Cleantech Market Intelligence
From NRG, a Solar Storm
According to David Crane, NRG Energy’s outspoken CEO, residential solar power will be cost-competitive with retail electricity in about 25 states next year. As a result, NRG is making some big moves in residential solar installation and financing.
In March, NRG announced that it is acquiring Roof Diagnostics Solar (RDS), which is the eighth-largest residential solar installer in the United States, employing 475 people. NRG already has a small but growing residential solar installation and financing business called NRG Residential Solar Solutions (RSS), which mainly consists of licensed dealers and operates in Arizona, California, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey, New York, Texas, and Vermont. RSS has a fleet of several thousand residential systems installed, but it hit a sales plateau in 2013. The company showed that it’s serious about becoming one of the largest solar installers and financiers in the United States by acquiring RDS, which will be rolled into RSS. NRG hopes to maintain its existing installer network despite some channel conflicts with RDS, which operates in New Jersey, New York, Massachusetts, and Connecticut and has expansion plans for California.
Undercutting the Customer
NRG is also planning to eventually use the growing underground network of pipes that delivers gas to about half the homes in the United States to complement its residential solar business. According to Crane, the company wants to provide customers with fuel cells and microturbines, which produce electricity from gas, to fill in the gaps of solar generation. Plus, NRG is dabbling in energy storage and microgrids on Richard Branson’s Necker Island.
In some cases, NRG is making bets against its traditional customers (and its own traditional business). It has become the largest power provider to U.S. utilities, with 25 GW of natural gas power plants, 13 GW of coal generation, 448 MW of wind farms, and 1.2 GW of utility-scale solar systems. Some of this power goes to NRG’s own service territory, but more than half of the company’s revenue comes from power sales to other utilities on the wholesale market. With its 47 MW of distributed solar panels on rooftops, NRG is actually undercutting the business of the utilities it serves.
A Lot to Lose
Why is NRG pursuing such an aggressive strategy? As the largest power generator in the United States, NRG has a lot more to lose than transmission and distribution (T&D) oriented utilities with the proliferation of distributed generation (DG). DG directly affects NRG’s bottom line, since every kilowatt-hour not provided by the company is a kilowatt-hour that’s costing NRG revenue. This doesn’t affect utilities that are focused on T&D as much, since they’re still providing the same interconnection services (at least for the time being). As a power provider, it’s in NRG’s interest to own as much of the utilized generation capacity as possible – and that now includes DG capacity, especially when you consider that DG output is always utilized due to policies like net metering.
Having an aggressive strategy also seems to be part of having David Crane as a CEO. According to Crane, future power customers will be able to disconnect from the grid as they use residential solar coupled with energy storage and a gas-powered fuel cell or microturbine to provide for their own power needs. This was the subject of Navigant Research’s recent webinar, The Energy Cloud. Crane is positioning NRG to be the supplier of solar arrays, fuel cells, and microturbines to power customers in this age of grid obsolescence. It’s remarkable to see a utility betting on the grid’s eventual obsolescence, but it’s important to note that within that framework, NRG is still maintaining its core business as a power provider.