NRG Sees Residential Solar Expansion Amid Commodity Price Decline

NRG Sees Residential Solar Expansion Amid Commodity Price Decline

January 15, 2015

Mark Chediak, Bloomberg
RenewableEnergyWorld.Com

NRG Energy Inc. plans to become the second- biggest U.S. rooftop solar company by year-end as falling prices put pressure on its conventional power production division.

NRG sees more solar rooftop installations in Texas, California and the Northeast, Chief Executive Officer David Crane said in a phone interview before the company’s two-day investor meeting. SolarCity Corp. is the biggest U.S residential installer, with a third of the market share as of Sept. 30, according to GTM Research. NRG, based in Princeton, New Jersey, was ranked fifth.

Conventional U.S. power producers face declining demand growth as more consumers opt for technologies that allow them to produce their own electricity. Residential solar installations have increased more than fivefold from 2008 to 2013, according to Bloomberg Intelligence. The lack of demand comes as a glut of natural gas depresses wholesale power prices.

"We expect to convincingly persuade our investors that NRG has an embedded SolarCity within it," said Crane. "Everyone is beginning to believe that residential solar is this trillion- dollar market that currently has about 1 percent market penetration."

Crane plans to double adjusted earnings before interest, taxes, depreciation and amortization by about 2022 from this year’s guidance level, according to slides from his speech to investors last night. Rooftop solar is a disruptive technology in an era characterized by chronically low commodity prices, Crane said.

NRG has fallen 28 percent from a June high, after a lack of extreme summer heat kept power prices low. The 55-year-old CEO, who drives a Tesla, has been expanding the company’s retail and green energy businesses since he took over in 2003.

Power Sales

Six years ago, wholesale power generation from its gas-and coal-fired plants contributed 98 percent of the company’s revenue, according to data compiled by Bloomberg. By 2013, after acquiring several retail businesses and creating an alternative energy unit, generation accounted for half of sales. Last year, the company bought Roof Diagnostics Solar and and Pure Energies Group Inc. to expand into the home solar market.

"Electricity is on the cusp of a massive transformation," he said. "If you want to win today and tomorrow, you have to have a strategy that is at least bifurcated" between conventional power and alternative energy.

NRG first began to discuss its home solar program in any depth on its third-quarter earnings conference call Nov. 5. It promised more details on the unit, which has an ad featuring the voice of Matthew McConaughey, at the annual meeting.

Added Value

"NRG Home Solar could add up to $5 per share to our valuation of NRG, we estimate," a group of Macquarie Capital (USA) Inc. analysts led by Angie Storozynski wrote on Nov. 7. "We wonder, however, if the business will need to be spun off" or sold to an NRG affiliate to get market recognition of its full value, they wrote.

Crane said in the interview that the company "covets" the 20-year relationship with customers that comes with a residential solar equipment lease. That gives the opportunity to sell additional power to the consumer, as well as offer battery backup or gas-fired generators and home warranties in certain markets.

"We can offer home solar customers so much more than panels on the roof," he said.

Copyright 2015 Bloomberg

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EUC members concerned about gas plant study

Uranquinty Power Station

Photo by Bidgee (Own work) [CC BY-SA 3.0], via Wikimedia Commons

January 14, 2015

by Tyler Whitson
Austin Monitor

While the future makeup of the city’s energy portfolio potentially rests on an upcoming independent review of a proposed natural gas plant, members of the Electric Utility Commission continue to vocalize their concerns about the study.

Vice Chair Karen Hadden and Commissioner Joep Meijer sent a letter Thursday to Austin Energy staff scrutinizing potential underlying assumptions and requesting that the study be fair and comprehensive in its cost, benefit and risk analysis of the natural gas plant and renewable alternatives such as wind and solar.

Among other comments, Hadden and Meijer said the study should consider the lowest-cost options in renewable alternatives and that the final report should include a “year-by-year summary of costs and revenues anticipated alongside environmental impact, including water use, water contamination and air and water pollution impacts.”

They wrote that “assumptions regarding future gas prices are uncertain” and asserted that substituting the Decker steam units with a hypothetical 500-megawatt gas plant in Austin Energy’s six-year backcast would “almost certainly show that a new gas combined cycle plant would have made money in 2011, but lost money in 2009, 2010, 2012, 2013 and 2014.”

Austin Energy must sell the power it generates to the Electric Reliability Council of Texas, the wholesale energy market for most of the state, and purchase it back at competitive prices tamiflu cost.

Hadden and Meijer also expressed affordability concerns. “A new gas plant will have many certain hard costs, which may range into billions of dollars over its lifetime for fuel and for building, operating and maintaining the plant, but may have uncertain revenues,” they wrote.

“It appears that at least $500 million would be needed for a gas plant before it starts generating any revenue. While much of this cost might be financed, and be spread out over time, there will likely be $100 + million in ‘current year funds’ for capital spending that will cause Austin Energy to exceed the affordability goal, at least for a time.”

City Council set affordability goals in 2011 that require Austin Energy to keep its rates in the lower 50 percent of comparable utilities in the state and not raise average bills by more than 2 percent in a given fiscal year.

Austin Energy spokesman Carlos Cordova told the Austin Monitor on Monday that the utility received the letter and has not yet posted online the request for proposal document, which will publicly solicit applications from potential consultants.

“We are in the process of considering and incorporating their comments into the final document,” Cordova said. “We hope to have this complete and over to City of Austin Purchasing next week. Our hope is we can expedite the process and have a contract back to the City Council in late February for approval.”

Cordova clarified this statement Tuesday. “We are only considering language that is consistent with the direction that we were given by the Austin City Council,” he said. “The Council considered and rejected amendments (to the generation plan) on the dais. While the Council requested that Austin Energy work with EUC members on the (request for proposal), we are not considering language that the Council already rejected or is not consistent with what they adopted.”

The independent review of a 500-megawatt combined-cycle natural gas plant that Austin Energy proposed is part of the Austin Energy Resource, Generation and Climate Protection Plan to 2025 that Council approved on Dec. 11. The plan also includes a 55 percent renewable energy goal and aims to reduce demand, replace the Decker steam units and create a fund to begin retiring the city’s shares of the Fayette coal plant in 2022.

In adopting the plan, Council requested that Austin Energy consult the EUC about the scope of the review, which it did at an EUC meeting on Dec. 15.

Rather than submit comments, the EUC requested more time and formed a “Gap Study Subcommittee” consisting of Hadden, Meijer and Commissioner Brent Heidebrecht to submit comments instead, though only Hadden and Meijer signed the letter to Austin Energy. The two commissioners also sent lists of consultants to Austin Energy that they believe would be well suited to conduct the study.

Hadden and Meijer both followed up with the Monitor on Tuesday.

Meijer referred to last week’s letter as the “start of the conversation” about the study between the EUC and Austin Energy and added that there will be “more comments coming in the next couple of months.”

“The intent is twofold,” Meijer explained. “One is to ask Austin Energy to clarify their position on some of these topics … and the second is to inform the consultant that is going to be hired to do the gap study so that they look at the assumptions from Austin Energy knowing that these are questions that are being raised by the EUC working group.”

Meijer said that the EUC plans to submit another set of comments on the study’s assumptions to Austin Energy and the consultant company, when it is hired. Basing his timeline on Austin Energy’s goal to hire a consultant by the end of February, Meijer said the EUC plans to submit the comments in early March.

Hadden explained why the Gap Study Subcommittee chose its name. “Austin Energy is looking at doing a study that they are calling a ‘gas plant study,’” she said. “We think it should be called a gap study, meaning the need for 500 megawatts of energy. They have a foregone conclusion that a gas plant is the best idea right now. I don’t believe that is true.”

Hadden raised concerns that the process of extracting natural gas — commonly known as fracking — can negatively impact the environment by releasing contaminants into the water supply near the extraction site and contribute to climate change by releasing methane into the atmosphere.

“In this day and age, when we’re dealing with climate change, if we can find a renewable energy solution and not build a gas plant, I think we would be much better off,” Hadden said. “We’re trying to get a study that leaves a more fair and honest look at options.”

Photo by Bidgee (Own work) [CC BY-SA 3.0], via Wikimedia Commons

Austin Plan for Renewable Energy at Odds With Utility

Oct. 17, 2014

by Neena Satija
Texas Tributne

by: Mose Buchele / StateImpact Texas The 380 acre Webberville Solar Farm outside of Austin will power 5000 homes.

by: Mose Buchele / StateImpact Texas
The 380 acre Webberville Solar Farm outside of Austin will power 5000 homes.

Late this summer, the Austin City Council trumpeted its commitment to a progressive energy policy by calling for a dramatic expansion in solar power generation, earning accolades from environmental advocates across the country.

But the city-owned utility, Austin Energy, has balked at the council’s proposal and said it would be too expensive for ratepayers. And since then, a debate has ensued over how to be politically progressive and economically practical at the same time.

Resolution 157, which council members passed in August amid controversy, directed Austin Energy to make sure that 65 percent of the city’s energy needs are met with renewable resources in just over a decade. In less than three years, the resolution adds, the utility should strive to completely replace power generation from an old natural gas-fired plant with solar power.

Council members also said they are committed to keeping rates low. But the utility said the changes would not be affordable. Today, more than 20 percent of the power provided by Austin Energy is renewable, but much of it does not come at a profit — especially not solar, which is the City Council’s chief target for expansion.

Paradoxically, that is in part because the city was a pioneer in generating renewable energy, and it secured long-term contracts years ago when the price of solar energy was far higher than it is now. And there are problems with generating lots of solar energy, like the variability of weather conditions.

"In a sense, it’s a great problem to have because we’re leading the state and probably most of the country when it comes to producing renewable power," said Robert Cullick, a spokesman for the utility. "But, there’s a cost to that," he added — at least tens of millions of dollars a year.

To make up for the loss, the utility said it must generate cheaper power through other means and sell it into Texas’ electric grid at a profit. So last week, Austin Energy presented a modified plan to the City Council: Lower the goal for renewable energy production to 50 percent of all generation by 2025 and build a newer, more efficient gas plant in place of the old one.

But Chris Riley, an Austin councilman who pushed for the original resolution, was skeptical of claims that natural gas was a clean enough form of energy.

"There are so many concerns about fracking and other gas extraction methods and the environmental problems associated with extraction," Riley said. "At this point, I don’t even know if there’s a way for us to have a plant that produces clean gas."

Council members have also pointed out that natural gas is still a carbon polluter, and their goal is to eliminate all carbon emissions from Austin Energy-owned power generation by 2030.

The utility’s proposal may soon go through an independent review.

"Austin is in a better situation than places that are not in charge of their own utility," said Daniel M. Kammen, a professor of energy at the University of California, Berkeley. He said the City Council’s goals were achievable, but that even if they are slightly too high, "aspirational" targets can spur more innovation.

Ross Baldick, a professor at the University of Texas at Austin who studies energy markets, said lofty goals only work up to a point.

In California, he pointed out, attempts to get to zero-emissions vehicles decades ago "were so unrealistic that they then were basically ignored."

"It’s good to have aspirations," he said, "except if the aspirations are so far afield that they are simply going to be ignored."

Disclosure: The University of Texas at Austin is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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This document contains copyrighted material whose use has not been specifically authorized by the copyright owner. SEED Coalition is making this article available in our efforts to advance understanding of ecological sustainability, human rights, economic democracy and social justice issues. We believe that this constitutes a "fair use" of the copyrighted material as provided for in section 107 of the US Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond "fair use", you must obtain permission from the copyright owner.
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