NextEra Energy CEO Sees Hydrogen as Next Frontier, Calls Offshore Wind ‘Bad Bet’

Having captured early-mover advantages in onshore wind — and leveraged massive amounts of data to optimize operations — NextEra Energy is eyeing hydrogen as its next frontier for growth.

“Hydrogen is a perfect way to store renewable energy for use by companies in the power sector,” NextEra CEO John Ketchum said on March 8 during CERAWeek by S&P Global.

With a focus on wind and solar energy plus storage, NextEra is the world’s largest producer of renewables. The company’s renewables storage backlog stood at a year-end record of about 19 gigawatts (GW) as it geared up to place into service about 32,740 megawatts (MW) to 41,000 MW of new renewables and storage projects from 2023 through the end of 2026.

Ketchum discussed several renewable energy topics, including battery development, hydrogen electrolyzers and the “risks” he sees with developing offshore wind.

NextEra is turning its attention to hydrogen.

Hydrogen’s decarbonization potential has been attracting energy companies working to lower emissions. Plentiful in supply, hydrogen has near-zero greenhouse-gas emissions, and it generates electricity with two byproducts: water vapor and warm air. 

However, hydrogen’s role in the world’s clean energy future depends on its ability to overcome challenges, including cost, scale and demand.

NextEra said in January it is building algorithms to find green hydrogen sites across the U.S. to leverage its interconnection and land inventory position. NextEra Energy Resources, the company’s clean energy business unit, is also participating in the development of hydrogen hubs in the southwest and southeast.

“Hydrogen is a significant opportunity” combining the company’s existing skillsets, Ketchum said. “The electrification of the oil and gas Industry, industrials, steel, agriculture—all of these applications that we have in front of us will benefit immensely from green hydrogen [and] green ammonia solutions that can be brought to market economically in competition with both gray hydrogen and blue.”

Maximizing electrolyzers

However, there is a catch, he warned. 

Regulation must be carefully crafted to maximize electrolyzer usage to capture renewable energy credits and help improve overall economics. An electrolyzer uses electricity to separate hydrogen and oxygen from water to produce hydrogen.
 
That electricity can come from renewables such as wind and solar energy.

Matching electrolyzer operation time with periods of clean energy generation is among the hurdles being discussed by regulators and industry players.

Companies risk not being able to utilize electrolyzers as much with hourly matching, described by Ketcum as pairing electrolyzers directly behind the meter with a wind or solar project, because of the intermittency of wind and solar.

However, with annual matching, “when the sun is not shining, the winds are blowing, the four-hour battery is not enough, I can still use that electrolyzer because I can buy power off the grid,” he said. “Where does that renewable energy credit come from? It comes from a brand-new wind facility or a brand-new solar project that just got built. So, when you talk about decarbonizing the overall grid, now you’re adding twice as much renewables than you would have under hourly to get 100% capacity utilization out of the electrolyzer.”

That, he said, lowers the price of green hydrogen from $5/kg to $2.

A ‘bad bet’

While NextEra sees an opportunity for hydrogen, it has no plans to dive into offshore wind.

Ketchum called offshore wind a “bad bet.”

“It’s very capital intensive, so you’re taking a lot of risk on behalf of the shareholder,” Ketchum said. “I don’t think it’s a whole lot different than the risk that you’re taking when you’re building a nuclear power plant.”

Besides having to find available Jones Act-compliant vessels and difficulty executing on OEM, Ketchum said the complexities of offshore wind include dealing with saltwater corrosion and the threat of storms. 

The high cost of transmitting electricity back to onshore is another deterrent, along with the supply chain issues that offshore wind developers have faced. 

“We find it hard enough just to take care of the fleet onshore with some of the issues that we deal with as a company, and we’re best in class,” he said.

Batteries

NextEra expects to increase its power generation capacity from about 25 GW today to about 70 GW by 2026, Ketchum said.

“And that installed capacity is going to come from renewables only,” he said, adding the company is also working on solar and battery storage.

As the auto industry drives battery technology with plans to discontinue combustion engines, Ketchum said a lot of capex is going into batteries.

“As a result of that, you’re going to see significant innovations that come to market for the next, I’d say, five to seven years that are going to dramatically change how we think about batteries and pairing them with renewables,” Ketchum said. “The duration of batteries is going to significantly improve.”