NRG executive makes upbeat solar predictions, despite falling subsidies

• 13 years ago (2011-02-26)
• Junior Isles

North America 1004 Renewables 757

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The chief executive of power generator NRG Energy Inc., David Crane, expects the demand for large solar projects to wane in the next few years, but this is not stopping his company from investing in it before the market gives way to smaller scale power generation.

The Princeton, N.J.-based energy company is soon to start construction on about 1000 MW of new solar projects. About two thirds of its forthcoming power projects are in large scale solar involving utilities; the rest being in fossil fuels.

In total, the company operates 25 000 MW of generation, largely in natural gas, coal, and oil, with some wind and solar thrown in.

Low natural gas prices and lower demand for electricity has cut into the bottom line of NRG, which sells power on the open market.

In an effort to rejuvenate its business, NRG has turned to solar generation as a market where utilities are willing to enter long term power purchase agreements, largely because of state mandates. Investment returns in solar project development are in the mid teens [in terms of percentage], Crane has said.

NRG has been acquiring a number of solar projects – many of which are centralised and more than 20 MW in size. It recently acquired a 290 MW project from First Solar Inc.

But "utility sized deals won't last," Crane says, adding that governments will at some point stop supporting such projects. Currently in the US there is a federal cash incentive that equals 30 per cent of the cost of a solar project, as well as various incentives at state level.

"We'll be developing predominantly [utility scale] solar for two to three years," said Crane. "Then there'll be fewer of [those projects], because the California [renewable power standard] will be achieved."

For generators Crane says, distributed solar makes the most sense, "because you're competing with retail not with wholesale prices" of power.

In addition, he said there's a "billboard value to solar," referring to the visibility of solar panels that can represent a business' commitment to environmental issues, for example. He added that NRG is planning on playing a big role in distributed solar in addition to its larger projects.

Overall, NRG will be focusing on solar, rather than other forms of renewable energy generation, such as wind, Crane said. Partly through the venture fund that the company recently entered into together with ConocoPhillips (COP) and General Electric Co. (GE), Crane said he sees that there are many more opportunities for significant technology improvements in solar rather than in wind.

"We are much more bullish on innovation in solar," Crane said.