How wind and solar toppled Exxon from its place as America’s top energy company

Savvy early investments and favorable policy tweaks—plus a continued reliance on fossil fuels—built a renewable energy titan.
Savvy early investments and favorable policy tweaks—plus a continued reliance on fossil fuels—built a renewable energy titan.
Image: Illustration by Tsjisse Talsma
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In early October, the world passed a milestone in the clean energy transition that, until very recently, seemed unthinkable: Exxon was unseated as the most valuable energy company in America. And not by Chevron, its closely-trailing oil and gas competitor. No, Chevron got leapfrogged too—by NextEra Energy, a company that has built the world’s largest collection of wind and solar farms.

The upset, to be fair, was more a result of the turmoil oil majors have faced during the pandemic than any new moves by the Florida-based electric power provider. In mid-November, news of two promising Covid-19 vaccines buoyed fossil fuel share prices and dropped NextEra to its previous rank, with a current market capitalization just shy of $150 billion.

But consider that as recently as 2011, Exxon was America’s most valuable company, period. It employs 61,000 more people than NextEra, and in 2019 booked $10 billion more in earnings. So for anyone holding back belief in renewable energy’s market ascendance, NextEra’s brief supremacy broke open a symbolic dam.

True to its name, NextEra offers a glimpse into the future: A world in which the climate change economy has anointed a new set of energy titans. Over the last two decades, the company has grown to control about 16 gigawatts of wind and 3 gigawatts of solar nationwide—more capacity than exists in all of Australia, and more than twice the wind and solar capacity of NextEra’s nearest competitor, according to Rystad Energy. According to the company’s third-quarter call with investors, it has a backlog of contracts for at least that much more.

“No one in any industry has done more than NextEra Energy to address CO2 emissions,” the company bragged in a 2019 investor presentation. Whether or not that’s true, it’s certain that no other company has done more to add zero-carbon electricity to the US grid, which accounts for more than one-quarter of the country’s carbon footprint. And it accomplished that feat while churning out cash for investors: Shareholder returns bloomed 530% over the last decade, more than double the S&P 500.

The company’s ascent has been the result of canny risk-taking and a readiness to seize on business openings afforded by fateful tweaks in energy regulation over nearly three decades. And yet NextEra’s environmental track record is far from spotless. In part, it reached the pinnacle of the renewable energy industry by aggressively defending its ability to burn fossil fuels.

From ice cream to nuclear power

NextEra was founded as Florida Power & Light in 1925. It sold electricity—as well as laundry services, ice cream, and some other odds and ends—to around 76,000 customers in the Miami area. The company expanded its reach gradually over the proceeding decades, benefitting from Florida’s booming population and wartime economic development, plus state rules that gave it a legal monopoly. In an agreement that was the norm in the US at the time, it provided exclusive power coverage in exchange for having its investment decisions and rate changes approved by a public agency.

One of those investments was the state’s first nuclear power plant, at Turkey Point, completed in 1972. In recent years, the plant has come under intense scrutiny after it was found to be leaking radioactive water into the Biscayne Bay. But at the time, Turkey Point was a marvel of engineering, a justification to raise electricity bills, and a case study in the value of early adoption. And decades later, it proved to be a valuable experience.

In 1996, a major reform by the Bill Clinton-era Federal Energy Regulatory Commission (FERC) opened a lucrative door for Florida Power & Light. Factories and other large electricity users were frustrated at being stuck with high rates, says Ted Kury, director of energy studies for the University of Florida’s Public Utility Research Center. FERC Order 888 allowed states to de-monopolize their electricity sectors, for the first time inviting power companies to compete.

The change was meant to reduce prices—but it also created a brand-new market for wholesale power.

Roughly half of states chose to deregulate, and in a dozen of those, power companies could no longer be vertically integrated: They had to sell off either their distribution lines or the power plants that fed them. Many chose the latter. “Basically anybody could buy these generating assets,” says Kury, “and different companies went out looking for opportunities”—including Florida Power & Light.

The next year, the company set up a new subsidiary, FPL Energy, tasked with acquiring and building power plants around the country. One of its early acquisitions was the Seabrook nuclear power plant in New Hampshire, a potential gold mine. It was the biggest power station in New England, but badly in need of a fix-up. Fortunately for FPL, it was structurally similar to Turkey Point, making the job relatively cheap and easy.

At the same time, 888 had suddenly made electricity prices much more transparent. It became easier to see what people were paying for power in different parts of the country—and consider how you might beat the offer. “They were able to identify markets where the prices are high enough that we can compete against them,” Kury says.

FPL Energy became a master of this game over the next two decades, snapping up other nuclear, oil, and natural gas plants. And in 1998 the company set its trajectory to the present by undercutting the local competition with another emerging technology: a wind turbine farm.

A perfect storm for utility-scale renewables

In the US, wind had been used to generate electricity since the late 1800s, and modern-looking large wind farms first appeared in Texas in the early 1980s. But after 1992, when president George Bush signed the first wind tax credits into law, wind began to look like a way to generate serious money. The tax credit, plus FERC 888, opened a window of opportunity.

Then, in the early 2000s, came a reason to climb through the window. A number of states began to require utilities to increase their usage of renewable energy over time. FPL Energy saw a perfect moneymaking storm brewing: It could move into newly-opened markets, snap up the windiest and sunniest real estate, maximize tax credits, build favorable relationships with wind and solar hardware suppliers, and be the first to provide utilities a product they were now legally obligated to purchase.

“They were one of the first to recognize the potential benefits of renewables even though they were very expensive in the early years,” says Andrew Bischof, a senior utilities analyst at Morningstar.

Over the next decade, the company built wholesale wind projects across the midwest, Texas, and California, adding solar farms with the help of a new solar tax credit in 2006. In 2008, the company went international with a wind farm in Quebec. In 2009, the Florida Power & Light Group, as the parent company was known, changed its name to NextEra Energy to reflect its growing footprint outside Florida. The wholesale branch became NextEra Energy Resources (NEER).

Meanwhile, the company had a secret weapon: Back home, nothing had changed, and fossil fuels—specifically natural gas—was still NextEra’s bread and butter.

Florida, where the cost of power had always been relatively low, had opted not to deregulate. So FPL (now a subsidiary of NextEra) was still a monopoly, still serving what had become one of the country’s biggest utility customer bases across the state’s entire east coast, still churning out power that came almost exclusively from nuclear and natural gas plants, still bringing in a steady, predictable income. That gave the company a financial cushion, Bischof says, and allowed it easier access to low-cost capital for renewables projects than most of its rivals.

The company’s split structure—a deregulated wholesale provider focused on renewables, and a traditional gas-reliant regulated utility—was ultimately the key to its success.

“The utility business definitely provided the sound balance sheet to finance renewables,” says Bischof. “Access to capital is one of NextEra’s biggest competitive advantages.”

During the last couple decades, as FPL provided the financial bedrock for NEER’s renewables buildout, wholesale wind and solar provided the company a green shine despite FPL’s continuing focus on natural gas. By 2019, three-quarters of NEER’s portfolio was wind and solar; for FPL, roughly the same portion is natural gas. Along the way, the wholesale business, which lost money in its first year but turned a profit after that, provided a growing share of the company’s overall bottom line. In 2019, 42% of the company’s $3.7 billion in net income came from NEER, and 54% from FPL (the rest was from Gulf Power, a smaller Florida utility the company acquired in 2018).

“NextEra has been very successful at playing two sports with completely different sets of rules,” said a longtime utility industry attorney who requested anonymity. “They’ve managed to guard their monopoly in Florida with ferociousness, while they compete like hell in everybody else’s yard.”

A mixed record

Along the way, NextEra has earned a reputation as a hard-elbowed and deep-pocketed political player. In the 2020 election cycle, the company gave nearly $1.4 million—more than any other utility—to political action committees for congressional candidates (52% went to Republicans). Closer to home, a 2017 report by the watchdog group Integrity Florida detailed the revolving door between FPL and the Florida Public Service Commission (PSC), which regulates utilities.

While the company was capitalizing on renewable tax credits in across the midwest, California, and elsewhere, the report alleges, it was working to roll back Florida’s energy efficiency targets and approve rate hikes that consumer advocates said were unjustified. A former chairperson of Florida’s Public Service Commission, which regulates utilities, agreed that the company “acted like thugs.” (NextEra declined to answer questions about its history and business and political strategy.)

FPL especially drew the ire of environmentalists in 2016, when it spent more than $8 million supporting a Florida ballot measure called Amendment 1. It was pitched as pro-solar, but would in fact have eliminated net metering, a policy that allows homeowners with rooftop solar to sell excess power to the grid. The measure failed, but Florida, the Sunshine State, still gets less than 3% of its power from solar, and remains one of the few states without a renewable energy mandate.

NextEra, surprisingly, is also one of the only large power companies in the US to not have a stated net-zero emissions target, something that even coal-reliant major utilities like Duke Energy and Southern Company have done. The closest NextEra has come is a promise to reduce its carbon emissions rate (i.e., emissions per unit of energy) 67% below 2005 levels by 2025. That promise would allow the company to continue burning gas indefinitely, as long as it keeps building renewables.

“They recognize the cost-effectiveness of renewables in other states,” says Alissa Schafer, a researcher at the Energy and Policy Institute, a DC-based think tank. “But in Florida, they’re continuing to ride the gravy train of natural gas.”

The next NextEra

The wholesale power market is much more crowded than it was back in the early 2000s. In 2003, NextEra’s wind portfolio accounted for nearly half of the national total; now it’s closer to 13%.

Meanwhile, the rapidly falling price of natural gas and constantly evolving national patchwork of clean energy policies and subsidies has left NEER and its competitors on the hunt for new competitive edges. For NextEra, one key alternative growth strategy—to snap up smaller utilities—has also raised climate questions.

In 2016, Hawaii regulators scuttled a proposed $4.3 billion purchase of the main utility there, citing concerns that NextEra would raise rates and not contribute enough to the state’s clean energy goals. NextEra’s most recent acquisition, Gulf Power, has a power plant fleet that is more than half coal. In September, NextEra made overtures to buy Duke Energy, the country’s second-most carbon-polluting utility, that also has one of the country’s worst records on coal ash pollution. And its most recent proposed acquisition, the midwest utility Evergy, also relies on fossil fuels for two-thirds of its power.

Nevertheless, NextEra is banking on clean energy as the engine of its future growth. In addition to its planned buildout of wind and solar, the company plans to spend $1 billion on utility-scale battery storage systems next year alone, a market that is expected to grow exponentially over the next few decades as intermittent renewable energy sources become more prevalent and the cost of batteries falls. It will also start work on a $65 million facility to produce hydrogen power, which many analysts see as the next big thing in zero-carbon energy, especially for power-hungry industrial operations.

And it continues to build out its industry-leading solar footprint. FPL plans to build 7.3 gigawatts of solar between this year and 2029, including dozens of sites that fall just under the size threshold of needing regulator approval—a strategy to build solar even where it may still not be cost-competitive, says Kury.

The global push for decarbonization depends on electrifying everything that currently burns fossil fuels. With electricity demand on the rise, utilities are naturally poised to take the reins of power from oil companies. But that transfer will be for naught if utilities themselves, like FPL, continue to rely on fossil fuels.

NextEra’s ascent shows that the market is clearly happy to reward companies for laying the physical groundwork for the post-carbon economy. The company’s clean energy peers in Europe, like Enel and Orsted, are also beating out comparably sized oil majors. Now, a century after its founding, NextEra needs to prove that it can keep its footing while it drops the crutch of natural gas—forging a business model that is both profitable and planet-friendly.