Weekly Update

NRG Energy: Pros and Cons of a Multi-Pronged Green Strategy

Princeton, N.J.-based NRG Energy is a big producer of fossil-fueled electricity, but it’s also been diving into wind and solar power. It bought a green consumer strategy with newly acquired Green Mountain Energy. And with the launch of eVgo, the country’s first for-profit, privately financed car charging network, NRG is making a bid to be supplier of choice for green transportation markets to come.

All told, it’s an interesting end-to-end approach to the green power market — albeit, one reliant on deregulated electricity markets. About one-sixth of the country’s power use today takes place in these markets, and advocates in multiple states want to expand them. Will NRG’s experience in wind and solar investments, green power marketing and flat-rate EV charging prove a model of competitive market success — or overreach? Here are some of the issues at stake:

The Pros

A growing green-generation portfolio. NRG’s wind power portfolio includes about 450 megawatts in Texas and a proposed 250-megawatt project off the Delaware coast. As for solar, it has $450 million invested in SunPower’s 250-megawatt California Valley Solar Ranch, $300 million of BrightSource Energy’s Ivanpah project and an undisclosed amount in nine Southwest projects from U.S. Solar.

FlexibilIty in selling green power. California’s mandated renewable power market represents one market for NRG’s green power. The company’s $350 million purchase of Green Mountain Energy gives it another, direct-to-consumer market worth some $70 million in annual revenues.

Innovation in new green energy markets. With the launch of its eVgo project, NRG is trying out a cellphone-like, flat-fee plan for car charging. EVgo customers, including new Nissan Leaf buyers in Houston, can pay from $49 per month for a home charger to $79 a month for access to its planned public network of fast chargers. Go to $89 per month, and you can get all your power for free as well. To be sure, there are many other public charging networks being built, but they’re all government-backed projects, which offers little insight into how they will pay for themselves. EVgo’s new price points could challenge that public-private model, or validate it.

The Cons

With deregulation comes risks. What if NRG builds the customer connections but the customers don’t show up? NRG’s retail operations are now limited to deregulated power markets such as Texas, New York City and parts of New England and the Midwest. Green Mountain Energy could face competitors like itself in deregulated markets, and from utilities in traditional markets. And its flat-fee model is susceptible to wholesale power price swings. With Texas’ current low prices for electricity, NRG’s monthly fee structure seems like it will be plenty profitable — but those prices could go up.

Competition from regulated models. With most of its monthly fees going to pay off financing costs of installing chargers in the first place, NRG will need lots of customers. Still, NRG expects it will take four to five years for eVgo to reach profitability. In the meantime, DOE has given out $130 million in charging network grants to help  brings public charging to some dozen cities.

Who will regulate car charging? State utility regulators haven’t really said if car charging should be handled as a utility service or retail operation. California regulators have said charging networks won’t be regulated as public utilities, which is expected to open the field to competitors such as Coulomb Technologies, EcoTality and Better Place. NRG has limited plans for its eVgo market to Texas and perhaps New York City so far, based on where it can offer competitive retail electricity products. But California’s market is the holy grail for EV charging technologies.

Question of the week

How will NRG Energy’s combo of green power generation, green power retailing and green car charging fare in a shifting marketplace?