Blog Post

NRG Energy: Pros and Cons of A Vertical Green Energy Play

NRG looks to be trying out a vertical green energy play from generation to consumer. It’s one of the biggest producers of fossil-fuel-based electricity in the U.S., it’s been diving into wind and solar power, and it’s also building a green consumer strategy with newly acquired Reliant Energy and Green Mountain Energy and its launch of eVgo, the country’s first for-profit, privately financed car charging network.

Will it work? In my weekly update at GigaOm Pro (subscription required), I take a look at some of the pros and cons inherent in such an approach.

First, NRG bought about 450 megawatts of wind power in Texas and more than 1 gigawatt of solar power in California, most recently with its $450 million investment in SunPower’s 250-megawatt California Valley Solar Ranch. But while California’s mandated renewable power market represents one market for NRG’s green power, its $350 million purchase of Green Mountain Energy in October gives it another, direct-to-consumer version of the green power buys corporations now use to bolster their green credibility.

With the launch of its eVgo project, NRG is trying out yet another form of power retail innovation — charging cellphone-like flat fees for car charging. EVgo customers, including new Nissan Leaf buyers in Houston, can pick monthly payment options from $49 per month for a pay-as-you-go home charger to $89 a month for all the electricity they can use from its planned public network of fast chargers.

Of course, 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. Different models will have to be developed in regulated markets, such as the municipal utility-controlled Austin and San Antonio, where NRG hopes to roll out its eVgo network via a partnership with Hertz.

Deregulation also brings its own set of risks. NRG’s flat-fee car charging offering is  susceptible to swings in the price of power NRG buys on the wholesale market. With Texas’s current low prices for electricity, NRG’s monthly fee structure seems like it will be plenty profitable, but those prices could go up. In any case, much of NRG’s monthly fees will go to pay off the financing costs of installing the chargers themselves, rather than the power they’ll be delivering.

That means NRG will need lots of customers to make good on its investment. But with plug-in cars expected to remain a tiny fraction of the U.S. and Texas market for some time, NRG expects four to five years for eVgo to reach profitability.

To read the rest of my weekly update check out GigaOM Pro (subscription required).