One of the biggest issues holding back the renewable energy industry’s full potential is intermittency. Since the sun doesn’t always shine and the wind doesn’t move at a steady speed, renewables don’t generate a consistent stream of electricity. As a result, utilities either need to build supplemental natural-gas-fired plants or install expensive battery storage capacity to meet peak demand.
However, as battery costs continue to decline, renewable energy is becoming increasingly competitive with fossil fuels. That was a central theme on the second-quarter conference call of clean-energy-focused utility NextEra Energy (NYSE:NEE). Among the highlights was a can’t-miss quote by CFO Rebecca Kujawa.
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The rapidly declining cost curve
Kujawa noted on the call that one of the drivers of NextEra’s excellent second-quarter results was its energy resources segment. The company not only benefited from recently completed renewable energy expansion projects, but also continued securing new projects that will power future growth. Overall, the company added 1,850 megawatts (MH) of new projects to its backlog as “we continue to capitalize on one of the best environments for renewables development in our history,” according to Kujawa.
That trend should continue, given what NextEra Energy sees ahead for the sector. Kujawa pointed out that:
With continued cost and efficiency improvements, we expect new NEER [NextEra Energy Resources] firm wind and solar to be cheaper than the operating cost of coal, nuclear, and less-efficient oil and gas fire generation units even after the tax credits phase down early in the next decade. The combination of low-cost renewables plus storage is expected to be increasingly disruptive to the nation’s generation fleet, providing significant growth opportunities well into the next decade. By leveraging Energy Resources’ significant competitive advantages, we expect to continue to capture a meaningful share of this opportunity set going forward.
Investors won’t want to miss what Kujawa is saying here. She states that within a few years it will be cheaper to build new wind and solar capacity than all but the most efficient fossil-gas-fired power plants. That’s without the benefit of tax credits and after adding in the extra costs associated with battery storage.
In the company’s view, the renewabl