Last year, it was the biggest utility in Europe, E.ON, outlining how it was going to adapt to a carbon-lite electricity grid. This year, it is NRG, the biggest generation company in the US, giving its take on the future.
E.ON announced dramatic plans to effectively dump its conventional, centralised fossil fuel generation assets in a separate company, and focus instead on distributed generation, including solar, storage, and micro-grids.
NRGs approach is slightly different structural approach, but its embrace of new technologies is just as comprehensive. It is not considering divesting fossil fuels any time soon, but it is putting its growth prospects in the hands of distributed generation, and those very same technologies solar, storage, and micro grids, and throwing in electric vehicles for good measure.
At a day-long analysts briefing late last week the key message of its (highly progressive) CEO David Crane was this: the company accepts that sooner or later it will be operating in a carbon-constrained world. That will either come from regulatory mandate or from consumer sentiment. More likely a mixture of both.
Indeed, NRG is targeting the post-retirement baby boomers which it will target through traditional marketing outlets such as department stores, and the so-called millennial generation, who will account for most of household spending power over the next decade, and which will be targeted through the internet and virtual presentations.
These millennials, Crane notes, will reach one third of the adult population by 2020; 91 per cent of them see climate change and rising sea levels as serious environmental problems, and their spending power in 2018 is estimated to be $US3.4 trillion, eclipsing that of the baby boomers. One third of them are likely to buy smart energy applications in the near term.
Crane says the history of the telecoms industry tells us that the incumbent who fully embraces the future technology while continuing to compete aggressively to win in the present industry paradigm will be best positioned.
The experience of AT&T and Verizon in the US tell us that most of the value creation occurred during the high transformational period. And Crane says that period is now.
He says that while the electricity system that has operated for the past century was well designed for the 20th Century . but no system that generates around 60 per cent waste is going to survive unscathed and untouched by technology through the 21st century.
The industry, he notes, is plagued with an overabundance of natural gas, wind, solar, coal and, increasingly, oil. But, he says, in the era of energy surplus, the value pendulum is swinging decisively to the end use energy consumer
Hence the focus on the distributed energy market.
NRG plans to transform its existing commercial and industrial business into a full service, high margin energy provider, using demand side management, fuel cells and on site generation and microgrids. That business is expected to grow profits four fold to nearly $500 million by 2022.
As part of this plan, it plans to shift its utility-scale renewables business to the commercial and industrial solar market, striking deals with the likes of Starwood, Unilver and a California health care provider. It sees 2,500MW of commercial and industry solar by 2022.
In the home business, NRG sees itself as a marketing company that happens to be selling power, with a focus on distributed solar, storage and smart energy systems. The Home solar division is aiming to boost its capacity from 75MW now to 2,400MW in 2022. It expects the cost of installed solar to come down by another 20 per cent in coming years.
This graph below gives an insight in the size of the addressable market in the US, and that trillion dollar opportunity mentioned earlier in the article.
Source: Renew Economy
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14 June 2017