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NextEra Energy: A Renewable Energy Giant That Relies on Fossil Energy for Profits

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Rakesh  Sharma's picture
Journalist Freelance Journalist

I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing at Rakesh Sharma  

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There is a lot of money chasing renewable energy nowadays. And much of it is going to NextEra Energy. The Florida-based company lacks the name recognition of ExxonMobil but has still surpassed the oil giant in market capitalization.

For ESG investors, NextEra has become a must-have because it exemplifies the future of renewable energy. It owns the largest number of wind and solar assets in the world today and is profitable. Strong regulatory tailwinds and aggressive climate change goals can only brighten its future prospects. What’s not to like about this company?

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Quite a bit actually.

The problems with NextEra Energy run the gamut. The company has cultivated a shifting identity that allows it to hide massive fossil fuel holdings in its portfolio even as it laps up investor funds earmarked for green industries. What’s more, the company has quietly erased all references to a business that helps polluting industries recycle their dirty fuel into renewable energy credits.   

NextEra’s claims would not be problematic, if the company was not picking up awards and attracting investor funds in the current ESG craze. Its valuation has skyrocketed in the last year. As of this writing, it has a market cap of $153 billion, almost 40 times its reported earnings for 2020. For context, the average price-to-earnings ratio for the utility industry in 2019 was 28.23. 

Where Do the Profits Come From: Natural Gas or Renewable Energy? 

NextEra has built its reputation on renewable energy. It claims to own the world’s biggest fleet of solar and wind assets. But owning renewable energy assets does not automatically mean that you are generating power from them. On a website page, NextEra claims to produce 97% of its power from a “diverse mix of clean or renewable energy sources”. After adding up the totals of power sources on another page, however, the share of power from renewable energy sources decreases to 51%.

The difference in figures is primarily due to NextEra’s loose definition of clean energy sources. In interactions with the media and on its subsidiary company websites, NextEra promotes natural gas as a clean source of energy.  That was the popular view once. But it is no longer the case. Scientists say natural gas is now a challenge to overcome for global warming. But NextEra doesn’t seem to have got the memo.

The company has bolstered its natural gas presence by snapping up pipelines and natural gas companies. It acquired Florida Power Gas, Oleander Power Project, and Stanton Power Project in 2018. That spree continued in 2019, when it acquired Meade Pipeline Co. in Pennsylvania in a deal valued at $1.37 billion. In Ohio, the company sells electricity and natural gas in bulk to NOPEC, a nonprofit that provides energy savings to utility customers. In total, it owns eight natural gas pipelines across the United States. 

NextEra CEO James Robo told analysts after the Meade acquisition that he considers natural gas to be a clean fuel. “Gas is an important bridge to a low-or-zero carbon future, thirty years out,” he said.

Don’t count on NextEra to accelerate into that future, however. The company has forecasted spending 45% of its capital requirements in the next year on development of pipelines and other gas infrastructure.

NextEra’s power generation source claims become even more suspect when you consider the renewable energy credentials of utilities owned by the company: Florida Power & Light (FPL) and Gulf Power. Together both contributed 98.9% of NextEra’s $2.9 billion income in 2020. Both are also heavily dependent on natural gas as a fuel source for generating electricity.  

FPL generated 73% of its total energy using natural gas in 2020. In a February filing with the Florida Public Service Commission, Gulf Power reported that it generated 81.2% of its electricity from natural gas and 17.5% from coal in January. This means that fossil fuel sources accounted for 98.7% of the company’s total energy mix.

But Gulf Power seems to have taken a page out of its parent company’s playbook and claims that 11% of its energy mix is from renewable sources. Even as it boasts about joining forces with FPL to build 30 million solar panels throughout Florida by 2030, the company has a separate page on its website touting the benefits of natural gas.

Natural gas has become a healthy source of revenue for NextEra Energy Partners, a subsidiary that sells power. In 2020, natural gas sales accounted for 7.2% of the company’s total revenue of $2.92 billion.

An Invisible Business That Generates Profits

In 2009, NextEra launched the EarthEra Trust to fund renewable energy projects and bring “transparency” to the renewable energy certificate marketplace. The idea was to fund renewable energy projects from its REC revenues. It sold $5 million worth of EarthEra certificates after launch. Customers included the likes of Starbucks and Office Depot.

But references to EarthEra and its revenues seem to have vanished since. The website is no longer functional and there is no mention of the trust or NextEra’s revenues from sales of renewable energy credits on its balance sheet or during earning calls.

About the only place where one can find mention of EarthEra is in the marketing copy on the NextEra Energy Resources (NEER) site. Another hint lies in a footnote on this page which states that “NextEra Energy’s electric generating facilities have been or likely will be sold or transferred to third parties who are solely entitled to the reporting rights and ownership of environmental attributes such as renewable energy credits, emissions reductions, offsets, allowances, and the avoided emission of greenhouse gas emissions.”  

According to a 2018 WSJ article, NextEra used $401 million worth of renewable energy credits to reduce its tax obligations between 2015 and 2018. But it refused to divulge its total revenues from sale of these credits to third parties.

The company’s hesitation to share details is puzzling since other companies often detail revenues from renewable credit sales in their income statements. For example, electric car maker Tesla has swung to profitability several times thanks to sale of these credits and, despite intense spotlight and criticism, has not shied away from the disclosure.

That renewable energy credit sales play an important role in NextEra’s bottom line is certain. In 2020, NEER had income of $533 million and it was the third-biggest source of earnings for NextEra after FPL and Gulf Power.

Might the hesitancy be related to the fact that EarthEra credits are being used to recycle emissions by heavily polluting industries into renewable energy credits? Norwegian Cruise Lines signed up for the EarthEra program when it was launched. Research has proved that emissions from cruises dwarf those from cars. In the absence of any details about the EarthEra program, NextEra investors have no way to evaluate NEER's customers or its impact on the environment. In any case, disclosures of this sort will sully the public image of a clean energy giant that NextEra has built for itself.

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Thank Rakesh for the Post!
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Bob Meinetz's picture
Bob Meinetz on Apr 26, 2021

Rakesh, that I may have provided a bit of inspiration for your article is a compliment; that I agree with your conclusions is irrelevant. Well-written and well-referenced, it's an uncommon example of fine journalism on EnergyCentral.

The new lines of investigation you've opened would make for a suitable sequel to Ozzie Zehner's Planet of the Humans: another chapter in the continuing saga of how big business has co-opted green energy, and is exploiting it for every dirty dime it can. Great work!

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