Every few months, corporate earnings announcements give us the chance to (pretty literally) take stock of how the energy transition is going. After a
rocky end-of-year for many renewables companies, this earnings season was, perhaps, more warily anticipated than most.
A bunch of energy companies reported this week, ranging from fossil fuel stalwarts to the bleeding edge of decarbonization and in between. The results indicate an industry that's a bit unsure of itself — showing promising signs overall, but with lots still to figure out, especially in how to make
offshore wind a real business. Everyone expects growth, but turning that growth in consistent profits can be tricky.
Here are four takeaways from a mixed bag:
1. TL;DR: Look at GE.
GE’s renewable energy business is a kind of snapshot for utility scale investment: it's doing a lot, but at least for now struggling to make money and taking a bath on offshore wind. The business reported both a fourth quarter loss and a full-year loss for 2023, but its onshore wind turbine business was profitable, as was its business servicing the electric grid. Offshore wind, meanwhile, remained something of a
money suck.
So while
one large offshore wind order was cancelled (likely a New Jersey project), GE’s renewables head Scott Strazik said the massive SunZia wind project in the Southwest was still full steam ahead with an order for 2.4 gigawatts worth of wind capacity.
2. Transmission is hot right now.
The rush to build out new power lines to deliver new electricity also buoyed GE’s business, with “a number of large [high voltage direct current] orders” — infrastructure for sending power over long distances — and a 40% jump in orders for power transformers, equipment necessary to help move electricity. “There’s a lot of healthy demand across renewables that we expect to continue into 2024,” Strazik said.
That demand is coming from
companies like NextEra, which combines a regulated utility in Florida with a wind, solar, and storage development business. The company told investors in a presentation on Thursday that it “continues to see strong demand for new renewables and storage,” and had added 9,000 megawatts of combined renewables and storage in 2023. The company said it would spend almost $2 billion to build out transmission through 2027, creating a virtuous cycle with manufacturers like GE.
3. Storage is taking off.
If NextEra is on one end of the storage business, then Tesla is on the other. The former builds out utility-scale battery operations,
often on the same sites as solar projects, and could “operate up to 53 gigawatts of generation with the potential to co-locate battery storage,” its chief executive John Ketchum told investors.
In
Tesla’s earnings call on Wednesday, meanwhile, CEO Elon Musk spotlighted the company’s Tesla Energy business, which sells the Powerwall battery and solar system, as an area of high growth while its core auto business goes through a period of transition. A new model code-named “Redwood” coming, Musk said, in 2025.
Musk said the company’s energy storage business “delivered nearly 15 GW-hours of batteries in 2023, compared to 6.5 GW-hours the year before,” growth he described as “tremendous.” And while investors were miffed that Tesla didn’t provide a forecast for growth in car sales — which implied it wouldn’t hit its traditional 50% target — Musk was happy to say that he thought the company’s storage business “would grow much faster than the car business.”
4. Don’t count out fossil fuels.
While the oil majors have yet to release their fourth quarter earnings, the market got a hint at how things were going from the results released by Halliburton, the oil services firm that’s also a major player in fracking.
The company hiked up its dividend and reported both revenue and profit growth in 2023. Overall, the business was the most profitable it had been “in over a decade,” the company’s chief financial officer, Eric Carre, told analysts.
It did, however, note that the footprint of its North American business was shrinking as the number of active oil rigs had declined, and that it expected “flattish revenue and margin environment,” the company’s chief executive, Jeff Miller, added. Meanwhile, overseas, Miller
said he expected industry spending to “grow at a low double-digit pace,” with “multiple years of sustained activity growth.”
He did not, however, expect an end to oil any time soon. “[The] long-term expansion of the global economy will continue to create enormous demands on all forms of energy,” Miller said. “I expect oil and gas remains a critical component of the global energy mix with demand growth well into the future.”
