NextEra Energy Inc. plans to invest $65 million in a hydrogen power project in Florida as the company looks for its next big investment opportunity in the clean energy sector.
The pilot project, which will be subject to approval by the Florida Public Service Commission, would use solar power from NextEra regulated utility Florida Power & Light Co. to produce "green" hydrogen through a 20-MW electrolysis system, NextEra CFO Rebecca Kujawa said on a July 24 call to discuss the company's second-quarter earnings results. The hydrogen would be used to replace some of the natural gas burned at FPL's Okeechobee Clean Energy Center.
"There's clearly an opportunity to ... displace the last 10% of the carbon emissions out of the electric sector by manufacturing hydrogen with renewables" within the next five to 10 years, NextEra Chairman, President and CEO James Robo told analysts. "This is a big strategic initiative for us, and we're going to drive it, and it's going to be very important for this company over the next decade."
If hydrogen technology proves to be cost-effective, it would in turn drive "gigawatts and gigawatts and gigawatts and gigawatts of renewable [energy] demand in this country," said Robo, whose company is one of the biggest developers of wind and solar projects globally.
NextEra hopes to have the pilot project at FPL operating in 2023, and Robo said he expects to make a similar investment at NextEra Energy Resources LLC, NextEra's unregulated power plant developer, in the next year.
"We won't make any money on it in the next five years, just like we didn't make any money in batteries in the first five years," Robo said, noting that NextEra now views batteries as lucrative investments and plans to spend $1 billion on the technology in 2021.
"And so that's the way I think about this," Robo said of hydrogen. "I think about, this is help powering the long-term growth of this company into the back half of this decade and the next decade as well."
In the meantime, NextEra will continue investing in renewable energy and battery storage as well as in initiatives to harden the power grids operated by FPL and its other regulated Florida utility, Gulf Power Co., Kujawa said.
In an earnings report July 24, NextEra said it expects capital investments at FPL to total between $6.5 billion and $6.7 billion this year, up from an April projection of $5.8 billion to $6.3 billion. Capital investments at Gulf Power now are expected to be between $1 billion and $1.1 billion, up from $800 million to $900 million in the earlier forecast.
"We keep finding terrific projects for our customers and investment opportunities, and we're starting to put those in place," Kujawa said of the higher projections.
NextEra reported adjusted second-quarter earnings of $2.61 per share, up from $2.35 per share a year earlier. Analysts expected earnings of $2.52, according to the S&P Global Market Intelligence consensus mean estimate.
The company is not alone in seeing huge potential for hydrogen. Enthusiasm has been building in Europe in recent months as EU leaders look to use coronavirus recovery packages to accelerate the energy transition.
However, executives at Spanish utility Naturgy Energy Group SA have sought to temper expectations, telling investors July 22 that plans to switch out natural gas with hydrogen produced from renewable energy are still a long way from commercial viability.
Hydrogen is "not quite economic yet," Jeffrey Eckel, chairman and CEO of Hannon Armstrong Sustainable Infrastructure Capital Inc., said July 9 on a call with investors. "But look at storage and wind and solar five, 10 years ago. It wasn't economic. I think the trend is absolutely inevitable. Costs are coming down."