NextEra Energy is one of the largest utility companies in the world, but understanding how NextEra Energy makes money requires looking beyond the electric bill. The company operates through distinct business segments, each with different revenue drivers, growth profiles, and risk characteristics. Breaking down the NextEra Energy business model reveals why investors treat it differently from a traditional regulated utility and where the real growth engine sits.
Key takeaways
- NextEra Energy generates revenue through two primary subsidiaries: Florida Power & Light (FPL), a regulated utility, and NextEra Energy Resources, one of the world's largest generators of wind and solar energy.
- The regulated utility segment provides stable, predictable cash flows, while the renewables and clean energy segment drives most of the company's earnings growth.
- NextEra Energy revenue streams also include energy storage, battery projects, and long-term power purchase agreements that lock in future cash flows for decades.
- The company's dual structure of regulated stability plus contracted renewable growth is the core reason it often trades at a premium to traditional utility peers.
How does NextEra Energy make money? The two-segment structure
At the highest level, NextEra Energy runs two main businesses under one corporate umbrella. The first is Florida Power & Light, which is a regulated electric utility serving millions of customers in Florida. The second is NextEra Energy Resources, which develops, builds, and operates clean energy projects across North America. These two segments have fundamentally different economics, and that distinction matters if you're evaluating the stock.
Regulated utility: A power company whose rates, returns, and capital spending are approved by a state public utility commission. Revenue is relatively predictable because the utility earns a set return on its invested capital. For investors, this means stable but slower-growing earnings.
Think of it this way: FPL is the steady paycheck. NextEra Energy Resources is the growth bet. Together, they create a business model that blends defensive income with above-average earnings growth, which is unusual for the utility sector.
Florida Power & Light: the regulated cash cow
Florida Power & Light is one of the largest regulated electric utilities in the United States by customer count. It serves a territory covering much of Florida's eastern coast and a growing portion of the state's population. Revenue comes from delivering electricity to residential, commercial, and industrial customers at rates set through periodic agreements with the Florida Public Service Commission.
Here's what makes FPL particularly valuable within the NextEra Energy business model. Florida has strong population growth. More people moving in means more meters, which means more rate base, which means more allowed earnings. The utility doesn't need to convince anyone to switch providers because it has a regulated monopoly in its service territory. Growth comes from the organic expansion of the customer base plus approved capital investments in grid improvements, storm hardening, and new generation capacity.
FPL typically accounts for a significant share of NextEra's total earnings. The exact split shifts over time as the renewables business scales, but historically FPL has represented roughly half or more of consolidated net income. Its allowed return on equity, set by regulators, tends to be competitive relative to other state-regulated utilities.
What keeps FPL's revenue stable?
Three factors keep this segment predictable. First, regulated rate structures mean revenue doesn't swing wildly with commodity prices because fuel costs are generally passed through to customers. Second, multi-year rate agreements provide visibility into allowed earnings for several years at a stretch. Third, Florida's lack of a state income tax and warm climate continue to attract population inflows, steadily growing the customer base without acquisitions.
NextEra Energy Resources: where the growth is
This is the segment that separates NextEra from a typical utility. NextEra Energy Resources is one of the world's largest generators of electricity from wind and solar. It also operates a growing portfolio of battery storage projects. The business model here is different from FPL: instead of regulated rate-of-return economics, Resources earns money primarily through long-term power purchase agreements (PPAs) with utilities, corporations, and other offtakers.
Power purchase agreement (PPA): A long-term contract where a buyer agrees to purchase electricity from a generator at a pre-negotiated price over a set period, often 15 to 25 years. PPAs give renewable energy developers revenue certainty that supports project financing.
The contracted nature of these agreements is the key. When NextEra builds a wind farm or solar installation, it typically signs a PPA before construction starts. That means the revenue stream is largely locked in for the life of the contract. This turns what could be a volatile merchant power business into something closer to a toll-road model: build the asset, sign the contract, collect payments for decades.
NextEra Energy Resources also earns revenue from selling renewable energy credits and from the production tax credits (PTCs) and investment tax credits (ITCs) available under federal clean energy policy. These tax incentives have been a meaningful driver of project economics, though the specific value depends on the policy environment at any given time.
How NEE makes money from energy storage
Battery storage is a newer but fast-growing part of NextEra Energy revenue streams. The company has been building large-scale battery projects, particularly in markets where solar generation creates an oversupply during the day and a shortfall in the evening. Storage projects earn revenue by charging when power is cheap and discharging when it's expensive, or by providing grid reliability services that utilities and grid operators pay for.
Storage doesn't yet represent a dominant share of total revenue, but the pipeline of projects under development is large. For investors researching how NextEra Energy makes money going forward, the storage segment is worth tracking because it pairs naturally with the company's existing wind and solar portfolio.
What drives NextEra Energy's growth beyond being a utility?
Most traditional utilities grow earnings at low-to-mid single digit rates. NextEra has historically guided for faster earnings growth than that, and the reason comes back to the renewables pipeline. The demand for clean energy from both utilities and corporations has expanded steadily as decarbonization goals, state renewable portfolio standards, and pure economics have made wind and solar competitive with or cheaper than new fossil fuel generation in many regions.
NextEra Energy Resources benefits from several structural tailwinds:
- Scale advantages in procurement: As one of the largest buyers of wind turbines and solar panels, NextEra negotiates volume pricing that smaller developers can't match.
- Development expertise: The company has decades of experience siting, permitting, and constructing renewable projects, which reduces execution risk and construction timelines.
- Access to capital: NextEra's investment-grade balance sheet and track record give it lower financing costs than most competitors in the renewables space.
- Backlog of signed contracts: A large pipeline of contracted projects provides years of visible earnings growth before a single new deal is signed.
The combination of these advantages creates a competitive moat that's hard to replicate quickly. A new entrant would need the capital, the supplier relationships, the permitting expertise, and the customer base, all at the same time.
How does the NextEra Energy business model compare to peers?
Traditional regulated utilities like Duke Energy or Southern Company generate most of their earnings from state-regulated operations. Their growth is tied to rate base expansion, which is steady but limited by regulatory approval and customer base growth. NextEra has that same foundation through FPL, but the Resources segment adds a layer of contracted growth that most peers lack at comparable scale.
Some utilities have invested in renewables, but few have done so at NextEra's scale or with the same integrated development model. That's why NextEra often trades at a higher valuation multiple than the average utility. Investors are pricing in the faster growth trajectory from the renewables pipeline on top of the regulated utility floor.
You can compare NextEra's financial profile against other utility and energy stocks using the NextEra Energy research page on Rallies.ai or filter for similar companies with the Vibe Screener.
Other revenue streams and business lines
Beyond FPL and NextEra Energy Resources, there are a few additional pieces worth knowing about.
NextEra Energy Partners (NEP): This is a publicly traded limited partnership that NextEra uses to recycle capital. NextEra develops and builds renewable energy projects, then drops some of them down into NEP, which owns and operates them. NextEra retains a management stake and earns fees. This structure lets NextEra monetize completed projects while maintaining operational control, freeing up capital to fund new development.
Transmission investments: FPL and other NextEra entities invest in transmission infrastructure, which earns a regulated return similar to the distribution utility. As the grid requires upgrades to handle more renewable generation and growing electricity demand, transmission spending is a growing capital allocation priority.
Natural gas pipelines: NextEra has had some involvement in natural gas infrastructure, though this is a smaller and more variable part of the overall NextEra Energy revenue streams. The strategic direction has increasingly tilted toward renewables and storage.
Risks to the NextEra Energy business model
No business model is bulletproof, and NextEra's is no exception. A few risks are worth considering:
- Regulatory risk at FPL: If the Florida Public Service Commission were to reduce the allowed return on equity or reject a rate increase, it would directly impact the regulated earnings base.
- Interest rate sensitivity: Utilities and capital-intensive renewable developers carry significant debt. Higher interest rates increase borrowing costs and can compress the valuation multiple investors are willing to pay.
- Policy changes affecting clean energy incentives: Federal tax credits have been a meaningful part of renewable project economics. Changes to these programs could affect future project returns, though long-term contracted PPAs provide some insulation.
- Execution risk on the renewables backlog: Supply chain disruptions, permitting delays, or interconnection queue bottlenecks can push project timelines out and delay expected revenue.
- Hurricane exposure: FPL operates in one of the most hurricane-prone states. While storm costs are generally recoverable through rates, major events can temporarily disrupt operations and require significant capital spending.
Understanding these risks is part of doing your own research. You can dig into the financial details and ask follow-up questions using the Rallies AI Research Assistant.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Break down how NextEra Energy makes money — what are their main business segments, how much does each one contribute to revenue, and what's driving their growth beyond just being a utility company?
- Break down how NextEra Energy makes money — what are their biggest revenue streams and what's growing fastest?
- Compare NextEra Energy's renewables pipeline and growth profile to other large-cap utilities like Duke Energy and Southern Company.
Frequently asked questions
What is the NextEra Energy business model?
NextEra Energy operates two main businesses: Florida Power & Light, a regulated electric utility serving customers in Florida, and NextEra Energy Resources, a large-scale developer and operator of wind, solar, and battery storage projects across North America. The regulated utility provides stable earnings, while the clean energy segment drives above-average growth through long-term contracted revenue.
How does NextEra Energy make money from renewable energy?
NextEra Energy Resources builds wind farms, solar installations, and battery storage projects, then signs long-term power purchase agreements with utilities, corporations, and other buyers. These contracts lock in revenue for 15 to 25 years. The company also earns income from federal tax credits associated with clean energy production and from selling renewable energy credits.
What are NextEra Energy's main revenue streams?
NextEra Energy revenue streams include regulated electric utility rates from FPL, contracted payments from renewable energy PPAs, revenue from energy storage services, tax credit benefits from wind and solar production, and management fees from NextEra Energy Partners. The regulated utility and renewables segments are the two dominant contributors.
How does NEE make money differently from other utilities?
Most traditional utilities rely almost entirely on regulated rate-of-return earnings. NextEra adds a large contracted renewables business on top of its regulated foundation. This dual structure gives the company a higher growth rate than most utility peers, which is why it often commands a premium valuation in the market.
Is NextEra Energy a renewable energy company or a utility?
It's both. The company is technically classified as an electric utility, and FPL is a straightforward regulated utility. But NextEra Energy Resources makes it one of the world's largest clean energy companies. Investors evaluating the stock should consider both sides of the business, not just one.
What is NextEra Energy Partners and how does it relate to NEE?
NextEra Energy Partners (NEP) is a publicly traded limited partnership that owns and operates a portfolio of clean energy projects. NextEra Energy develops projects and sometimes sells or "drops down" completed assets into NEP. This lets NextEra recycle capital for new development while retaining management fees and operational involvement.
What risks should investors consider with NextEra Energy?
Key risks include regulatory decisions affecting FPL's allowed returns, interest rate sensitivity given the company's capital-intensive business, potential changes to federal clean energy tax credits, execution risks on the large renewables development backlog, and hurricane-related disruptions in Florida. Investors should weigh these factors alongside the growth opportunity. Consulting with a qualified financial advisor before making investment decisions is always a good idea.
Bottom line
Understanding how NextEra Energy makes money comes down to two things: a large regulated utility in Florida that generates steady, predictable earnings and a massive renewables platform that provides contracted growth well above the typical utility rate. The interplay between these two segments is the entire thesis for the stock, and evaluating which one matters more depends on whether you're investing for income stability, earnings growth, or both.
If you want to explore NextEra's financials further or compare it against other utility and energy stocks, the stock analysis resources on Rallies.ai are a good starting point. Do your own research, look at the numbers, and decide whether the business model fits what you're looking for in a portfolio.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.