NextEra Energy sees $8 trillion addressable market for renewables

NextEra Energy sees $8 trillion addressable market for renewables

NextEra Energy (BORN 0.88%) has been a phenomenal investment over the years. The utility has delivered a total return of more than 500% over the past decade, or almost 20% annualized. It’s way ahead of S&P500total return of 280% (14.4% annualized).

The company’s strong returns were fueled by its investments in renewable energy. NextEra has become the largest producer of electricity from wind and sun. However, the company believes it is only scratching the surface of its growth potential. He sees an $8 trillion addressable market opportunity for renewable energy in the United States. It is confident that it can continue to grow at an above-average rate, creating considerable value for shareholders.

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A Huge and Growing Opportunity

NextEra Energy recently promoted John Ketchum to CEO, which has raised some uncertainty about where he might go in the future. He presented his vision of the company on its first quarter conference call. He stated:

I expect our strategy to be consistent with how we have grown the business over the past decades. But that we will continue to adapt and evolve our strategy to meet growing customer expectations, take advantage of new technologies, and lead the decarbonization of the U.S. economy. Now is the time for our business, our industry and our country to embrace low-cost renewable energy like never before.

Ketchum makes it clear that NextEra intends to continue to lead the transition to low carbon energy sources. While the company may make subtle changes based on customer needs and technological changes, it expects a future powered by renewable energy.

Ketchum said, “We intend to build more windmore solar and more battery storage than anyone else in this country year after year, regardless of headwinds or tailwinds in a given year. We believe we have the competitive advantages to win in all market conditions.”

The driving factor is the huge opportunity the company sees for low-emission energy. Ketchum noted that:

With recent technological advances in green hydrogen and other forms of long-term storage, we see a total addressable market in this country for renewable energy, storage and transmission of approximately $8 trillion through 2050. We’ve said it before, and we believe that is never truer than today. The opportunities offered by renewable energy in this country continue to develop rapidly.

This figure is double the company’s earlier view that decarbonizing the US economy would create a $4 trillion investment opportunity through 2050. Ketchum believes NextEra is in an ideal position to capitalize on this opportunity and increase long-term shareholder value.

Added new growth drivers

NextEra believes it can leverage its leadership in wind, solar and battery storage to seize emerging opportunities in the storage and green hydrogen sectors. He is working on his first pilot hydrogen project in Florida, building a 25 megawatt electrolysis system at his Okeechobee Clean Energy Center which he is expected to complete next year. This project will test whether it can replace natural gas with green hydrogen as fuel for the power plant. If successful, this project will pave the way for the future use of hydrogen in the company’s fleet to reduce its emissions.

Replacing natural gas with hydrogen as fuel for power plants is one of the many opportunities he is pursuing. NextEra is also looking at ways to use renewable energy to produce green hydrogen for industrial, power and transportation applications. Meanwhile, there are many other end uses of hydrogen in the economy, as it could replace fossil fuels in almost any setting.

Additionally, given the versatility of hydrogen and its similar properties to natural gas, there are many opportunities to build infrastructure to support a hydrogen-powered economy. Hydrogen would require intermediate infrastructure similar to that of the natural gas market, such as production facilities, storage terminals and transmission pipelines. NextEra already has experience in this area, given its gas pipeline operations, which puts it in an excellent position to seize opportunities across the hydrogen value chain.

Strong future growth

NextEra Energy believes it can continue to increase shareholder value in the future. This is because he sees a tremendous opportunity for renewable energy investment in the country. With an $8 trillion addressable market (and growing) through 2050, the clean energy company should have enough fuel to grow profits and dividends in the future.

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