NextEra Energy, the largest U.S. wind and solar developer, sees little threat to the renewables market from the fading federal tax credits, executives said Wednesday.
With the federal Production Tax Credit (PTC) for wind already phasing down, and the federal Investment Tax Credit (ITC) for solar set to begin declining next year for new projects, individual companies and their broader industries are grappling with how — or whether — to push for an additional extension.
The Trump administration's elimination of the Clean Power Plan in favor of a more coal-friendly approach has led some in the renewables business to change their minds in favor of asking for another extension, despite the political challenges of doing so.
NextEra, for its part, is focused on its gargantuan development pipeline, and believes wind and solar will remain highly competitive without federal subsidies, CFO Rebecca Kujawa said on an analyst call Wednesday discussing the company’s financial results.
“With continued cost and efficiency improvements, we expect new near-firm wind and solar to be cheaper than the operating costs of coal, nuclear and less-efficient oil- and gas-fired generation units, even after the tax credits phase down early in the next decade,” Kujawa said.
“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.”
Last week the Solar Energy Industries Association, which represents the solar sector in Washington, D.C., organized a letter to Congress signed by nearly 1,000 companies calling for an extension of the ITC.
The wind industry has so far taken a less explicit approach toward another PTC extension, with the American Wind Energy Association (AWEA) having only gone as far as calling for a technology-neutral tax credit.
Pressed Wednesday on the renewed efforts to extend the solar ITC, Kujawa said: “We’ve benefited over the last couple of years from some of the most significant visibility for long-term incentives the industry has ever had.”
“When the tax credits were last extended [in 2015], implementing the phase-down currently in place, we were very supportive of that, as an industry and our company specifically.”
While another extension could create a stronger tailwind for the renewables market, NextEra is "excited about our development program" with or without subsidies, she said.
NextEra on Wednesday revealed that its renewables backlog — or projects to be built over the next few years — has grown to a record 11.7 gigawatts.
A pivot toward solar
NextEra is by far the largest owner of U.S. wind capacity, with more than 14 gigawatts in operation, according to AWEA.
But the company is in the midst of a pivot toward solar and somewhat away from wind, reflecting shifts in the broader U.S. power market. Solar’s ITC has an advantaged phase-down schedule compared to the wind PTC.
While wind is expected to remain Energy Resources’ main focus through 2020, solar will overtake it in the 2021-2022 timeframe, in part because the company’s industry-leading efforts to upgrade — or repower — many of its existing wind farms have been heavily tied to the PTC.
Florida-based NextEra, which owns several large regulated utilities in addition to its more freewheeling Energy Resources development arm, is already second only to First Solar when it comes to installed utility-scale solar capacity in the U.S., according to Wood Mackenzie Power & Renewables.
Although a much smaller part of its business, NextEra is also a leading player in the distributed solar market, focused primarily on the commercial and industrial segment. It continues to look at opportunities in residential solar, Kujawa said.