“There is not a regulated coal plant in this country that is economic today, full period and stop,” said Jim Robo, Chairman and CEO of NextEra Energy, the country’s largest electricity utility by market value, in an earnings call with analysts in February.
Robo spoke in unusually frank terms about why coal-fired power plants are retreating from the market, and why the remaining coal plants are being used less than ever before. He said coal-fired power is unprofitable everywhere in the country because of competition from less expensive sources like wind, solar and natural gas.
Robo would know. His Florida-based company owns and operates coal-fired power plants, even though NextEra is better known as a leading developer of utility-scale renewable energy. “I believe we are at an inflection point in the history of our company, our industry and our global economy,” Robo wrote in a public letter to stakeholders. “Like so many of you, I have believed in the future of renewable energy for a very long time.
“Wind and solar energy have made economic sense for customers in many parts of the country for years. As technology has improved and costs have come down, even more customers across the country have realized the benefits of clean energy.”
NextEra Energy is a Florida-based energy company with about 58 GW of generating capacity, revenues of over $18 billion in 2020, and about 14,900 employees throughout North America. Its subsidiaries include Florida Power & Light (FPL), NextEra Energy Resources, NextEra Energy Partners, Gulf Power Company, and NextEra Energy Services. FPL, the largest of the subsidiaries, delivers rate-regulated electricity to approximately 5 million customer accounts, or an estimated 10 million people, across nearly half of Florida.
NextEra Energy Resources (NEER), together with its affiliated entities, is the world’s largest generator of renewable energy from the wind and sun. In addition to wind and solar, NextEra Energy Resources owns and operates generating plants powered by natural gas, nuclear energy, and oil. As of 2020, approximately 41% of NextEra Energy’s generating capacity was from fossil fuels and non-renewables. The company ranked 167th on the 2018 Fortune 500 of the largest United States corporations by revenue.
A DIFFERENT KIND OF CEO
James Robo has long had a reputation as a different kind of CEO. His given name is James but he much prefers to be called Jim. In reality, he’s rather quick to correct anyone who does call him James and ask them to call him by his preferred nickname instead. He brings that exact same sense of levity to his job. Many people who work with him are surprised at the fact that he prefers to keep things light. Most have become used to working around CEOs that are very strict, even stuffy. Neither of these terms would ever likely be used to describe Robo.
Unlike many business leaders, Robo’s educational background came in the Humanities. He studied European History at Harvard where he received the Baker Award, something that is only given to the best and brightest students. Robo has often said that he has very fond memories of Harvard and does everything he can to give back. As such, he provides not only monetary contributions but also contributions of his time. His goal is to make sure that other students who are up-and-coming have the same chances for success that he did.
Robo thrives on the idea of staying busy and making positive change in the world. He serves as Director for both Florida Light & power and JB Hunt Transport. He claims that he just doesn’t like the idea of not having something to do, so he makes sure that he is involved in enough things to keep him busy, and he carries this same sense of responsibility and enthusiasm into his vision for a clean energy future.
A CLEAN ENERGY FUTURE
One of the challenges facing energy and utility companies in their pursuit of a clean energy future, as Robo said on the February earnings call, is that many of the remaining coal plants are able to keep operating because they are in states or regions with regulatory systems that force consumers to cover the costs. For utilities in those states, it makes more sense to continue operating a plant at a customer-guaranteed profit than to go through the risk of proposing and building something new.
“In Florida, we’ve shut our coal down and we save customers literally billions of dollars of present value over the expected life of the new generation that we’ve put in place,” he said in February. “So, there is an enormous opportunity. There (are) several states in the country that are not taking advantage of that opportunity, because of some of the regulatory approaches.”
One of the most telling indicators of coal’s decline is the falling “capacity factor” of coal-fired power plants, which is a percentage that shows how much the plants are being used compared to their full capacity. The national average capacity factor for coal plants dropped below 50% last year for the first time on record in 2019.
We don’t have numbers yet for all of 2020, but the monthly figures show that coal plants dropped to new lows in utilization during the coronavirus shutdowns, with capacity factors falling below 30 percent last spring, which is astonishingly low.
Those numbers underscore the reality Robo was describing, and raise the question of why coal plants aren’t closing even faster.
Robo believes that the Biden administration’s policies probably will accelerate the shutdowns of coal-fired power plants, which he said is a good thing because customers are losing money by continuing to operate unprofitable plants.
Meanwhile, companies continue to disclose timetables to shut down coal plants. Earlier this year, Alliant Energy of Wisconsin announced what it called “the end of an era” with a plan to close the Columbia Energy Center, with a capacity of about 1,100 megawatts, in 2025. The company has said that closing coal plants and adding solar power can save customers more than $6 billion over the next 35 years.
The trend is clear. Utilities have found that they can save money by closing coal-fired plants and replacing them with wind, solar and other sources. The usual caveats apply, including that wind and solar are intermittent sources. They need to work with battery storage or other technologies to provide electricity around the clock.
“Today, we can see a path to a completely emissions-free power sector built upon the combination of low-cost renewables with various forms of energy storage,” Robo said in his letter to stakeholders. “The most mature of these new technologies is battery storage. Over the past several years, our company has paired battery storage with wind and solar projects in a variety of configurations to deliver additional value to customers and to give grid operators more options to maintain reliability.
“The capability to store renewable energy at utility scale for even a few hours has already greatly improved the economics of wind and solar projects to meet customer demand for renewable energy. We expect that battery storage alone, combined with renewables, could enable a power sector that is up to 85% emissions-free.”
By Anthony Moran