A major company potentially creating off-the-grid resources for customers and making money while doing it? Think this could be the beginning of an industry trend? And maybe the beginning of the end for the existing centralized utility paradigm.
In its 4th quarter 2013 earnings results conference call on Feb. 28, NRG president and CEO David Crane announced that NRG will begin to offer rooftop solar systems to NRG’s nearly 2.3 million retail customers.
Forming strategic partnerships with technology providers, NRG is looking at solar as a major generator of ROI.
“We are positioning ourselves to succeed during a prolonged period during which the traditional centralized grid-based power system coexists with the fast emerging, high growth distributed sector, much like how fixed line long distance graciously gave way to cellular world dominance only after a couple of decades of relatively peaceful coexistence,” Crane said.
Rooftop solar is a top priority for NRG. “We are big believers in this view that various analysts ... have also come to the conclusion that within the next 12 to 24 months in 24 states, roughly 20 to 24 states, residential solar will be cost competitive, and where we see our advantage is in combining that with actual supply of system power,” Crane said.
NRG is also looking at backing up residential distributed solar with natural gas fired Stirling engines as a bridge between conventional central generation and distributed.
In the news release of March 14, NRG that it “…has entered into agreements with Dominion Resources, Inc. to acquire its retail electric business. Dominion currently serves more than 600,000 customer accounts in Connecticut, Illinois, Maryland, Massachusetts, New Jersey, NewYork, Ohio and Pennsylvania, and through its Cirro Energy brand in Texas.”
Clearly NRG is going after more retail customers with its new solar offerings.
I asked several members of our expert panel for their thoughts. Here’s what they said:
Dr. Merwin Brown
Co-Director, Electric Grid Research
California Institute for Energy and Environment
University of California
If I wanted to have distributed renewables, especially “roof-top” PV, to become a big disruptive energy threat to utilities, I’d probably do what NRG is proposing, i.e., couple the solar with a natural gas-fired on-site generator. To make sure that I maximized the disruption, I’d retain a connection to the electric utility to serve as emergency back up to the times when the sun doesn’t shine, which can be quite frequent, and when the generator needs repair, which I would think (hope) would be quite infrequent. Of course that requires the electric utility to have in reserve enough capacity to totally serve this infrequent electric customer, the cost of which would have to be recovered either by relatively large unit charges per event, or by spreading these costs over other “regular” customers, as a subsidy to the PV/generator owners. If the number of PV/generator owners remains relatively small, the disruption, while real, would probably be inconsequential. But if this number became relatively large in a relatively short period of a few to many years, then the disruption could be substantial, perhaps to the point it would “financially,” if not “electrically,” strand the “regular” customers, the ones who could not afford or chose not to buy the PV/generator packages.
Since presumably you can’t see me, I’ll point out I’m saying the above tongue-in-cheek. My point is that, if due to high costs of going to the distributed PV/generator route, or for some other reason, the penetration of is slow enough, physical, business and societal systems will adapt, and this route would probably be a good thing for most if not all. If for some reason, high penetration is rapid, then extra care must be taken by many players to prevent uncomfortable or even damaging disruptions to not only utilities, but many others in business and society as well.
And speaking of utilities, this business plan actually doesn’t cut the tie to a utility, it just changes the type of utility, and one that means CO2 production for sure. If one were to want very high rapid penetration with no utility connection at all, very low CO2 production and minimal disruptions, then the distributed generation packages would need to be composed of much larger PV systems and some form of enough electrical energy storage to reduce the probability of an outage at that site to an acceptable degree without a utility backup. Although probably quite expensive in the foreseeable future, if this model were to become the dominant energy system of the future, then there would be a lot of excess stored energy sitting around, tempting some to want to sell some of it, albeit at some risk of running short themselves at times. Who knows, these sellers might start stringing wires, or pipes carrying hydrogen, to other customers, who would in time probably reduce their degree of reliance on on-site generation and increasingly rely on their neighboring net energy exporters, who in turn might see a higher load factor in their assets and hence a lowering of unity cost, by relying on diversity in demand.
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Matthew C. Cordaro, PhD
Trustee at Long Island Power Authority
Former Utility CEO, University Dean
The major question for NRG's initiative, is it premature. Is this the right time to grab the towel and consider throwing it in the ring?
No matter what we can imagine about the future, it will take a long time to develop the critical mass necessary for dramatic changes. Does NRG have the staying power to survive while it rolls the dice that the utility industry will depart from its historical glacial pace of evolution?
This course of action ignores the fact that the NRG concept still depends on natural gas, a fossil fuel,and that there may be new developments around the corner which would make a totally different strategy more attractive. It is also defended with an analogy based on the success of cellular phones when that technology was never saddled with the baggage intermittent renewable energy must bear.
Has anybody yet asked a question on what this will cost?
Edward Thomas, PE
President, Utility Electrical Consultants, PC.
We must all think 'outside the box’, but when a germane part of that 'box' is the roof to a residence, I start to have nightmares. All sorts of homeowner nightmare visions appear -- especially those relating to roof loading, roof penetrations, and future roof maintenance. Are they going to deliver to the source side of the existing meter and depend on grid utility billing at the same rate or are they going to depend on net metering from the grid? Either way, a pure PV installation will have a very small probability of being 'off the grid'. The claimed reduction in distribution plant investment escapes me.
The Stirling engine is certainly 'off the grid' capable. In fact, at 10kW or 15 kW this will be a strong distributed resource with the attendant problems of backfeed and public safety. Details were not available but they may be looking for an inverter-connected system but that would require a stable grid connection to facilitate an IEEE 1547-compliant (or other) system that would assure public safety. If the residence is going to operate in a stand-alone mode during emergencies, this will require connection on the load side of the meter with necessary switching. Therefore, a second meter for NRG energy supplied at what rate? Do they become a regulated utility in each jurisdiction in order to generate and sell power? Also, even if NRG is a utility, they are going to have to install facilities within the customer’s premises per the NEC at a commensurate (higher) capital cost.
An interesting situation will arise if NRG is not the distribution utility serving the customer. If so, the economic interests will not converge toward optimization of investment, but will be competitive; thus resulting in stranded distribution plant investment that is of no economic consequence to NRG. Could NRG’s recent announcement that they are acquiring Dominion Resource’s “retail” business in the Northeast be a first step in that direction?
Also, NRG seems to be thinking in terms of high penetration for the Stirling concept. I am not a gas distribution engineer, but there seems to be an analogy here to a high penetration of electric vehicle fast charging stations on the distribution system. Do the gas distribution utilities have enough 'surplus' distribution infrastructure capacity to support the volume of gas that would be required for a high penetration scenario with simultaneous operation of many Stirling units?
With any mechanical device like the Stirling, there are going to be maintenance requirements. In a similar fashion, the roof-mounted PV panels will require maintenance. So, we now have utility-owned equipment on customers' premises that requires ‘utility’ access for periodic maintenance and repair. This is a true paradigm shift for conventional utilities that have evolved in the regulated environment. All of this would seem to mandate an unregulated structure for the customer-side installations. If this or a similar distributed generation paradigm achieves high penetration, a true allocation of fixed (stranded) costs to distribution utility ‘service charges’ will become more important and the results even more unpalatable to the public. Should we quit calling this type of distributed generation a “utility” and start considering it just another unregulated business entity? If so, investors should recognize that the risks (and rewards) are not the same as those of regulated utilities.