NextEra Energy (NEE 1.01%) has been a phenomenal investment over the years. The utility has delivered a more than 500% total return over the past decade, almost 20% annualized. That's well ahead of the S&P 500's 280% total return (14.4% annualized).
Powering the company's strong returns has been its investments in renewable energy. NextEra has become the largest power producer from the wind and sun. However, the company believes it's only scratching the surface of its growth potential. It sees an $8 trillion addressable market opportunity for renewables in the United States. It believes it can continue growing at an above-average rate, creating tremendous value for shareholders in the process.
Image source: Getty Images.
An enormous and growing opportunity
NextEra Energy recently promoted John Ketchum to the CEO role, which has caused some uncertainty about what direction he might take the company in the future. He outlined his vision for the company on its first-quarter conference call. He stated:
I expect our strategy to be consistent with how we have grown the company over the past several decades. But that we will continue to adapt and evolve our strategy to meet increasing customer expectations, to leverage new technologies, and to lead the decarbonization of the U.S. economy. Now is the time for our company, our industry, and our country to embrace low-cost renewable energy like never before.
Ketchum makes it clear that NextEra intends to continue leading the transition to lower-carbon energy sources. While the company might make subtle changes based on customer needs and technology changes, it expects a renewable-powered future.
Ketchum stated: "We intend to build more wind, more solar and more battery storage than anybody else in this country year in and year out regardless of the headwinds or tailwinds in any given year. We believe that we have the competitive advantages to win under any market conditions."
The driving factor is the enormous opportunity the company sees ahead for lower emissions energy. Ketchum noted that:
With recent technological advancements in green hydrogen and other forms of long-term storage, we see a total addressable market in this country for renewables, storage, and transmission of around $8 trillion through 2050. We have said this before, and we believe it is never more true than it is today. The opportunity set for renewable energy in this country continues to expand rapidly.
That number is double the company's prior view that the decarbonization of the U.S. economy would create a $4 trillion investment opportunity through 2050. Ketchum believes NextEra is in a terrific position to capitalize on this opportunity and grow long-term value for shareholders.
Adding new growth drivers
NextEra believes it can leverage its leadership in wind, solar, and battery storage to capture emerging opportunities in the storage and green hydrogen sectors. It's working on its first hydrogen pilot project in Florida, building a 25-megawatt electrolysis system at its Okeechobee Clean Energy Center that it should finish next year. This project will test whether it can replace natural gas with green hydrogen as a fuel for the power plant. If successful, this project will guide the way for the future use of hydrogen across the company's fleet to lower its emissions.
Replacing natural gas with hydrogen as a fuel for power plants is one of many opportunities it's pursuing. NextEra is also looking for ways to use renewable energy to produce green hydrogen for industrial, electrical, and transportation applications. Meanwhile, there are many other end-uses for hydrogen in the economy as it could replace fossil fuels in almost every setting.
Further, given hydrogen's versatility and similar properties to natural gas, there are many opportunities to build infrastructure to support a hydrogen-fueled economy. Hydrogen would need similar midstream infrastructure as the natural gas market, like production facilities, storage terminals, and transmission pipelines. NextEra already has experience in this arena, given its natural gas pipeline operations, putting it in an excellent position to capture opportunities across the hydrogen value chain.
Powerful growth ahead
NextEra Energy believes it can continue growing shareholder value in the future. That's because it sees such a tremendous opportunity for renewable energy investment in the country. With an $8 trillion (and growing) addressable market through 2050, the clean energy company should have plenty of fuel to grow its earnings and dividend in the future.
