In just a few years, Americans will soon produce the majority of the power they consume at their home or office, primarily through distributed solar arrays on their roof or over their driveways or parking lots. If they come up short, they can tap the battery in their electric car or an energy converting appliance in their basement. What these options illustrate is that consumers will only turn to the “the Grid” as a last resort.
It’s a reality that the utility companies have ignored for too long. Like the phone and transportation monopolies before them, they believed the sun would never set on their position as keepers of the all-powerful Grid. But the grid, which is the backbone of their business model, is in jeopardy due to the rise of distributed generation.
First, let’s accept the fact that the sale of system power has entered a period of inexorable decline. The correlation to GDP growth is broken. Societal trends, such as stagnant population growth, consumption crowdsourcing and a greater commitment to sustainable lifestyles will accelerate the pace of demand destruction in the energy industry.
Another factor is automated at-home conservation, which will help smooth out the daily load curve. As power sources like solar and wind take over the system, they will match electricity usage both when it is being produced and where it is being produced.
The net effect is that the massive excess capacity that our grid system currently carries – generation and transmission – to meet high peak demand will become unnecessary, as well as eliminate the need to build more power plant and transmission lines.
Over the next decade, three trends will pave the way for consumers to leave the rate-based power industry behind:
- Cheap Distributed Solar. Solar panels continue to become more efficient and affordable. Soon, people and businesses will be able to generate their own power, or “monetize the solar value of their real estate.”
- Automated Conservation. Estimates of electricity wasted in the US vary from 20 to 30 percent. However, once conservation behavior is automated through technology such as motion sensitive thermostats, electricity waste will decrease, as will overall demand.
- Extreme Weather. Our wood pole-based, above-ground electric distribution network cannot withstand 21st century weather. Storms such as Hurricane Sandy will become the norm. New products that can be installed underground can help preserve access to power during times of disaster.
At first, the utility companies tried an ill-conceived attempt to win politically. As we saw in Arizona last month, the utilities’ political strategy involves net metering constraints and absurd interconnection charges that they try to coopt for their economic benefit.
This is not to say there is no role for utilities down the line. But that prize will go to those that evolve with the times and NRG certainly hopes to be one of the leaders serving this new future.
Solar will soon become dirt cheap, but nothing is going to change its fundamental intermittency. The solution lies in compromise. Utilities should compensate solar customers fairly by buying back the excess supply that coincides with peak use, instead of trying to offer average power supply costs. Solar customers should expect to pay for grid use at night or on cloudy days.
Long-term, off-grid solar needs a reliability partner and the solution is the natural gas distribution system that could be used to connect a home ‘appliance’ to convert natural gas into electricity for the home. Currently, 34 million American homes are served by electricity and natural gas distribution systems, and it makes no sense for homeowners to pay for both when one would suffice.
NRG is developing a gas conversion machine with Segway inventor Dean Kamen. This machine, known as the Beacon 10, operates like a refrigerator compressor running backwards. Heat from natural gas goes in and out comes 10 kilowatts of electricity to supplement solar on the roof or from a freestanding structure like NRG’s Solar Canopy. The Beacon 10 also emits heat as a byproduct, which can supplement your hot water heater and your home heating system.
Clearly, the future of our industry is completely up for grabs. We don’t know which companies will helm the future of the electricity industry. However, the only thing I am sure of is that our sector can no longer defend the status quo.
Put simply – we can’t act like utility companies anymore.
David Crane has been the President and Chief Executive Officer of NRG Energy since December 2003. Under his leadership, NRG has become a Fortune 500 company with enough generating capacity to power nearly 40 million homes, benefiting about 2.2 million retail customers.
Crane established NRG’s strategy to enhance the Company’s core generation, expand retail businesses both geographically and through new offerings, and grow new green businesses. In 2012, NRG raised the bar to a new level in the competitive energy landscape by combining with GenOn Energy, nearly doubling generating capacity to about 47,000 megawatts and growing the Company to about 8,000 employees.
In addition to building the Company’s financial strength, Crane is a leading voice on climate change and the power sector’s role in reducing greenhouse gases from the next wave of new power generation. He has been outspoken on the need to support cleaner energy resources and technologies critical to our transition to a low carbon-emitting society.
Prior to joining NRG, Crane was Chief Executive Officer of International Power PLC, a UK-based wholesale power generation company. He also worked for Lehman Brothers and ABB Energy Ventures, where he was responsible for developing and financing independent power generation plants and transmission facilities in the Asia-Pacific region.
Crane holds a bachelor of arts degree from Princeton University’s Woodrow Wilson School of Public and International Affairs and a juris doctor degree from Harvard Law School.
A Brave New World Powered by Distributed Energy
By David Crane on December 06, 2013 at 10:00 AMIn just a few years, Americans will soon produce the majority of the power they consume at their home or office, primarily through distributed solar arrays on their roof or over their driveways or parking lots. If they come up short, they can tap the battery in their electric car or an energy converting appliance in their basement. What these options illustrate is that consumers will only turn to the “the Grid” as a last resort.
It’s a reality that the utility companies have ignored for too long. Like the phone and transportation monopolies before them, they believed the sun would never set on their position as keepers of the all-powerful Grid. But the grid, which is the backbone of their business model, is in jeopardy due to the rise of distributed generation.
First, let’s accept the fact that the sale of system power has entered a period of inexorable decline. The correlation to GDP growth is broken. Societal trends, such as stagnant population growth, consumption crowdsourcing and a greater commitment to sustainable lifestyles will accelerate the pace of demand destruction in the energy industry.
Another factor is automated at-home conservation, which will help smooth out the daily load curve. As power sources like solar and wind take over the system, they will match electricity usage both when it is being produced and where it is being produced.
The net effect is that the massive excess capacity that our grid system currently carries – generation and transmission – to meet high peak demand will become unnecessary, as well as eliminate the need to build more power plant and transmission lines.
Over the next decade, three trends will pave the way for consumers to leave the rate-based power industry behind:
At first, the utility companies tried an ill-conceived attempt to win politically. As we saw in Arizona last month, the utilities’ political strategy involves net metering constraints and absurd interconnection charges that they try to coopt for their economic benefit.
This is not to say there is no role for utilities down the line. But that prize will go to those that evolve with the times and NRG certainly hopes to be one of the leaders serving this new future.
Solar will soon become dirt cheap, but nothing is going to change its fundamental intermittency. The solution lies in compromise. Utilities should compensate solar customers fairly by buying back the excess supply that coincides with peak use, instead of trying to offer average power supply costs. Solar customers should expect to pay for grid use at night or on cloudy days.
Long-term, off-grid solar needs a reliability partner and the solution is the natural gas distribution system that could be used to connect a home ‘appliance’ to convert natural gas into electricity for the home. Currently, 34 million American homes are served by electricity and natural gas distribution systems, and it makes no sense for homeowners to pay for both when one would suffice.
NRG is developing a gas conversion machine with Segway inventor Dean Kamen. This machine, known as the Beacon 10, operates like a refrigerator compressor running backwards. Heat from natural gas goes in and out comes 10 kilowatts of electricity to supplement solar on the roof or from a freestanding structure like NRG’s Solar Canopy. The Beacon 10 also emits heat as a byproduct, which can supplement your hot water heater and your home heating system.
Clearly, the future of our industry is completely up for grabs. We don’t know which companies will helm the future of the electricity industry. However, the only thing I am sure of is that our sector can no longer defend the status quo.
Put simply – we can’t act like utility companies anymore.
David Crane has been the President and Chief Executive Officer of NRG Energy since December 2003. Under his leadership, NRG has become a Fortune 500 company with enough generating capacity to power nearly 40 million homes, benefiting about 2.2 million retail customers.
Crane established NRG’s strategy to enhance the Company’s core generation, expand retail businesses both geographically and through new offerings, and grow new green businesses. In 2012, NRG raised the bar to a new level in the competitive energy landscape by combining with GenOn Energy, nearly doubling generating capacity to about 47,000 megawatts and growing the Company to about 8,000 employees.
In addition to building the Company’s financial strength, Crane is a leading voice on climate change and the power sector’s role in reducing greenhouse gases from the next wave of new power generation. He has been outspoken on the need to support cleaner energy resources and technologies critical to our transition to a low carbon-emitting society.
Prior to joining NRG, Crane was Chief Executive Officer of International Power PLC, a UK-based wholesale power generation company. He also worked for Lehman Brothers and ABB Energy Ventures, where he was responsible for developing and financing independent power generation plants and transmission facilities in the Asia-Pacific region.
Crane holds a bachelor of arts degree from Princeton University’s Woodrow Wilson School of Public and International Affairs and a juris doctor degree from Harvard Law School.
Topics: Comment, David Crane, Distributed Generation, NRG, Power Generation, Residential Solar, Residential Solar Market, Rooftop Solar, Solar, Solar Panels, Solar Power, Solar PV, Utilites