The Next Era of American Energy Generation

NextEra Commits to “Real Zero” Decarbonization Pledge by 2045

Last week, NextEra Energy, Inc. announced a game-changing commitment to “real zero” carbon emissions by 2045.  

The commitment comes with a massive investment in solar energy, battery storage, and the emerging technology of “green hydrogen.” Between now and 2045, NextEra plans to add to its system:

• 90,000 megawatts of solar energy;

• 50,000 megawatts of battery storage;

• 16,000 megawatts of green hydrogen (converted from existing gas);

• 6,000 megawatts of biomass (which the company refers to as “renewable natural gas”). 

The company plans to start piloting its new technology by producing green hydrogen at the Okeechobee gas plant, and blending it with gas to fuel one of the units on site. In its pledge, NextEra outlines its intent to convert the rest of its gas fleet to hydrogen by 2045.  

Better Than “Net Zero”

NextEra is the nation’s largest electric utility holding company by market capitalization and owner of Florida’s largest utility, Florida Power & Light. Its long-awaited climate commitment stands in contrast to other utilities that seek to rely on flimsy “net-zero” pledges that allow continued reliance on fracked gas and questionable carbon offsets. NextEra’s commitment does not rely on carbon offsets and includes both direct and indirect emissions, known as Scope 1 and Scope 2 emissions. The company does not include Scope 3 emissions (emissions indirectly generated by a business: business travel, employee commutes, waste, purchased goods, and services … transportation, distribution, and more) merely stating that it will work to achieve “greater transparency on Scope 3 emissions.” - (“Deep Dive: Scope 3 Emissions,” Sustain Life, May 18, 2021) 

Part of NextEra’s plan to get to “real zero” carbon emissions includes five-year benchmarks. It plans to reduce emissions by 70 percent starting in 2025, and achieve a 100 percent emission reduction by 2045. These benchmarks are important in determining a company’s true intentions behind climate commitments and ensuring that the pledge isn’t just aspirational but built into the utility’s strategic plan.  

A New Framework for Clean Energy vs. Gas

NextEra included in its presentation to investors a new framework for consideration when it comes to clean energy and gas. The headline on slide #27 admits that there has been a paradigm shift in the economics of clean energy.  Inflation combined with international crises like the conflict in Ukraine have caused the price of gas to become wildly volatile and to spike beyond most predictions.  

From the presentation: “The levelized cost of existing natural gas-fired generation is up 63 percent in the last year compared to 16 percent for new solar.”

These recent challenges only highlight the financial risk tied to fossil fuels and have shed light on the need to find a more stable, sustainable path when it comes to power generation. NextEra’s inclusion of this graph is a clear signal to the industry that that shift has indeed occurred. 

NextEra’s Role in Decarbonizing the US 

One of the more hopeful elements of this announcement by NextEra is the larger context in which the company acknowledges its role.  Several times in the presentation, NextEra leadership outlines the fact that “decarbonization is happening across the US” and presents this as a factor that strengthens its strategy.

In fact, the company stated that, outside of Florida, it hopes to assist with decarbonization inside of its NextEra Energy Resources subsidiary as well as other sectors.  According to the company, it envisions a $4 trillion capital investment to decarbonize the US economy by 2050.  

While this is a great example of a company as large as NextEra leaning into a clean energy future and recognizing the course that has been set by the current leadership to rapidly decarbonize, the proof will ultimately be in the execution of the plan and the ability of NextEra to ensure that this commitment becomes a reality. 

Missing Pieces?

NextEra has produced a pledge and a plan that is ambitious and seeks to meet the urgency of the moment as it relates to the decarbonization of the US.  However, there are a few missing elements to the plan that, if included, would ensure that vulnerable populations are safeguarded from high energy burdens and better position the company to meet its goals. 

Energy Equity

In NextEra's investor conference slide presentation from June 14, 2022, they include in the footnotes the following: “[W]e are striving to achieve our goal of Real Zero emissions by no later than 2045 so long as there is no incremental cost to customers relative to alternatives…” The inclusion of this statement puts climate and social advocates on alert due to the conditioning language used regarding the company’s ability to carry out this commitment and its ability to keep customer costs low. There is no mention in the presentation, however, of the company’s commitment to energy efficiency and conservation.

The Florida Public Service Commission (PSC), a five-member board appointed by the governor that regulates utilities in the state, has been notorious for its lack of meaningful goals under the Florida Energy Efficiency and Conservation Act. The use of the Rate Impact Measure test has enabled the PSC to avoid setting conservation goals, allowing companies like NextEra’s subsidiary, Florida Power & Light, and others to dodge the inclusion of energy efficiency in their plans.  

This has led to high energy burdens for Florida utility customers and shutoffs, especially during challenging events like the COVID pandemic. Companies like NextEra that tout their commitment to embracing new technologies like solar, battery, and now green hydrogen should lean into technology that can help customers conserve energy. With climate change causing extreme heat, severe storms, and other challenges, it is of the utmost importance that NextEra work with its customers to set meaningful and measurable goals regarding energy conservation.  

This is ultimately where the intersection of equity and sustainability meet and it’s a challenge that a company like NextEra should see as its next opportunity to be a leader in the industry. 

Raise the Roof

Also missing from NextEra’s announcement is the incorporation of customer-owned rooftop solar. While NextEra touts FPL’s “Solar Together” solar subscription program, there is no inclusion of how customer-owned residential and commercial rooftop solar factors into the plan. Perhaps that is because FPL supported legislation in Florida that would have wiped out incentives for customers to install solar by canceling net metering. Net metering is a billing mechanism that credits solar energy system owners for the electricity added to the grid and provides a financial incentive to customers to pay the upfront costs of solar installation. 

While Governor Ron DeSantis ultimately vetoed the legislation, it was widely known that FPL and other Florida investor-owned utilities lobbied heavily to pass the bill. Instead of fighting distributed generation, NextEra should view this as a chance to lead the way and work to include customer-owned solar in its “real zero” equation. 

Pipeline to Nowhere

NextEra’s announcement this week highlights the company’s commitment to decarbonization and as well as the financial risk associated with gas. However, the company does not talk about its involvement in the proposed Mountain Valley Pipeline, a project designed to enable more fracked gas to flow in the Mid-Atlantic region. This project hardly fits into the decarbonization plan NextEra rolled out with great fanfare at the investor conference.  

In fact, the only mention of the project is in slide #209 under the headline “Definitional Information,” which mentions that “Adjusted earnings expectations also exclude … an impairment charge and ongoing costs related to NextEra Energy’s investment in Mountain Valley Pipeline, LLC.”

On February 18, 2022, the Sierra Club noted that the ongoing problems associated with the MVP project had caused an $800 million loss and resulted in NextEra’s reevaluation of the project. 

“NextEra Energy Inc. announced it is reevaluating its investment in the fracked gas Mountain Valley Pipeline after the 4th Circuit rejected two necessary approvals. The project, which faces numerous hurdles, including several legal battles and the need to still obtain three major approvals from federal agencies, faces another pivotal moment as NextEra has stated in its annual report that the “continued legal and regulatory challenges have resulted in a very low probability of pipeline completion.” - “Mountain Valley Investor Says ‘Very Low Probability of Pipeline Completion,’” Press Release, The Sierra Club, February 18, 2022

The unveiling of the company’s “real zero” plan should include a zeroing out of all investments in gas, including pipelines.  In its presentation to investors, NextEra points out the volatility, risk, and rising costs of gas compared to clean energy.  When it comes to gas, there is little more risky than investment in a pipeline that is years behind schedule, billions over budget, and barely half complete. NextEra, to fully comply with its “real zero” commitment, should ensure the MVP project is never completed by not reapplying for new permits and canceling the project once and for all.

Green Hydrogen: Will It Work?

One of the more ambitious aspects of the NextEra “real zero” plan is its widespread conversion of a fleet of gas plants to run on green hydrogen.  But what is green hydrogen and is it in line with the company’s “real zero” commitment?  Green hydrogen is made through electrolysis powered by renewable energy. This new technology may be carbon-free, but burning hydrogen does produce nitrous oxide (NOx) which leads to ozone and smog. 

The Sierra Club believes:

• Green hydrogen is a promising solution only for uses that cannot otherwise directly rely on clean electricity, which is much more efficient;

• Green hydrogen should not be used to justify a buildout of facilities that otherwise increase pollution or fossil fuel use;

• If green hydrogen is being used, the goal should be to switch to 100 percent green hydrogen once the technology is available.

NextEra announced its intention to pilot the technology at its Okeechobee gas plant: The FPL Cavendish NextGen Hydrogen Hub is expected to have a $65 million capital cost and start service in December 2023.  Also from NextEra’s presentation: 

• “Solar energy from adjacent Cavendish Solar will generate energy for electrolysis system to produce and store hydrogen

• Hydrogen is expected to replace a portion of the natural gas used in the OCEC combined cycle plant

• One turbine is expected to run on a blend of H2 and natural gas and enable operational learnings.” - (NextEra Investor Presentation, Slide 191, June 14, 2022)

The intention to “blend” the use of hydrogen and gas promises to be troublesome and off the narrative with NextEra’s “real zero” goal if that practice is continued beyond the pilot at Okeechobee.  In 2016, NextEra’s subsidiary, Florida Power & Light (FPL) built out a huge fleet of gas plants as well as updated a combined cycle plant in Dania Beach despite a lack of determination of the need for the plant.  

There is great concern that FPL’s massive buildout of gas over the past ten years could result in a fallback on gas if green hydrogen doesn’t work the way the company envisions and to be clear, blending hydrogen with gas will not meet the company’s “real zero” commitment. 

The Takeaway

Overall, NextEra’s commitment to “real zero” and the included emissions reductions, benchmarks, and lack of dependence on carbon offsets make this a truly game-changing announcement.  Sierra Club has been skeptical of “net-zero” commitments due to other companies’ inclusion of fracked gas, carbon offsets, and the lack of measurable benchmarks and timelines. 

There is no doubt that other utilities have taken notice of one of the country’s largest companies and its noteworthy pledge.  While Sierra Club will continue to monitor the commitment, push for missed opportunities to be included, and mark the steps needed to carry out this ambitious plan, the hope is that other utilities step up and improve pledges to include these elements in their plans.