NextEra Energy, North America’s leading wind and solar generator, is combing through its base of existing solar facilities with an eye to retroactively adding batteries, as it adopts a more “aggressive” view on the falling cost of energy storage.
“We increasingly see storage as an important standalone business in its own right,” CEO Jim Robo said Friday on an earnings call. The company is reviewing “a number of opportunities to add storage to our existing solar sites to take advantage of the [Investment Tax Credit] and enhance the value of our existing projects for customers.”
NextEra has already set a precedent for this approach: In 2018 it added a 10-megawatt battery facility to its existing Babcock Ranch solar farm in Florida. Last March things got much more interesting when its Florida Power & Light unit announced plans to build a 409-megawatt/900-megawatt-hour battery project known as the Manatee Energy Storage Center, to be charged by an existing solar facility.
In Robo’s telling, more such deals may soon be on the way.
A small but growing number of other utilities, including Arizona Public Service, are taking a similar approach to adding storage at existing solar plants. In doing so, they can claim the ITC, tap additional revenue streams and maximize the existing grid infrastructure.
The ITC used by the solar industry also applies to grid-scale storage facilities that derive most of their charging from solar generation. The industry failed to get a standalone energy storage ITC passed in 2019 but will continue to push for one.
The U.S. added about 430 megawatts of storage capacity last year, a figure which should more than triple in 2020, according to Wood Mackenzie. In hindsight, 2019 looks like an inflection point for the way utilities view batteries as part of their long-term planning processes, new WoodMac research shows.
"Near-firm" renewable power
NextEra’s success in the renewables market played a large role in it becoming America’s most valuable investor-owned utility, its $128 billion market capitalization now nearly double that of major peers like Duke Energy.
NextEra built 2.7 gigawatts of renewables in 2019, mostly through its unregulated Energy Resources arm — with more than 40 percent of that capacity coming from repowering existing wind farms.
These days NextEra spends a lot of time talking about energy storage and what Robo calls “the next phase of renewables development,” with batteries allowing for the supply of “near-firm” renewable power.
NextEra has previously signaled its plan to build as much as 1,250 megawatts of storage capacity in 2021-2022, most of it linked to solar. Beyond its growing stable of solar-plus-storage facilities, the company is now working on more than 2 gigawatts of “trifecta” projects, combining wind, solar and batteries, Robo said.
Among those three-way hybrids is the Skeleton Creek project in Oklahoma announced last year, which will combine a 250-megawatt wind farm, a 250-megawatt solar array and 200 megawatts of battery storage. The wind farm is due for completion this year, with the solar and battery facilities to come later. Skeleton Creek’s power will be sold to Western Farmers Electric Cooperative.
The one-year extension of the federal wind Production Tax Credit that unexpectedly passed in late 2019 will support “incremental wind demand” in 2023-2024, Robo said. But NextEra has long insisted that the American renewables market will be fine without subsidies.
On the call, Robo repeated his claim that without any incentives, by the mid-2020s, “near-firm wind” will be a $20-$30 per megawatt-hour product, and “near-firm solar” will be a $30-$40 per megawatt-hour product.
In-house battery expertise
NextEra is getting a better handle on the downward price curve for batteries, CFO Rebecca Kujawa said on Friday’s call.
“Whereas two years ago we were surprised at how much faster costs were coming down, we’ve gotten more aggressive with our assumptions.”
Rather than relying on system integrators like Fluence, NextEra wants to piece together its own energy storage systems, she said. Beyond component procurement, it's focusing on what Kujawa calls the “secret sauce” of the market: “We’re designing our own management systems."
“There’s not one [revenue] stream that creates value for batteries; it’s usually a couple of different applications within the same system," she said.
“We’ve invested a lot of time and energy thinking that through, not only on Energy Resources’ deployments, but also for the deployments at [Florida Power & Light] — we’ve learned a tremendous amount.”
Stymied M&A
NextEra posted an 8.7 percent increase in its adjusted earnings per share in 2019, on strong performances from both Florida Power & Light and Energy Resources. The company has benefited from Florida's strong economic and population growth.
Among its recent wins, FPL in December secured a 20-year extension for two nuclear reactors at the Turkey Point plant along Florida’s coast, bringing their potential lifespan to an unprecedented 80 years — or out to the early 2050s. Opponents say that over that timeframe, Turkey Point faces a real threat from climate change and rising sea levels.
NextEra hasn’t been without its recent disappointments. Along with a number of other suitors, NextEra expressed interest in buying JEA, Jacksonville's municipal utility. But in late 2019, JEA pulled away from a potential deal.
"We're disappointed that the sale process has been terminated," Robo said. "We think we could have brought enormous value to the customers and the interests of the citizens of Jacksonville," which is Florida's most populous city.
"I don't think there's a utility in the country that wouldn't benefit from the application of our playbook," Robo added.