-fired power plants to replace ones built after World War II that ran on oil and coal.
Now, the company will turn much of its focus to greening its utility business with major capital investments on which it will earn a return. The company hasn’t put a price tag on achieving its goal, but it will cost tens of billions of dollars as a global surge in natural-gas prices, inflationary pressures and supply-chain snarls are driving up electricity costs in Florida and across the country.
NextEra said it anticipates investing as much as $95 billion in its business as a whole between 2022 and 2025. The company said the decarbonization plan won’t result in rate increases above a business-as-usual scenario. It also said it expects the solar development to reduce its operating expenses over time, lowering labor costs and serving as a hedge of sorts against fuel inflation.
Other U.S. utility companies with net-zero plans have committed to effectively canceling out their carbon emissions in the coming decades in part by using technology to capture them or purchasing credits used to offset them on paper. NextEra resisted joining its peers in setting a net-zero target, in part because Mr. Robo viewed such pledges as corporate greenwashing.
“I think it’s very disingenuous for a lot of folks in our sector to come out with net-zero commitments when they don’t really have a view to get to what I call ‘real zero,’” Mr. Robo said during an S&P Global Inc. conference last year.
NextEra said it has trademarked “real zero” and plans to use it as a marketing slogan. It doesn’t expect to use carbon capture, credits or offsets.
The company, which rarely engaged with the press under Mr. Robo’s leadership, invited The Wall Street Journal to its Juno Beach, Fla., headquarters last week to explain how it plans to achieve its “real zero” goal.
NextEra plans to focus first on developing large solar farms in Florida, as well as projects to produce “green hydrogen” with excess solar power through a process called electrolysis. While the solar development will occur steadily over the next two decades, the company doesn’t expect its gas plants to run exclusively on hydrogen until about 2040.
It is planning to build more than 86,000 megawatts of solar-generating capacity to serve its Florida utility customers, up from about 4,000 megawatts, or about 4% of its generation mix today. At the same time, it plans to multiply the utility’s current power storage capacity by 100, with 50,000 megawatts of batteries to store and discharge power for use at times when solar production declines, up from 500 megawatts today.
NextEra also plans to use its competitive power business to develop hydrogen infrastructure to help replace natural gas and other fuels used in power production, transportation and heavy industry throughout the country. The company plans to convert most of Florida Power & Light’s gas-fired power plants, generating some 16,000 megawatts, to run on green hydrogen.
The plan wouldn’t necessarily eliminate all carbon emissions. The company may retire the remainder of Florida Power & Light’s gas-fired plants, producing about 6,000 megawatts of electricity, or it may keep some of them open to run on so-called renewable natural gas, or methane captured from organic waste, during periods of peak power demand.
Decarbonization on the scale contemplated by NextEra poses huge technical and financial challenges. Hydrogen, for example, doesn’t emit carbon dioxide when burned, but it is now more expensive than natural gas when produced using renewable electricity. Such green hydrogen doesn’t yet exist at scale, and its high costs will fall only after the build-out of large projects. There are also engineering hurdles associated with retrofitting gas-burning power plants to run exclusively on hydrogen.
Mr. Ketchum said he expects the cost of green hydrogen to fall precipitously as more companies invest in the alternative fuel, similar to the rapid decline in solar, wind and battery costs over the past decade. The company recently launched a pilot program to produce green hydrogen and blend some of it with natural gas fueling one of its Florida power plants.
Mr. Ketchum, 51, a trained tax lawyer who has been with NextEra for 20 years, already had large shoes to fill in succeeding Mr. Robo, a General Electric Co. alumnus who shepherded the company’s meteoric growth. NextEra’s market capitalization soared from roughly $30 billion when Mr. Robo became CEO in 2012 to more than $180 billion just before he announced plans to step down.
Mr. Ketchum is challenged with continuing that performance by investing a substantial amount of capital while navigating the obstacles facing the industry. He often repeats a saying favored by another of the company’s former CEOs, Lewis Hay III, who oversaw its early expansion into renewable energy when wind and solar farms were expensive and battery storage wasn’t yet viable: “Don’t ever bet against the engineer.”
“That has never been more true than what we’ve seen in the renewables industry,” Mr. Ketchum said.
Write to Katherine Blunt at Katherine.Blunt@wsj.com
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