Even though the wind and solar power industries have traditionally been “compadres” because of their joint interest in renewable portfolio standards, the two industries’ interests will diverge sharply during the next decade, said David Crane, CEO and president of NRG Energy. And once solar is divorced from wind, it will be free to take up with a new partner: Natural gas.
“Distributed solar is the future of the solar industry,” said Crane, speaking at The Wall Street Journal’s ECO:nomics conference in March. “The great thing about solar is the sun shines where people live… you don’t need transmission lines and you don’t need the wind.”
Eventually, Crane said, the natural gas industry will realize that it doesn’t need the power industry’s transmission lines and distribution system because natural gas can be distributed through underground gas pipelines into retail customers’ homes. Such a distribution system is better than power lines, said Crane.
Indeed, natural gas has clearly emerged as a major source of energy in the power generation mix. Figures from The Wall Street Journal show that in 2006 the power mix was composed of 49 percent coal, 2 percent renewable sources such as wind and solar and 20 percent power from natural gas. (The rest of the mix is comprised of nuclear power and other sources.)
Now, coal has dropped to 32 percent, renewables have bumped up from 2 percent to 5 percent, and natural gas has jumped from 20 percent to 30 percent.
And while some say natural gas is the answer to the world’s environmental problems, Crane doesn’t agree: “All I know is, dependency on one fuel is a disaster,” he said. However, he points out that natural gas is wiping out the coal and nuclear industries, and it’s likely that usage of natural gas will surge past coal over time.
In fact, Crane said that he expects a technology breakthrough in the next year or two that will allow companies to convert natural gas to electricity in people’s homes using only a “gizmo in the basement.” Crane said he knows of three lines of technological development that could be applicable, including fuel cells, a micro-gas instrument or a derivative of the stirling engine, which converts heat to energy.
“If you have gas into your house and say you want to be as green as possible, maybe you’re anti-fracking or something and you have solar panels on your roof, you don’t need to be connected to the grid at all.”
In Crane’s view, the American public will eventually stop tolerating the power industries’ repeated failures at providing reliable power due to weather disruption. And NRG is profiting from it. Crane said the fastest growing part of NRG’s business is its “reliability services” division, which is no accident.
On the other hand, pointed out Tim Rosenzweig, CEO of Goldwind Americas, such a huge demand on natural gas would lead to a spike in prices.
“Certainly it’s a risk that natural gas prices will go up,” said Crane. At the same time, the rate-based utility model will also result in increased prices because that’s the way it’s designed.
“But I think you have that risk even if natural gas is… used for big power plants and high –voltage transmission lines.”
In the end, NRG’s bet on distributed solar is expected to pay dividends, says Crane, and it had to be made if the company wanted to survive the next two decades.
“When you see a disruptive technology come into your space if you don’t embrace it… the people who try and cling to the past get rolled over.”