Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Energy

The NextEra-Dominion Merger Would Create a Storage Juggernaut

And just in the nick of time.

NextEra and Dominion merging.
Heatmap Illustration/Getty Images

America’s largest renewable developer is swallowing up the utility at the heart of the data center boom.

NextEra Energy, which also owns the utility Florida Power & Light, announced Monday morning that it had agreed to acquire Dominion Energy, the utility that operates in Virginia and the Carolinas. The deal would create an energy giant valued at around $420 billion. It would also — importantly for Virginia and PJM Interconnection, the 13-state electricity market of which the state is a part — create a battery electric storage giant.

The companies said in a Monday presentation laying out the case for the merger to investors that the combined entity would be the largest power company in the United States and the third largest energy company behind just ExxonMobil and Chevron. The companies projected that, when combined, they would be the domestic leader in total generation, market capitalization, rate base, annual capital expenditure, total generation built, and, specifically, battery storage capacity.

NextEra is already a storage leader. Its Florida utility is planning to add 7.6 gigawatts of battery storage over the next decade, and its development arm added almost a gigawatt of storage to its backlog in just the first quarter of this year.

NextEra’s storage expertise couldn’t come at a better time for Dominion. Virginia passed a law in April mandating that the utility procure 16 gigawatts of short-duration storage and 4 gigawatts of long-duration storage by 2045, with 4 gigawatts of short-term storage coming by 2030. Compare that to a previous state target for Dominion of around 3 gigawatts of storage 2035 and the challenge becomes apparent.

“With NextEra Energy’s world leadership in battery storage, there’s a potential to accelerate Dominion Energy’s capital plan to meet Virginia’s storage goals,” NextEra Chief Executive John Ketchum said on a call with analysts discussing the merger plans.

The market Dominion operates in in Virginia, PJM Interconnection, has long been a laggard in bringing new storage resources onto its grid, thanks to its famously dysfunctional interconnection queue. Although its newly refreshed queue has seen a large increase in storage projects compared to when the organization closed it to new projects in 2022, the market is still well behind storage-friendly peers like California and Texas.

PJM has also become notorious more recently for its capacity market, which has fueled price increases across the region in the billions of dollars, and yet failed to procure the reserve margin PJM typically aims for in its most recent auction. “Given that we’re the world’s leader in battery storage and the legislation that was just passed by Virginia, there is a tremendous opportunity to meet that capacity short quickly by deploying battery storage in the right places,” Ketchum said Monday. “We know what a big impact battery storage can have, and how quickly it can have it on capacity-short positions. And so we look at a Dominion in Virginia with [a] short capacity position — I think there’s a real opportunity to accelerate investment.”

The proposed deal comes at a time of rising prices and public anger at utilities up and down the Eastern Seaboard, and especially in the Mid-Atlantic. Dominion’s rates in Virginia have risen around 36% in the past four years, according to the Heatmap-M.I.T. Electricity Price Hub, while typical bills have risen from about $96 per month to $146 per month. Virginia’s rates have grown faster than average in PJM, but are still well below the increases in states like Maryland and New Jersey despite serving a fast-growing data center industry.

While elected Democrats in PJM states regularly bash utilities (see: New Jersey and Pennsylvania), it’s possible that both Virginians and Virginia might look favorably on NextEra, Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Monday. “If [NextEra] focuses on storage development under the new Democratic legislation recently passed, it could form a coalition of support; we believe this is [a] critical point that could make the deal approval process less bumpy than some other recent M&A deals.”

Morningstar analyst Andrew Bischof saw the deal as allowing each side to use the other’s expertise (and balance sheet) to ramp up investment. Dominion might be able “leverage NextEra’s strong balance sheet to accelerate investment, particularly in Virginia,” whereas NextEra “could accelerate its data center ambitions, which had trailed those of its regulated peers, by using Dominion’s expertise and relationships to expedite NextEra’s data center hub plans,” he wrote in a note to clients Monday.

Building out more storage could also be great for a regulated utility like Dominion, as it would get to put new resources into its rate base and garner a return on equity.

“The General Assembly just added new storage requirements for us, which we think are going to be great for our customers, being able to work with Nextera and this combined company on that,” Dominion chief executive Robert Blue said on the call. “I think this is really going to benefit our customers as we serve them better and will deploy capital faster that way.”

Editor’s note: This story has been updated to correct the estimated value of the combined companies.

Green

You’re out of free articles.

Use code: CWNYC30 to save 30%.
Subscribe to access Heatmap’s exclusive polling and expert analysis of energy, climate change, and sustainability, now just $99/year $69.30/year.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Hotspots

A Big Battery Relief in New York

And more of the week’s top news around project fights.

The United States.
Heatmap Illustration/Getty Images

1. Suffolk County, New York – Rarely do I get to say battery fire fears can be quelched but we have a very good example brewing in the Empire State.

  • On September 11, New York state regulators did a Friday News Dump: The Department of Environmental Conservation confirmed a large PFAS pollution site in East Hampton was explicitly tied to fighting a battery storage site fire. The investigation began after PFAS chemicals, known as “forever chemicals,” were detected in drinking water wells.
  • Investigators will still have to produce a final report, but in their bulletin confirming the pollution source, the agency said it is now working with state energy and fire officials to avoid a specific chemical fire suppression system identified as a potential culprit known as Novec 1230. “The investigation points to the fire suppression system, not battery storage, as a [PFAS] source,” the bulletin states, adding this system wasn’t used in other recent fires at BESS facilities.This defuses what was poised to be a new PR problem for the battery storage sector in a state where local moratoria and restrictive ordinances have become increasingly common.

2. Loudon County, Virginia – I can’t believe it: Data Center Alley is going to enact a moratorium.

Keep reading...Show less
Yellow
Q&A

The Case for a Data Center Dividend

A conversation with Sam Lyman of the Bitcoin Policy Institute.

The Bitcoin Policy Institute’s Sam Lyman.
Heatmap Illustration

This week’s conversation is with Sam Lyman, head of research at the Bitcoin Policy Institute. Originally focused on cryptocurrency, Lyman’s organization has expanded to policy and messaging development around data centers, most notably providing research many AI boosters cite to claim foreign influence is driving opposition to new hyperscale projects. Last week, the think tank released a new report calling for a novel solution to the data center permitting bottleneck: direct cash payments from data center projects to individuals involved with building them, as well as residents nearby facilities once they’re operating.

I reached out to BPI and asked for a chat with Lyman about the data center dividend proposal. I also tried to get to the bottom of where this increasingly relevant think tank stands on the general idea of a national data center law. The conversation was immensely informative. So here it is, in a lightly abridged and edited format.

Keep reading...Show less
Yellow
Politics

The Bipartisan Buddies With a Plan to Fix Transmission

With a permitting deal seemingly on the horizon, Republican Gabe Evans and Democrat Scott Peters may be about to see their partnership pay off.

Gabe Evans and Scott Peters.
Heatmap Illustration/Getty Images

The fate of permitting reform legislation that could smooth the way to all kinds of new and improved energy infrastructure — including transmission lines and renewables — is currently hostage to opaque discussions between Senate committee chairs. Rhode Island Senator Sheldon Whitehouse, the Democratic ranking member of the Senate Environment and Public Works Committee, told a Rhode Island business group earlier this week that “we’re actually in a pretty good place on permitting reform,” and that there was “maybe another week of negotiations.” Whitehouse’s Republican counterpart on the EPW committee, West Virginia Senator Shelly Moore-Capito, told Semafor on Friday that any bill has “got to pop out of here in the next 48 hours.”

If that’s going to happen, it will be because Republicans and Democrats have decided it’s worth it to get along. Any deal will eventually have to be voted on by the House, which has already produced several bills on a bipartisan basis, and even passed one — the SPEED Act — late last year.

Keep reading...Show less
Green