Leaders from major American utilities have cautioned that the country’s economic expansion would be in danger if this need is not met.
According to NextEra Energy CEO John Ketchum, the demand for renewable energy will quadruple over the next seven years as data center expansion picks up speed to support the spread of artificial intelligence.
In the second quarter, NextEra added 3,000 megawatts of storage and renewable energy projects to its order backlog. Of them, agreements with Google to power the internet company’s data centers account for 860 megawatts, or 28%.
During the company’s results call on Wednesday, Ketchum informed investors, “This marks our second best origination quarter ever.” “These findings confirm our hypothesis that a combination of renewable energy sources and battery storage will account for the majority of the growth demand.”
According to Brian Bolster, NextEra’s chief financial officer, the company now has seven gigawatts of operational and backlog renewable assets with clients in the IT and data center industries.
Early afternoon trading saw a 3.5% increase in NextEra’s shares. By market capitalization, it is the biggest power firm in the S&P utilities sector and manages the largest portfolio of renewable energy in the United States.
Due to investor excitement on the company’s ability to fulfill the rising demand for electricity in the United States, shares have increased by 24% year to date and by 12% over the previous three months.
soaring need for electricity
Due to the need from data centers, industrial, and the electrification of the economy, NextEra projects that power consumption will increase four times faster over the next 20 years than it did in the previous 20, according to Ketchum.
According to a recent prediction by consulting company Rystad Energy, the United States’ power consumption would increase by 290 terawatt hours by 2030 due to data centers and the use of electric cars alone. According to Rystad, it is equal to Turkey’s total power demand.
Leaders from major American utilities have cautioned that the country’s economic expansion would be in danger if this need is not met. The CEO of NextEra Energy Resources, a subsidiary of NextEra Energy, Rebecca Kujawa, said that it would take some time to determine with certainty the precise amount of demand coming from data centers in particular.
“However, it is impossible to ignore the reality that these are incredibly high figures—figures that I doubt any utility in the sector has ever seen before,” Kujawa said on Wednesday. Practically speaking, it will take a few years for this to really happen and for utilities to be able to take it in and provide for it.
Cheaper and quicker than gas are renewables.
Though there is continuous discussion on how the power mix will split between gas and renewables, natural gas is also anticipated to play a significant role in satisfying demand for electricity. Producers and pipeline operators have said that gas will be required as a backup to maintain dependable electricity since renewable energy sources are reliant on the sun and wind.
The CEO of Williams Companies, a pipeline operator, Alan Armstrong, warned CNBC last week that if the United States doesn’t adopt natural gas as a power source, it would lag behind other nations in the AI race.
According to Ketchum, natural gas will be crucial as a bridging fuel in the next energy shift. In Florida, NextEra owns and runs a fleet of natural gas vehicles. However, the CEO said that renewable energy is quicker to install and less expensive.
Given the requirement to have gas transported to the producing unit and the three- to four-year waiting period for gas turbines, building new natural gas power is “more expensive in most states, is subject to fuel price volatility, and takes considerable time to deploy,” according to Ketchum.
Growing interest is being shown in nuclear energy as a dependable, carbon-free energy source as electricity demand is predicted to soar. Though a comprehensive evaluation would be necessary, Ketchum said on Wednesday that NextEra is thinking about resuming operations at the Palo, Iowa, Duane Arnold nuclear reactor. In 2020, the facility closed its doors.
Ketchum said on Wednesday, “We would only do it if we could do it in a way that is basically risk free with plenty of mitigants around the approach.” “Yes, we are looking at it, but there are a few things that we would need to work through.”
Seventy percent of Wall Street analysts rank NextEra as buy equivalent, and the company has an average price objective of $79.12 per share, which implies a roughly 10% increase from Tuesday’s closing price of $72.11.
