The Financial Times has reported another win for clean energy. NextEra, the world’s largest solar and wind power generator, has surpassed ExxonMobil in market value. NextEra is now more valuable on the stock market than ExxonMobil. This reflects that investors believe that the energy system is changing in favor of renewables and fossil fuels are starting to become a thing of a past.
NextEra is an energy company from the US (Florida). On Friday, its market cap was $138.6 billion in intraday trading. S&P Global Market Intelligence noted that this is a gain of more than two-thirds within the past two years.
ExxonMobil had the highest market cap in US on the day of @tesla IPO. Now the company with a mission to accelerate transition to sustainable energy has 2x plus as much market cap. Now NextEra, clean energy group, market cap also exceeds Exxon. The stock market is getting it. https://t.co/rndHUUMlSD
— HIRO MIZUNO (@hiromichimizuno) October 3, 2020
One of Tesla’s newest board members, Hiromichi Mizuno, shared his thoughts on this in the tweet above. When Tesla first had its IPO, Exxon’s market cap was the highest in the US. Now, not only does Tesla, a company on a mission to empower humans by accelerating our transition to sustainable energy, have a higher market value than ExxonMobil, but so does NextEra. This trend is definitely notable and many are taking notes.
ExxonMobil, which is one of my state’s largest employers, as we have quite a few of its plants around here, was the world’s largest public company not so long ago. However, change is inevitable — and the transition to clean energy is the type of change that will put behemoth companies such as Exxon out of business unless they are able to get on board.
Since the beginning of this year, ExxonMobil lost more than half of its value. It dropped down to $137.9 billion from its peak of more than $500 billion back in 2007. This decline shows that the energy industry is slowly moving away from oil in the direction of clean energy. With companies such as NextEra leading the way — especially during the pandemic — demand is in favor of renewable energy. See: “Solar Power = 60% of New US Power Capacity in June.”
Jim Robo, NextEra’s chief executive, spoke in an interview with a Wolfe Research analyst about the matter. “We’re seeing just enormous demand for renewables right now,” he said.
During the first half of this year, NextEra reported a net profit of $1.7 billion. Wholesale customers also signed up for 14.4 gigawatts worth of renewable energy capacity, which is almost three times the amount of two years ago. This is what increased the earnings guidance and led to a four-for-one stock split in September.
FT pointed out that NextEra isn’t solely using renewables, though. Both its wholesale power generation and utilities are still dependent on fossil fuels for power. Another thing that added to NextEra’s profits is the federal tax credits for wind and solar projects. NextEra was able to use them against tax liabilities on both of its businesses — wholesale power and utilities.
Tough Future For Fossil Fuels
NextEra, in an investor presentation, shared its thoughts on the future for gas. With the cost of batteries for electricity storage included, solar power is set to be around the same price as gas-fired generation by the middle of this decade on average. The prices could range around $30–40 a megawatt-hour, and wind plus storage could cost around $20–30 per megawatt-hour.
NextEra also wants to embrace hydrogen as a replacement fuel for diesel. The company has a pilot program that will use solar electricity to produce hydrogen. “It is a replacement fuel for diesel,” Robo explained. He also noted that investments made by European majors resulted in some of the worst projects that he’d seen in this sector. Robo also stated that he wasn’t worried about the oil majors.
Phasing Into Clean Energy From Fossil Fuels
Phasing from fossil fuel dependency to standing on our own independently by using clean and renewable energy will take some time. However, it’s refreshing to see clean energy winning in the financial markets. While average Americans may not invest in the stock market, many of the most powerful and well-known brands are included in these markets, and for a clean energy company such as NextEra to surpass ExxonMobil in value is a major win.
Clean energy will take this win and keep moving forward.