America’s energy sector is going through its biggest crisis–as well as its biggest seismic shift–in modern history. Fossil fuel companies have always dominated the U.S. energy space, and no company has been more dominant than Exxon Mobil (NYSE:XOM) thanks mainly to its powerful John Rockefeller pedigree. Exxon has always been the United States’ most valuable energy company since it began as Standard Oil more than a century ago.
But something very strange happened over the last week: Suddenly, a company that has become the face of renewable energy took the mantle of America’s most valuable energy company from mighty Exxon.
Florida-based NextEra Energy Inc. (NYSE:NEE) has leapfrogged Exxon and Chevron Corp. (NYSE:CVX) to become America’s most valuable energy company thanks to its growing green energy credentials. NEE boasted a market cap of $147.61B compared to $144.69B and $141.32B by Exxon and Chevron, respectively, by close of business on Wednesday.
This has been a long time coming.
NEE has nearly doubled over the past three years compared to declines of 59% and 38% by XOM and CVX over the timeframe, respectively.
NEE is up 23.5% in the year-to-date vs. -50.8% and -39.0% returns by XOM and CVX.
Source: CNN Money
ESG/ Renewables Boom
The Covid-19 crisis, as well as the ongoing ESG boom, has provided a major boost for NextEra while also condemning Exxon and Chevron.
According to a report from Morningstar, U.S. assets in sustainable index funds have quadrupled over the past three years and now account for 20% of the total. Increasing adoption of the UN’s Sustainable Development Goals by asset managers as well as the ongoing generational wealth transfer from baby boomers to millennials and Gen Xers have been playing a significant role in this trend.
NextEra has been on the right end of this megatrend while Exxon and Chevron have not.
Currently, NEE is the world’s largest producer of wind and solar energy, with 45,900 megawatts of generating capacity. The company owns eight subsidiaries, with the largest, NextEra Energy Services, supplying 5 million homes in Florida with electricity.
NextEra has doubled down on renewable energy’s most promising sectors: Solar and hydrogen.
NextEra has unveiled its 30×30 goal to install more than 30 million solar panels, or roughly 10,000 megawatts of incremental solar capacity, in Florida, a world leader in the production of solar energy, by 2030 through one of its subsidiaries, Florida Power & Light (FPL). Related: 5 Major Takeaways From The IEA’s World Energy Outlook 2020
That is likely to end up paying big dividends considering the extremely bullish projections for solar.
Solar stocks have emerged as the best-performing of any energy stocks after more than doubling amid Covid-19.
Solar ETF, Solar Invesco ETF (NYSEARCA:TAN), has been surging with blue wave prospects as Wall Street grows more bullish on the odds of a decisive Democratic victory that could provide a big push towards renewable energy.
TAN has gained 83.3% over the past 90 days, and a sizzling 146.2% YTD as new polls show Joe Biden has extended his lead over President Trump to 16 points–the widest so far for this election cycle. Biden’s lead is the best of any challenger since 1936, the year when the first scientific polls were taken in a presidential race.
Biden has announced aggressive plans to ramp up renewable energy production.
Indeed, Biden has proposed a staggering $1.7 trillion in federal spending over the next decade to achieve this goal, with the private sector expected to chip in with the balance. Biden also says the taxpayer costs can be recovered by repealing the generous tax bonanza that Trump granted U.S. fossil fuels.
JPMorgan has said that a Democratic sweep, aka a blue wave, is a near-term catalyst for the solar energy sector.
But NextEra has not stopped there. The giant utility has lately expressed serious interest in investing in hydrogen fuel technology.
During its latest earnings call, NextEra’s CFO Rebecca Kujawa declared that the company is “…particularly excited about the long-term potential of hydrogen” and discussed plans to start a pilot hydrogen project at one of its generating stations at Okeechobee Clean Energy Center owned by its subsidiary, Florida Power & Light (FPL).
CFO Kujawa told analysts:
“Based on our ongoing analysis of the long-term potential of low-cost renewables, we remain confident as ever that wind, solar, and battery storage will be hugely disruptive to the country’s existing generation fleet, while reducing cost for customers and helping to achieve future CO2 emissions reductions. However, to achieve an emissions-free future, we believe that other technologies will be necessary, and we are particularly excited about the long-term potential of hydrogen.”
Read More: The Secret Behind America’s Most Valuable Energy Play