Utilities in the U.S. are facing more uncertainty than ever before as the energy landscape changes around them. Coal is dying, while renewable energy is growing faster than many once thought possible. This couldn't be a bigger deal for the utility sector and its investors. Fortunately, a few choice names long ago started pivoting toward renewable energy sources, to benefit both the environment and their shareholders. The undisputed leader -- of interest to any dividend-minded investor -- is NextEra Energy (NEE -0.63%).
The rise of renewable usage
Although coal is quickly falling out of favor, nuclear plants are incredibly expensive; it's no surprise that renewable energy continues to grow. The U.S. Energy Information Administration projects that it will do so for decades:
Image source: U.S. Energy Information Administration -- Annual Energy Outlook 2017.
Which brings us to NextEra. Not only is NextEra one of the largest electricity utilities in the U.S., but it also happens to be the biggest producer of renewable energy. It has consolidated revenues of approximately $16.2 billion; approximately 45,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners, LP; and approximately 14,700 employees in 30 states and Canada, as of the end of 2016.
NextEra Energy is headquartered in Juno Beach, Florida. One of its principal subsidiaries is Florida Power & Light Company, which serves approximately 4.9 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the United States. The other is NextEra Energy Resources, LLC, which, together with its affiliated entities, is the world's largest generator of renewable energy from the wind and sun.
Through its subsidiaries, NextEra Energy generates clean, emissions-free electricity from eight commercial nuclear power units in Florida, New Hampshire, Iowa and Wisconsin.
Power from the sun in the Sunshine State
Perhaps the greatest example of NextEra's renewable credentials is its Florida Power & Light (FPL) subsidiary. Currently, FPL's capital spending is dominated by renewables -- particularly solar.
Florida Power is currently in the middle of building solar projects ever in the eastern United States. Construction is underway at eight 74.5 megawatts (MW) of solar capacity across FPL's service territory. This explains why, last fall, the company celebrated the installation of its 500,000th solar panel. Once complete, the eight solar energy centers will propagate nearly 600 MW of combined solar capacity, enough for approximately 120,000 homes.
Furthermore, FPL has confident land for more than 4 gigawatts of expansion capabilities, and is developing an additional 1,600 MW of renovated heliacal generating capacity scheme for beyond 2018.
Image source: Florida Power & Light.
It doesn't stop there. Construction on the Okeechobee Clean Energy Center, with a capacity of approximately 1,750 MW, is on schedule and under budget. Once it begins operations in mid-2019, Okeechobee will be one of the cleanest plants of its size in the world.
In addition, the company is currently petitioning regulators for the modernization of its Lauderdale plant in Dania Beach. If approved, the roughly 1,200 MW Dania Beach Clean Energy Center will be highly efficient and breeze by clean-intense natural gas. FPL is also petitioning to shut down its St. Johns River Power Park, a roughly 1,300 MW coal-combustion plant. If approved, it will move Florida and the world toward more renewable electricity generation, and prevent millions of tons of carbon dioxide emissions.
Renewable energy is turning into a cash cow
During the second quarter, NextEra Energy continued to grow its backlog, adding 631 MW of additional renewables projects to its already sizable plate. This includes approximately 193 MW of new wind projects and roughly 438 MW of new solar assets.
Long-term, renewable energy needs to be able to generate "renewable" cash flows. This is fast becoming a reality in many regions, and becoming easier and easier by the month. Once a windmill or solar module becomes efficient enough, it becomes increasingly attractive to utilities. After all, wind turbines require moderate maintenance assets, and their fuel usage is negligible. Any utility not getting on the NextEra bandwagon and emulating its model invites disaster.
With a 2.7% dividend, and a long runway of consistent renewable growth ahead of it, NextEra Energy is not just the utility of the future, but a stock for the future as well.
