NextEra Energy, Inc. (NEE)

Company website 2020 Financial Report Stock Analysis 2020 ESG Report

Gigawatts

of renewable energy capacity in 2020

Million

solar panels, amounting to more than 11,700 MWs of capacity, are being built in Florida by NextEra by 2030

409

Megawatts

of integrated solar-powered battery project - the world’s largest so far - is under construction

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The Path to Drawdown: Solar, Wind and Nuclear

To fight climate change and remain below 1.5ºC of global warming, the world’s electricity source needs to switch from fossil fuels to 100% emissions free sources by 2050. Solar, wind, and nuclear power are some of the electricity sources leading this transition.

Utility-Scale Solar

Photovoltaic (PV) solar panels are the predominant way of capturing the sun's energy and converting it into electricity. The industry has been growing fast and solar panels are now the cheapest source of electricity in most places on earth as of 2020.

Solar produces ~2% of global electricity today. According to Project Drawdown, to be on track to remain under 1.5ºC of warming, utility scale solar will have to generate a combined ~26% of global electricity by 2050.

To get there, the PV solar industry needs to keep scaling over the few next decades:

<::marker> 720 TWh of solar electricity generated in 2019
<::marker> 28,200 TWh needed by 2050
<::marker> CAGR of 12.56% from 2019 - 2050

Analysis from the IEA similarly forecasts that, to reach a 100% clean electricity grid by 2050, annual solar panel manufacturing capacity will need to scale from 134 GWs in 2020 to 630 GWs in 2030 (p. 74).

Onshore Wind

Onshore wind turbines account for 4.36% of global electricity generation in 2020.

Global wind capacity has risen steadily by around 20% per year for the past decade. Thanks to this expansion, the cost of electricity generated from onshore wind continues to fall, even in areas with low wind speeds.

According to Project Drawdown, to be on a path to remain under 1.5C° of warming, onshore wind turbines will need to be generating a combined 26.85% of global electricity by 2050.

To get there, the onshore wind industry will need to continue to scale over the next few decades

<::marker> 1,150 TWh of onshore wind electricity generated in 2018
<::marker> 19,460 TWh needed by 2050
<::marker> CAGR of 9.38% from 2019 - 2050

The IEA forecasts (p. 74) that, to reach a 100% clean electricity grid by 2050, annual onshore wind capacity additions will have to increase from 109 GWs in 2020 to 310 GWs in 2030.

Nuclear

Nuclear power’s share of global electricity generation today is 10.5%.

Extremely powerful and efficient in generating electricity, nuclear power has reduced CO2 emissions by over 60 gigatonnes over the last five decades -- equivalent to nearly 2 years’ worth of global energy-related emissions. Unlike solar and wind, electric generation from nuclear power is stable throughout the day. The cost of building new plants is still very high, but once built, the energy is cheap. With Generation III reactors on the horizon, nuclear power is becoming safer, cheaper, and more efficient.

To be on a path to remain under 1.5C° of warming, nuclear power is expected to grow mildly in the next three decades:

<::marker> 6,093 TWh of nuclear electricity generated in 2018
<::marker> 6,245.3 TWh needed by 2050
<::marker> CAGR of 0.08% from 2018-2050

Importance of Utility Companies

Electric utilities play an important role in the path to a world of net-zero emissions. They provide the connective tissue between key Drawdown solutions: renewable energy generation and energy storage. Through long-term power purchase agreements (PPAs), utilities enable renewable energy developers to secure buyers for their power and unlock project finance. Utility companies also often control electrical grids, putting them in the position to prioritize (or deprioritize) the extent to which the grid is outfitted for the intermittency of solar and wind power generation. They also are key players in greenlighting the development of large-scale energy storage.

There are dozens of investor-owned utilities traded on the New York stock exchange (such as Duke, NextEra, Dominion, Xcel, PG&E, etc.), and many of them are purchasing or developing renewable power capacities to provide clean electricity to customers across large regions. We use a stringent criteria to determine which utilities are significantly contributing to the low-carbon energy transition.

About

Headquartered in Juno Beach, Florida, NextEra Energy, Inc. (stock ticker: NEE) is one of the largest electric utility holding companies in North America. Its renewable energy holdings consist of solar, wind, and nuclear power, complemented by investments in battery storage projects and transmission facilities. Among its subsidiaries are Florida Power & Light and NextEra Energy Resources.

NEE's Role in Drawdown

According to the IEA, getting to net zero would mean growing combined global capacities of utility-scale solar, onshore wind, and nuclear power from 1,889 GWs in 2020, 8,572 GWs by 2030, and 23,535 GWs by 2050. NEE’s total renewable capacity was ~27.4 GWs in 2020, or 1.45% of the global market share. NEE would need to increase their combined capacity to 124.22 GWs by 2030 and 341.06 GWs by 2050 in order to maintain this market share.

This level of growth would require a 16.33% annual increase in capacity from now until 2030, and 5.18% annual growth between 2030 and 2050. NEE’s renewable capacity grew by 6% annually since 2018, which is an impressive feat for a company of its size. But to play their part in drawdown, we need to see a more aggressive development of additional renewable power facilities in this decade.

NEE: What We Like

NEE is a global leader in renewable energy, particularly wind and solar, and has worked to massively invest in these sectors:

<::marker> ~20% annual growth (p. 21) in solar capacity and 5.9% annual growth in wind power since 2018
<::marker> Expects 23 - 30 GWs (p. 29) of additional renewable projects between 2021 - 2024, enough to power somewhere between 8 million and 10.5 million homes

At the same time, NEE has committed to reduce its carbon emissions by declaring clear goals and retiring fossil fuel plants:

<::marker> Promised to reduce CO2 emission rate by 67% by 2025 (p. 18) from a 2005 baseline, equivalent to ~40% in absolute CO2 emissions

Closed approximately 2.1 GWs of coal capacity (p. 21) since 2015, with plans to retire additional coal units by 2024

What We Want to See Improve

Retire All Fossil Fuel Facilities

Jim Robo, NEE’s CEO professes (p. 3) his belief in a “completely emissions-free power sector.” Yet natural gas, coal and oil accounted for almost 50% of NEE’s generation capacity in 2020, and have only increased year-on-year since 2018. We are impressed with the expansion in NEE’s renewable capacities, but this needs to be complemented by completely retiring fossil fuel facilities.

Systematically Report All GHG Emissions

NEE reports its scope 1 emissions and promises (p. 18) to include scope 2 and 3 emissions in its survey response for the Carbon Disclosure Project. But they should clearly report all scopes in their ESG reports so that investors can transparently evaluate their carbon footprint in one place.

Expand Renewable Capacity

We want to see NEE become a leader in renewable energy. That means aggressively expanding its renewable capacity in the next decade, but also working with other renewable energy developers and utilities to increase capacity and transmission in areas where NEE already has a significant presence.

Related Green Energy Stocks in the Climate Index

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Allocated	Company	Description
3.32%	Exelon Corp. (EXC)	Exelon is one of the largest US electric utility and operates nuclear, wind, solar, hydro plants. They’re a key player in decarbonizing the power sector
2.61%	Sempra Energy (SRE)	Sempra Energy develops energy infrastructure and provides electricity and gas. Green utilities are the bedrock for developing more renewable energy
1.53%	Companhia Energética de Minas Gerais (CIG)	CIG is one of the largest power utilities in Brazil that generates its electricity from renewable sources. They’re a model of how utilities should go green
1.48%	PG&E (PCG)	PG&E is a public utility that offers electricity and natural gas to customers and growing their clean energy capacity. Green utilities are key to Drawdown
1.30%	Avangrid, Inc. (AGR)	Avangrid generates most of its electricity through solar, onshore wind, geothermal, hydroelectric and biomass - an exemplar of green utilities
0.71%	Algonquin Power & Utilities Corp. (AQN)	Algonquin Power & Utilities operates renewable and clean energy assets throughout North America. These are key sources of energy in a decarbonized world
0.19%	Enel Chile S.A. (ENIC)	Enel generates electricity from hydroelectric, solar, wind, and geothermal. They’re helping expand clean energy capacity
0.10%	Montauk Renewables, Inc. (MNTK)	Montauk has facilities that generate renewable natural gas, a sustainable fuel. Electric utilities like Montauk are key to expanding clean energy capacity