In a changing world, the survivors are often those who can jettison the familiar in favor of entirely new strategies. It’s harder to do than you think, requiring a willingness to abandon things you’ve long held dear. “Kill your darlings,” editors tell writers about sentences we’re convinced are perfect, but don’t really work. In industry, you may have to kill an entire paradigm.
David Crane, CEO of NRG Energy Inc (NYSE:NRG), is the rare brand of leader who can do just that. At the recent Bloomberg New Energy Finance (BNEF) Summit, he laid out his vision for his company and the future of the energy sector.
Power to the people
NRG is the largest power provider to U.S. utilities, and it’s one of the largest equity owners of solar power. The existing energy system in the U.S. is based on centralized command and control, and Crane wants to shift that autonomy into people’s homes. He sees a future in which there are more forms of generation at the house. Remarkably, this represents a cannibalization of NRG Energy Inc (NYSE:NRG)’s legacy business model, which relies heavily on centralized utilities.
Putting his money where his mouth is, Crane recently led NRG Energy Inc (NYSE:NRG) into a partnership with Nest, a company that provides home energy-consumption solutions with an emphasis on elegant design. Crane sees a natural interplay between Nest’s technology and rooftop solar, into which NRG is increasingly expanding. The company has begun installing rooftop solar panels on homes and businesses through its NRG Residential Solar Solutions unit.
The move could constitute a real threat to incumbents like SolarCity Corp (NASDAQ:SCTY). Still, SolarCity Corp (NASDAQ:SCTY) may be down but it’s not out. Goldman Sachs Group, Inc. (NYSE:GS) is providing the company with $500 million in lease-finance capital to install about 110 megawatts (MW) of solar energy systems on residential and commercial rooftops with little or no up-front cost.
Meanwhile, NRG is working in partnership with other solar companies. NRG Energy Inc (NYSE:NRG) and SunPower Corporation (NASDAQ:SPWR) are developing the 250-MW California Valley Solar Ranch together. Once the project is completed – which is projected for December 2013 – the companies will operate and maintain it jointly for two years, after which NRG will take sole responsibility. Just last month, First Solar, Inc. (NASDAQ:FSLR) completed the 66-MW Alpine Solar Generating Facility it built for NRG. First Solar, Inc. (NASDAQ:FSLR) is also building Agua Caliente – the world’s largest solar plant at 250 MW – for NRG Energy Inc (NYSE:NRG) and Warren Buffett’s MidAmerican Solar.
Despite these megaprojects, Crane ultimately sees no future for high-voltage transmission lines. “It’s idiotic to put panels in the desert and transmit electricity to cities.” Noting that there are 130 million wooden utility poles across the U.S., Crane wryly observed, “The 21st century economy should not be based on wooden poles.” Crane envisions a distributed solar future, whether it’s through rooftop or parking lot installations, observing that solar photovoltaic (PV) technology downsizes well.
