Despite CEO ouster, NRG has eyes on green energy future
Company wants to be seen as trailblazer but has tough row to hoe
With some of the most ambitious clean-energy goals among U.S. electricpower companies, NRG Energy sees itself as a trailblazer in the industry.
But pursuing those objectives has been difficult for NRG, whose board sacked its CEO, David Crane, last December.
Now, with a new boss, one of the nation’s biggest independent power companies sees itself as still on course — but taking a more cautious approach — to a greener energy future.
“Unequivocally, we want to continue to be in the forefront of transforming the energy industry,” Mauricio Gutierrez said Monday, three days after NRG released its sixth annual sustainability report.
The report reiterates a pledge first made by NRG two years ago to reduce its carbon emissions by 50% by 2030 and 90% by 2050, compared to 2014 levels.
“The industry, as you can see, is going through a massive transformation from coal and oil and some nuclear toward natural gas and renewable energy,” Gutierrez said in an interview. “But as we go through this transformation, we need to make sure we do it in a way that does not compromise reliability.”
For Gutierrez, that means making sure its core business of selling electricity in competitive markets from coal, gas and nuclear power plants remains steady while it reconfigures its green-energy operations, including units that install rooftop solar systems for homeowners and operate a network of battery-charging stations for electric vehicles.
So what distinguishes Gutierrez from Crane, an outspoken advocate of clean energy who was fired amid a slump in the company’s financial performance?
Not all that much, Gutierrez insists.
“I think that if you talk to 90% of the people in the industry, we will all tend to have a similar end point: empowering the consum- ers more, making the system more decentralized, making sure the system is reliable and much cleaner than it is today,” he said.
“That’s the vision that we as an industry and a society would like to have in the electricity industry. So the question is how to get there, and I think that’s where perhaps the biggest differences are.”
Crane spoke of NRG becoming the Google or Apple of the energy industry, enabling consumers to increasingly go off the grid for electricity and acquire energy services that meet their personal preferences and needs.
But NRG’s heavy investments in clean-energy ventures such as home solar systems lost money and eventually cost him his job.
When NRG announced the change in leadership Dec. 3, the company’s market value had fall- en 60% since the start of 2015.
Since Gutierrez’s appointment as CEO, the price of NRG’s shares has risen by 63%, closing Tuesday at $17.90.
Moreover, the company posted net income of $47 million for the first three months of 2016, compared to a net loss of $136 million in the first quarter of 2015.
Gutierrez, 45, who had been NRG’s chief operating officer under Crane, canceled his predecessor’s plans to spin off renewable-energy operations and sought a partner for its electricvehicle-charging business.
He also made paying down debt a top priority.
“When I look at the company as a whole, I see the renewable business as a natural transition for our conventional generation business, so simplifying the message is important,” he said.
Just as essential is putting into perspective the impact on power markets of cheap natural gas, which Gutierrez said challenges expectations of high returns on renewable energy sales.
“It’s been the biggest catalyst for change (in the electric-power industry), not environmental regulations, not policy,” he said of gas prices.
In its latest short-term energy report, issued Tuesday, the U.S. Energy Information Administration predicts spot-market prices for gas will average $2.22 per mil- lion British thermal units in 2016 and $2.96 in 2017, well below a high of $13.66 in 2005, before the arrival of the U.S. shale boom and record production of gas.
“It’s been the price of natural gas, because in competitive markets, it has basically made uneconomic for the most part all other forms of generation, whether it’s coal, nuclear or even renewables. They are significantly challenged because of the current price of natural gas.”
Gutierrez calls current prices for gas “not sustainable” over time and predicts they will increase once the gas industry finds new markets in the U.S. and abroad for its record-setting production.
“I tend to think we’re seeing the bottom of the market,” he said.
In the meantime, Gutierrez feels a sense of urgency to make sure the transition to increased reliance on gas and renewable energy goes smoothly — a period he refers to as a “reliability bridge” that may last 10 years or more.
“We need to prove that with the new energy mix we can actually manage the system as reliably as we have in the past,” he said. “It’s still a work in progress.”
“We need to prove that with the new energy mix we can actually manage the system as reliably as we have in the past. It’s still a work in progress.” NRG Engery CEO Mauricio Gutierrez