NextEra Energy and CF Industries are about to upend the fertilizer world with a new green hydrogen and ammonia venture in Oklahoma.
The Florida energy firm NextEra Energy Partners has decided to ditch its natural gas pipelines and transform itself into a pure-play renewable energy investment opportunity. That pulls the rug out from under Florida Governor Ron DeSantis, who has been agitating against renewable energy investment. Nevertheless, green hydrogen is part of NextEra’s overall plan, and if all goes according to plan, the green hydrogen wave will hit Arkansas, Louisiana, and Oklahoma, too.
NextEra Energy Partners Says Buh-Bye To Natural Gas Pipelines
NextEra Energy Partners (NEP) comes under the umbrella of Florida-based NextEra Energy, a diversified energy company that continues to hold fossil assets in the power generation field. Apparently, not for long. NextEra Energy has also been carving out a solid reputation for pushing the renewable energy envelope. Transitioning its as power plants to green hydrogen is part of the plan (see our complete NextEra coverage here).
NextEra launched NEP in 2014 with a twin fossil fuel and renewable energy profile that includes the natural gas pipeline STX Midstream in Texas and the Meade pipeline in Pennsylvania. Those pipeline investments are now complicating things for NEP, which would like to maximize its ability to catch the flood of money pouring into clean power projects as the Biden administration’s climate policies kick into gear.
NEP chairman and CEO John Ketchum notes that NEP is now known as one of the world’s leading clean power generators, having increased its renewable energy portfolio nine times in less than ten years. In contrast, the pipelines have become a dead weight.
“We have a terrific track record, but we believe NextEra Energy Partners’ future growth potential is not reflected in its current valuation,” Ketchum explained earlier this week, when NEP announced that it will sell its interest in th fossil gas pipelines.
“The U.S. economy’s ongoing transition to renewable energy is a significant driver of future renewable energy investments, and we want NextEra Energy Partners to be well positioned to capitalize on these investments,” Ketchum added.
Who’s Afraid Of The ESG?
A web of financial transactions stands between NEP and its pipeline-free goal, but the company believes that achieving pure-play status for its renewable energy business will be well worth the effort.
“The partnership believes these changes could potentially invite a new class of investors looking for a carbon-free, pure-play option to participate in the energy transition,” NEP stated in a press release dated May 8.
Pure-play refers to companies that focus on a specific business activity. With NEP as a pure-play renewable energy developer, investors who are on the prowl for clean power opportunities can put their money on NEP without having to calculate fossil energy assets into their environmental investng profile.
That’s a mighty attractive carrot these days. Despite the anti-ESG rhetoric bandied about by partisan office holders in the US (more on that in a second), leading businesses here and elsewhere around the globe continue to align with the corporate ESG (environmental, social, governance) movement. ESG guidelines are widely recognized as risk management tools for businesses to cope with 21st century challenges rather than floundering around in the 20th century. That’s why the environmental leg of the ESG stool leans heavily on renewable energy.
NextEra Energy Plunges Into Green Hydrogen Pool
NextEra Energy’s interest in green hydrogen could provide NEP with an additional demand platform for its renewable energy plans. Green (aka renewable) hydrogen can be produced from water with electrolysis systems powered by wind or solar power, which is right up the NEP alley.
NextEra sketched out its green hydrogen plans last summer, with the aim of decarbonizing its fleet of fossil naural gas power plants. That may seem like a far-off dream, considering that green hydrogen is a relatively new fuel and suppliers are playing catch-up. However, the transition to green hydrogen is already under way. Leading turbine manufacturers like Mitsubishi introducing gas turbines that are engineered to handle more green hydrogen on an incremental basis as the supply chain ramps up to 100%.
More Green Hydrogen For The Fertilizer Industry
NextEra has also set the green hydrogen wheels in motion for another leading user of hydrogen, the agriculture industry. Green hydrogen can be combined with ambient nitrogen from the air to produce green ammonia, which is then used to make ammonia fertilizer. Without the green hydrogen angle, the primary feedstock for ammonia is fossil gas.
The green ammonia trend is supported by federal policy. In 2020, for example, the US Department of Energy launched a program aimed at using green ammonia as a hydrogen carrier, to help release a bottleneck inthe hydrogen distribution chain.
Leading ammonia producers are catching on. In 2021, CF Industries announced that it would introduce a green ammonia system to its plant in Donaldson, Louisiana.
As if on cue, in April NextEra Energy and CF Industries Holdings announced a green hydrogen project to be launched at CF’s Industries’ Verdigris Complex in Oklahoma.
The two companies note that the proposed project is part of the HALO Hydrogen Hub proposal launched by Arkansas, Louisiana and Oklahoma. If all goes according to plan, HALO will win a slice of an $8 billion Energy Department funding pot that aims to establish a network of regional hydrogen hubs around the US.
Funding for the Energy Department initiative comes from the Bipartisan Infrastructure Law, which stipulates a carve-out for fossil energy. However, the main focus is on renewable sources.
Who’s Afraid Of The ESG, Part Deux
Republican governors and attorneys general in about two dozen US states have been peppering the mediawith anti-ESG rhetoric over the past year or so. That’s kind of funny, because in some cases their own economic development agencies have poured millions into attracting manufacturers that will spread new clean technologies far and wide. Kentucky is one standout example. If you can spot others, drop us a note in the comment thread.
The irony is especially delicious when the state in question is Florida, where Republican Governor Ron DeSantis recently signed an anti-ESG bill into law.
“Today, Governor Ron DeSantis was joined by Senate President Kathleen Passidomo and House Speaker Paul Renner to announce comprehensive legislation to protect Floridians from the woke environmental, social, and corporate governance (ESG) movement that continues to proliferate throughout the financial sector,” the Governor’s office announced on February 13, when the bill was introduced.
Apparently NextEra Energy did not get the memo. As reported by The Wall Street Journal, the corporate parent of NEP is yeballing the potential for investments in green hydrogen totaling $20 billion, leveraging the favorable winds of the federal Inflation Reduction Act.
“Despite the risks, it is a familiar playbook for NextEra, which grew from a regional utility by capitalizing on tax credits that spurred the build-out of wind and solar farms,” WSJ observed.
WSJ also reported that “the company played a crucial role lobbying lawmakers to define the size of new hydrogen tax credits,” with the aim of helping green hydrogen achieve cost parity with hydrogen from fossil sources.
That’s an interesting twist, considering the context. Governor DeSantis has been waging open warfare against another leading corporate citizen of Florida, Disney, for months now. That includes slinging the “woke” canard as part of the broader anti-ESG argument. While he has been chasing the Disney mouse, though, NextEra has already lined up the pieces for an ESG revolution.
That includes the social leg of the ESG stool as well asthe environmental one. “At NextEra Energy, we define diversity broadly,” the company states on its website. “We provide an inclusive work environment that is free from discrimination and harassment on the basis of race, color, age, sex, national origin, religion, marital status, sexual orientation, gender identity, gender expression, genetics, disability or protected veteran status.”
“We also appreciate diversity of thought, style, technical and functional capabilities or leadership,” they add for good measure.
Your move, Governor.
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Image: Proposed green hydrogen system in Oklahoma, part of a three-state hydrogen hub partnership with Arkansas and Louisiana courtesy of NextEra Energy Partners.