Future of energy – and decline of centralised generation – explained in 70 seconds

Last month we reported on how US utility giant NRG saw the changing future of energy – one that is based on distributed generation – solar, battery storage, mini and micro-grids, and electric vehicles.

NRG CEO David Crane made it clear that he saw the future in tapping the huge potential of the “millennial generation”, who will account for most of household spending power over the next decade – several trillions dollars – and which will be open to new forms of technology.

Crane says the history of the telecoms industry tells us that the incumbent who fully embraces the future technology will be the winner. That future technology will emerge through the internet and virtual presentations – big data incorporating the information from solar, storage, electric vehicles and inverter – and the new generation will be comfortable with that.

The judgment by NRG is important. It is the biggest privately owned centralized generator in the US, with large nuclear, coal and gas assets in a 50GW portfolio that nearly matches the size of Australia’s entire electricity grid.

But Crane says that is not the future. And last week, for the benefit of those who missed his company’s day long presentation in February, he broke it down to a 70 second spiel for analysts covering his company’s quarterly results. We thought it was worth publishing, because you don’t hear Australian generator owners admitting to this.

“Our industry is in the early but unmistakable stage of a technology-driven disruption of historic proportion. This disruption ultimately is going to end in a radically transformed energy industry where the winners are going to be those who offer their customers, whether they be commercial, industrial or individual customers, a seamless energy solution that is safer, cleaner, more reliable, more convenient and increasingly wireless.

“And I might add just generally more personalized than what is currently being offered to energy consumers through our current command and control centralized one size fits all wire and wooden pole system invented by Thomas Edison and seemingly last improved upon in his era.

“NRG , through our multiple initiatives in the smart home with home solar, distributed generation, reliability solutions, microgrids, electric vehicle charging, and portable solar and energy storage products, is positioning itself to win this long-term future in a way that no other power company is attempting.

“In the short to medium term we continue to execute across our consolidated and unrivalled asset platform in a manner that will allow us to win the next few years as the power plants of the post World War II era create a retirement tsunami washing across our core markets that will benefit us as one of the last men standing thanks to our substantial investment in environmental remediation over the past ten years.”

So, what Crane is referring to in the “tsunami” of plant retirements is  essentially the coal-fired generators whose departures will be accelerated by tighter emissions rules, ageing nuclear plants who can no longer get returns in a market that is relying less on a centralised grid, and gas plants that will be priced out of the market by cheaper wind and solar.

The key, though, is what happens to replace it, and it will occur at the local level

As Steve McBee, NRG’s head of NRG Home, the company’s new business that focuses on the residential market, traditional centralised energy service models are significantly at risk.

“We believe that the future eventually will belong to demand-driven decentralized models of service that empower individual consumers through sustainable energy solutions that are affordable, personalized, convenient, and reliable,” he said.

McBee said his task is to win business in a world “where we believe a growing share of the market is going to want and expect to generate and manage a larger share of their own energy.”