The U.S. will need to add an estimated 450 gigawatts of power-generating capacity by 2030.
Given the limitations of gas and nuclear, renewables will play a leading role in the near term.
NextEra Energy is in an ideal position to meet the country's power needs.
The U.S. will need to build a tremendous amount of new power-generating capacity by 2030. According to an estimate from leading utility NextEra Energy(NYSE: NEE), the U.S. will need to add more than 450 gigawatts (GW) of new power generation by the dawn of the next decade. That's massive, considering the country currently has less than 1,300 GW of generation capacity.
Meeting the country's power needs will require all forms of energy. That plays right into the strategy of NextEra Energy, which is a leader across energy technologies. It's "the quintessential all forms of energy company," as CEO John Ketchum called it on its first-quarter earnings conference call.
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Here's a look at the country's upcoming power problem and how NextEra Energy will play a leading role in providing solutions.
Meeting the power surge
On the first-quarter call, NextEra Energy's CEO discussed the country's surging power demand and the obstacles to meeting those needs. He stated: "The demand for electricity in the United States is here now, and it's not slowing down. Frankly, it's unlike anything we've ever seen since the end of World War II." Several factors are driving the acceleration in electricity demand, including the electrification of transportation, the onshoring of manufacturing, and AI data centers.
Ketchum commented that exercising "energy realism and energy pragmatism" is important when looking at how best to address the country's power needs. He explained that "energy realism is about embracing all forms of energy solutions." Meanwhile, "energy pragmatism is about recognizing some technology is ready at scale today and other technology needs more time to get there, and there will be significant trade-offs with regard to the timing and cost of each."
In the near term, it will be difficult for natural gas and nuclear to provide much additional power for practical reasons. For example, Ketchum noted that gas turbines are in short supply and in high demand, while there aren't enough workers to build these complex power plants. Meanwhile, there are limited opportunities to restart idled nuclear power plants. NextEra is evaluating the restart of its Duane Arnold facility in Iowa. Beyond that, small modular reactors are at least a decade away and will come at a much higher cost than new gas-fired plants, which have tripled in cost over the past few years, and that's before the potential impact of tariffs.
Renewables, on the other hand, are the lowest-cost forms of new power generation capacity. NextEra can build these projects in less than a year and a half. Accordingly, "We should be thinking about renewables and battery storage as a critical bridge to when other technology is ready at scale, like new gas-fired plants," Ketchum said on the call.
Built for this
NextEra Energy is ideally suited to help meet the country's power needs. It's a world leader in developing renewable energy and storage. The company's energy resources segment currently has about 37 GW of generation and storage capacity in operation, with 87% renewables, 6% nuclear, and 6% gas and other. The company expects its renewable power capacity alone will grow to more than 70 GW by 2027. It already has firm contracts supporting 27.7 GW of new projects in its backlog. Meanwhile, its future pipeline of development sites is around 300 GW, giving it plenty of room to continue expanding to meet the country's growing power needs.
Those projects, plus additional solar energy capacity and other investments within Florida Power & Light, its electric utility in Florida, position NextEra Energy to grow its earnings at an above-average rate in the coming years. Ketchum has repeatedly said that he would be disappointed if NextEra doesn't deliver adjusted earnings-per-share growth at or near the top end of its 6% to 8% annual target range through 2027. Meanwhile, the company expects to raise its dividend, which yields nearly 3.5%, at around a 10% annual rate through at least next year.
NextEra has plenty of growth potential beyond 2027. In addition to continuing to build renewables, the company is in an ideal position to be a leader in building additional gas and nuclear capacity in the future. Ketchum noted: "We know gas because we operate the largest gas-fired fleet in America and have built more gas-fired generation than anyone over the last two decades. We know nuclear because we operate one of the largest fleets in the United States." Because NextEra is one company that truly does it all in the energy space, it's the quintessential company for the coming power surge.
A must-own energy stock
Few companies are in a better position to capitalize on the country's power surge than NextEra Energy. It's a leader in building renewables, which will be a crucial power source in the coming years. It also has expertise in gas and nuclear, which the country will need more of in the future. It should be able to continue growing its earnings and dividend at healthy rates, making it one of the best energy stocks to buy and hold to cash in on the coming power boom.
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