NextEra Energy Sets Sights on Renewable Natural Gas

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Researched by Industrial Info Resources (Sugar Land, Texas)--Last week's earnings conference call with NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida) had most of the elements seen in previous calls: Net income for the third quarter was up over the previous year, and the company has added significantly to its backlog of renewable projects. But during the call, executives announced that the company is investing more than $1 billion into a renewable natural gas (RNG) portfolio.

"We are excited to announce we reached an agreement to acquire a large portfolio of operating landfill gas-to-electric facilities, which will become a core part of our renewable fuels and potentially hydrogen strategies," said Kirk Crews, chief financial officer of NextEra. The company's nationwide renewables arm, NextEra Energy Resources, will purchase the portfolio for $1.1 billion.

And NextEra isn't stopping with only the acquisition. "In the coming years, we expect to invest roughly $400 million, net of the investment tax credit benefit, of additional capital into the portfolio of projects, primarily to enable production of renewable natural gas," said Crews.

The projects will be acquired from Energy Power Partners (EPP) (Allentown, Pennsylvania) and its funding vehicle North American Sustainable Energy Fund LP (Marina del Rey, California). EPP has several RNG and biogas facilities throughout the U.S., many of which are clustered in the northeastern U.S., but also in other states such as California, Texas, Florida and Utah.

Examples of EPP plants include the McCommas Bluff landfill gas-to-energy plant in Dallas, Texas, which, under a long-term agreement, sells RNG to Shell plc (NYSE:SHEL) (London, England) that is ultimately delivered to the transportation market. Subscribers to Industrial Info's Global Market Intelligence (GMI) Alternative Fuels Plant Database can click here for the plant profile.

Industrial Info is tracking 12 plants owned by EPP throughout the U.S., most of which are for landfill gas-to-energy undertakings. Subscribers can click here for a full list.

Tied up in NextEra's decision are significant tax credits provided by the Inflation Reduction Act (IRA), which passed in August. The IRA includes a "clean hydrogen" tax credit that allows for the use of RNG as a qualifying feedstock for hydrogen production. "Blue hydrogen" is produced from natural gas in a process that uses carbon capture and sequestration (CCS), and the use of RNG in the production process will allow blue hydrogen to take full advantage of the tax credits.

"There's also the opportunity to support the further decarbonization or the improving of carbon intensity for blue hydrogen, which really opens up a whole new market for renewable natural gas that we think is going to be very attractive to blue hydrogen producers to enable the full value of the PTC [production tax credit] where they otherwise wouldn't have been entitled to the full value of the PTC," said Rebecca Kujawa, chief executive officer of NextEra Energy Resources. "And in doing that, we think that creates a real long-term contracted market because a blue hydrogen producer will be very motivated to lock in the value that the renewable natural gas lending will bring to their economics."

The acquisition of the RNG portfolio complements NextEra's growing list of renewable energy projects. Industrial Info is tracking more than $41 billion worth of renewable energy projects from NextEra, including solar, wind and battery energy storage installations. Set for completion by the end of this year is the Young Windfarm in Graham, Texas, which will use 160 wind turbines to generate about 500 megawatts. Subscribers to Industrial Info's Power Project Database can click here for more details.

NextEra isn't the only company making moves into the RNG sector. Last month, BP (NYSE:BP) (London, England) announced it was buying RNG producer Archaea Energy Incorporated (NYSE:LFG) (Houston, Texas) for $4.1 billion. Industrial Info is tracking more than 25 plants owned by Archaea throughout the U.S., mostly landfill gas-to-energy plants. Subscribers can click here for a full list.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).