This is the final installment in GTM Squared’s countdown of the leading battery asset owners in the U.S. The series, looking at the five biggest owners of currently operational front-of-the-meter batteries, previously covered Duke Energy, San Diego Gas & Electric, Invenergy and AES.
You don’t become the biggest overnight.
NextEra Energy Resources spent years building up the largest renewables development business in the country. Its battery business is newer, but it’s still been a long time coming.
The Juno Beach, Florida-based company closed a series of ancillary services deals in the early and mid-2010s, building big in numerous places. Then it started branching out to other business models, like grid-upgrade deferral on remote parts of Long Island and shifting solar power for a utility in Minnesota. NextEra almost always builds, owns and operates its project, while the customer gets the benefits of the new technology without taking on much risk.
Things kicked into high gear in 2017 when the company announced a solar-plus-storage deal for Tucson Electric Power, which promised record-low pricing. Although that project is not yet complete, it's already helped shift the market toward ever-larger versions of solar-paired batteries. NextEra has since closed two deals that throw in wind for a clean energy trifecta.
"It’s just an exceptionally well-run company," said Andrew Beebe, who ran NextEra's distributed generation business from 2013 to 2015, before becoming managing director at Obvious Ventures. "They're very long-term thinkers, and they've been thinking about energy storage for a long time."
The winning record on the NextEra Energy Resources side inspired similar interest from sister company Florida Power & Light, the largest regulated utility in the Sunshine State. FPL has built a few grid batteries already and committed to a 409-megawatt behemoth to replace aging gas plants.
Unlike the other companies in the Top 5 Battery Owner Countdown, both NextEra Energy Resources and FPL declined to comment on their storage strategies and activities.
Buoyed by a sharp team and the financial stability of the NextEra Energy holding company, NextEra’s storage development continues to compete aggressively and win big deals; it’s already operating plants in 12 states. With more than 1 gigawatt of future storage deals announced, NextEra is primed to hold onto its leadership position.
NextEra initially started developing batteries for frequency regulation, as many developers did. But it didn’t stay put in PJM; it sought out utility customers across the country. And instead of developing merchant battery plants, the company built relationships with utility customers and supplied them with battery services.
Between 2014 and 2016, NextEra Energy Resources delivered large-scale ancillary services batteries in places like Illinois, Pennsylvania and coastal Maine. By 2017, NextEra had finished a 10-megawatt/2.5-megawatt-hour battery at a substation for Tucson Electric Power, the start of a momentous working relationship.
Successful early batteries do not flow seamlessly into new applications. Other uses of storage required different market dynamics and customer needs. Early on, NextEra started scoping out futuristic business models for things like renewables paired with storage or peaker plant replacement.
While New York state energy wonks debated the implementation of the Reforming the Energy Vision, including its concept of “non-wires alternatives” in place of expensive grid upgrades, NextEra developed and built projects to do just that. It constructed 5-megawatt/40-megawatt-hour batteries in East Hampton and Montauk, on Long Island, in a $110 million deal to help utility PSEG Long Island cope with seasonal influxes of tourist demand. Those systems still stand out nationally for their lengthy duration.
Turn to hybrids
Sunnier places often get credit for driving the clean energy revolution, but Minnesota hosted a few key developments. Most recently, its cooperative utility Great River Energy ditched coal power at the same time it contracted for a groundbreaking 150-hour advanced battery from startup Form Energy.
But back in 2018, electrical cooperative Connexus Energy (a member of Great River Energy) flipped on two solar-paired batteries totaling 15 megawatts/30 megawatt-hours. Engie North America handled the solar arrays; NextEra Energy Resources built, owned and operated the batteries. NextEra also finished a 10-megawatt system that year for Arizona’s Salt River Project, connected to 20 megawatts of solar.
The clean energy industry had always talked about batteries as the “holy grail” for storing renewable power and unlocking a grand clean energy future. But developing and building such systems is harder than talking about it, and even in 2018, hardly any projects actually did that at the scale of these systems.
Those ones, however, got overshadowed by NextEra's deal with Tucson Electric Power, announced in the spring of 2017. This would be 30 megawatts/120 megawatt-hours, which qualified as a “long-duration” system back then, attached to a 100-megawatt solar field.
And it came out with great fanfare because TEP released pricing details that framed it as the lowest-cost solar-plus-storage deal ever. An executive said that the blended price was less than $0.045/kilowatt-hour, with the solar portion coming in below $0.03/kilowatt-hour. That handily undercut the splashy $0.11 per kilowatt-hour pricing AES revealed a few months earlier for its Kauai project, which would be smaller but come online earlier. (As a note to readers, a surefire way to elicit more media coverage of a battery project is to offer some hard pricing numbers.)
The TEP announcement sparked hungry speculation within the industry about how such pricing was feasible. It banked on the federal Investment Tax Credit, sure. The contract also baked in a few years of battery price declines: The system was originally set to come online at the end of 2019, but TEP more recently said it would be operational by the end of 2020.
Still, the deal revealed just how confident NextEra felt in muscling through groundbreaking battery projects with the discipline, and the low cost of capital, to make money at unheard-of low prices.
That confidence carried through to a new type of hybrid development: solar-plus-storage-plus-wind. This collection taps the often complementary production schedules of wind and solar, with a battery to cover the gaps. It yields something that is not quite baseload, but closer to it than previous non-hydro renewables.
In 2019, NextEra first closed this concept with Portland General Electric. It followed up with Oklahoma’s Western Farmers Electric Cooperative, including what will be one of the world’s largest batteries at 200 megawatts/800 megawatt-hours.
FPL joins the battery party
We saw how Duke Energy dipped into battery development with its competitive renewables arm, then handed the baton to the regulated utility. Something similar happened with NextEra: As the renewables arm closed battery deals year after year, regulated sister company FPL got into the business, too.
Unlike Duke, NextEra’s competitive arm kept going with storage instead of pulling back after completing a grant-funded demo project. And the regulated side quickly went very large in its battery development, while Duke has incrementally grown battery investment through various distribution grid use cases.
FPL tinkered with smaller battery systems, then finished Babcock Ranch in 2018, claiming the title of “largest combined solar-plus-storage facility operating in the U.S.” It includes 10 megawatts/40 megawatt-hours of battery capacity next door to 74.5 megawatts of solar. (Tesla’s Kauai solar-storage project had a bigger battery at the time, but smaller solar capacity, leaving room for FPL to claim the “combined” capacity title.)
After the Trump administration imposed import tariffs on solar panels in defense of the largely nonexistent U.S. solar manufacturing sector, JinkoSolar decided to set up an assembly plant to make 1 million panels a year in Jacksonville. NextEra Energy immediately signed up to buy 7 million over four years, and FPL pledged to install 30 million solar panels by 2030.
With all that solar on the way, FPL upped the battery ambitions, too. It proposed a battery in March 2019 that would be the biggest in the world at 409 megawatts/900 megawatt-hours. The Manatee Energy Storage Center would sit next to existing solar plants and expedite the retirement of two nearby gas plants from the 1970s.
Its announcement speaks suavely to different audiences. For all those typical Floridians out there reading utility press releases, or the journalists writing for them, it contextualizes the project in relatable terms: It’s like “100 million iPhone batteries.” And for regulators and ratepayer advocates, it runs the “steel for fuel” playbook; the proposal would shut down aging fossil fuel plants, thereby reducing 1 million tons of carbon dioxide, while saving customers $100 million, NextEra said.
It’s hard to argue with a rate-based investment if it saves customers money and makes the world a better place. Duke Energy pursued a strategy of acclimatizing regulators to the costs and benefits of storage through a series of tightly scoped projects. FPL moved aggressively to propose this massive battery, confident that its payback calculations and existing rapport with state decision-makers could get the deal approved.
The company won’t stop there: its 10-year plan for FPL and recently acquired utility Gulf Power calls for 10,000 megawatts of solar and 1,200 megawatts of energy storage, according to an investor presentation. It expects to put $420 million into the rate base for battery projects between 2019 and 2022. “Growth in regulatory capital employed is expected to drive FPL’s net income growth through 2022,” the report states.
But FPL is careful to pair that increase in spending with savings for customers. It grew regulatory capital employed from $13.2 billion in 2008 to $33.7 billion in 2018 (compound annual growth rate: 10 percent). During that time, it reduced the typical residential bill by 6 percent.
More profit margin with lower power prices is a winning combo, and battery storage is primed to play a greater role in keeping the good times rolling.