NextEra plans deeper moves into solar

With the U.S. utility-scale solar sector experiencing headwinds due to collapsed prices, intense competition and the fear of policy changes from the Trump Administration, it is easy to lose sight of the big picture of ongoing growth.

Today we got another indication of just how much solar is going to grow over the next few years, in an analyst conference of NextEra, the parent company of NextEra Energy, utility Florida Power and Light, and renewable energy developer NextEra Energy Resources (NEER).

NextEra claims to be the world’s largest owner of solar and wind generation, with 14 GW of wind and around 2 GW of solar assets. The company can easily claim this position since the fall of SunEdison, which upon its acquisition of First Wind became the world’s largest solar and wind developer but sold off substantial assets as part of its bankruptcy.

And according to its investor presentation, NextEra’s involvement in renewable energy is accelerating. NEER brought 3.9 GW of solar and wind online in 2015 and 2016, and has signed contracts for another 2.7 GW of renewable energy to be delivered post-2016. In dollar amounts it is growing as well, with NextEra investing more into renewables in 2016 than any time since 2012, which was its top year to date.

By 2020, the company intends to build another 1.4-3.8 GW of solar, and even more wind. NextEra bought enough wind turbines by the end of 2016 to put 10 GW of wind online and still qualify for a “safe harbor” provision and claim the full federal Production Tax Credit (PTC), even if the projects are built by 2020.

After these are built, the company’s mix appears to move sharply towards solar. NextEra estimates that it has 20 GW of wind and solar in its pipeline, nearly half of which is solar. These projects are located across the United States, with the largest capacities in the West and the South.

And this is just the beginning, as the company expects to add 20 GW to its renewable energy pipeline by 2020.

As it does so, NextEra is moving away from conventional power plants that sell power on the spot market and towards contracted assets, most of which are solar and wind. NEER has grown projects under contract from 49% to 71% of its business, and expects these to rise to 78% by 2020. At the same time, merchant projects fell from 40% to 15% of its business, and the company expects this to fall to 9% in 2020.

The reasons for this are obvious. The merchant power market is suffering from tremendous difficulties, with wholesale power prices tanking largely due to a surfeit of cheap gas, which is threatening other independent power producers with bankruptcy. And with the growth of zero marginal-cost wind and solar, this is not likely to get better.

But the company is also not banking entirely on renewables. NEER got into the gas pipeline businesses in 2016, acquiring three pipelines in the U.S. South and Texas.

This embrace of solar is not limited to NextEra’s unregulated power development arms. This spring NextEra subsidiary Florida Power and Light (FPL) announced that it had contracted with two companies to build 596 MW of solar assets to serve its customers, and the utility says that it expects to add another gigawatt of solar in 2019 and beyond.

This may also be only the beginning, as FPL has identified 58 sites that could host 3.5 GW of potential solar in 19 Florida counties.