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NRG CEO Crane's Vision for Energy Industry Again Inconsistent With Push for Capacity Market
NRG recently published a letter on its website (click here) from CEO David Crane which outlines Crane's visions for NRG and the industry, and which we again see as irreconcilably in conflict with NRG's preferred policy of a capacity market in Texas.
Highlights from Crane's letter (all emphasis in original):
"There is no energy company that enables the consumer to make their own energy choices."
"Now we are headed ... down the path towards a distributed generation-centric, clean energy future featuring individual choice and the empowerment of the American energy consumer."
"As lack of confidence in the grid coincides with the introduction of new technologies, businesses and homeowners will realize that there is a better way. And, for them, that means generating most of the electricity they consume on the premises, from their own resources ... We expect to be soon-to-market with a robust platform offering rooftop solar to homes and businesses and other forms of sustainable and clean generation that will offer our customers the ability to dramatically reduce their dependence on system power from the centralized grid."
"And for the customer, business or individual, who simply wants nothing to do with the grid, the centralized control it represents and the inhibition of individual choice and restriction of personal freedom that is implicit in being 'intertied' to the grid, there is the post-grid future – a future that is driven by renewables, incorporating both energy storage and sophisticated localized automation to balance production and load."
Forward, centrally planned capacity markets are simply inconsistent with the individual customer choice expressed in this vision. Due to their forward load forecast, they do not recognize and reward customer response to dynamic pricing and market conditions, instead penalizing customers with an immutable capacity tag for one year.
Story Continues Below...
ADVERTISEMENT Even if behind-the-meter distributed generation can be accounted for in the capacity market, a three-year forward period, as is the preferred solution of many capacity market supporters, is inconsistent with the customer uptake decision for solar. A customer isn't going to decide to install distributed solar three-years into the future, and should not have to wait three years until this capacity is recognized in the market (either through a reduction in their capacity obligation or by qualifying the resource as capacity available to sell).
Crane's letter does talk about the need for a bridge to this long-term vision. However, even if we accept that the future envisioned by Crane is not immediate, capacity markets are designed to build and support 40-year assets, not simply bridge us to an inevitable distributed future driven by individual customer choice.
Specifically, the Crane letter says, "Even if you believe, as we do, that this future world will be upon us with lightning-like quickness in electricity industry terms, in real time the distributed future is going to take a while to get here. In the meantime, the lights need to be kept on, homes heated and chilled and appliances powered up. So at NRG we are positioning ourselves to succeed during a prolonged period through which the traditional centralized grid-based power system co-exists with the fast-emerging high-growth distributed generation sector – much like fixed-line telephony has co-existed with the wireless world for a couple of decades."
In the letter, Crane says that he wants NRG to be Amazon, Apple, Facebook and Google.
"They all provide products or services, directly to the consumer, which are deemed essential to the enrichment of their life experience, day in and day out. What causes these four companies to rise well above others that have similar offerings? The 'Big Four' offer their own product or service in a manner that is more comprehensive, seamless, intuitive and, in the case of Apple, visually elegant, than their respective competitors. They enable, they connect, they relate, they empower," Crane says.
Unsaid is that Amazon, Apple, Facebook and Google have built their businesses by winning customers through offering a service of value to customers -- not by getting the government to force customers to buy their services through administrative or regulatory designs.
Indeed, the contrast could not be starker. The "Big Four" spend millions, if not billions, on R&D and innovative product offerings that they have no guarantee for which there will be a market. But because the rewards are so big, they are willing to take the risk. In seeking a capacity market, merchant generators simply don't want to behave like Amazon, Apple, Facebook and Google -- they want the luxury of a government-assured revenue stream like their 100-year old utility brethren -- except they also want to make unregulated profits just like disruptive innovators like Amazon, Apple, Facebook and Google
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March 27, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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