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Utility CEO on Solar: In “3 to 5 Years You’ll Be Able to Get Power Cheaper from the Roof of Your House Than From the Grid”

CEO of NRG Energy: The fundamental issue of our day [is] climate change…. The people who were opposed to climate change legislation used one of two tactics. They either said, “Well, we don’t believe it’s happening.” Which, of course, is just a bald-faced lie.

Or the second part of the one/two punch is, “We can’t afford to do anything about it because a synonym for the word “green” is “expensive.” But looking forward, electric vehicles will be far cheaper to operate than internal combustion engine vehicles. And solar panels on the roof will provide power more cheaply than taking power from the grid.

That’s from a Yale Environment 360 Interview of David Crane, the CEO of one of America’s’s largest electric utilities. It produces power for some 20 million U.S. households, and over 90% of NRG’s power comes from natural gas and coal. But Crane says the future — the near future — will be different.

Climate Progress has written a number of articles on the sharply declining cost of solar photovoltaics (see “Solar is Ready Now: ‘Ferocious Cost Reductions’ Make Solar PV Competitive”). It’s good to hear from a leading utility executive that the facts on the ground bear our analyses out.

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Here are more excerpts from this remarkable interview, including his discussion of “democratization of customer choice” and the key role of electric vehicles:

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e360: What can you do as a major power generator to nudge the country toward a renewable energy future?

Crane:I think the most important thing is to make the American public aware that now they have energy choices in a way that they never really did. You don’t just have to settle for using electricity in your house that is supplied by coal-fired power plants on the grid. And you don’t just have to put oil that comes from the Middle East in your gas tank. You can buy an electric car. You can put solar panels on your roof. You have choices now…..

e360: Could you talk about NRG’s move into utility-scale solar, and also your vision long-term of large-scale solar, versus distributed [smaller-scale] solar power?

Crane: So far most of our business has been utility-scale solar — gigantic plants in the desert. The biggest solar [project] we have is 295 megawatts. That’s something like 6 million solar panels. Those projects are really dependent on two things, because they cost over a billion dollars: the Department of Energy (DOE) Loan Guarantee Program and California’s 33 percent Renewable Portfolio Standard, and the fact that the two largest California utilities have been willing to sign long-term agreements in order to meet their requirements [to obtain 33 percent of their electricity from renewables by 2020] under the Renewable Portfolio Standards. We have over 800 megawatts of projects out there, which is a huge number for solar. But our view is that because the DOE Loan Guarantee Program is going away and the California utilities are coming close to putting themselves in a position to satisfy the requirement, there will be fewer of those projects in the future.

We expect to continue to pursue that business and to do well, but that’s not going to be the explosive-growth part of the industry. The explosive-growth part will be between distributed solar power, which is like 1 to 10 megawatt size, and then residential, which is measured in kilowatts. We have so many parking lots and warehouse rooftops and residential locations where people want to reduce their monthly electric bills and that is just an enormous area of growth….

e360: Can you explain your three-pronged approach to transforming the country’s electricity system.

Crane: Democratization of customer choice in our sector begins with two things. One is the electric car and the other is the solar panel on the roof. I think it actually starts with the electric car. You put the electric car in your garage and you really have a mini power plant because these batteries that drive electric cars are quite substantial pieces of equipment. The average car in the United States is sitting still about 22 hours a day. Those are hours where the car can either be accepting power from the grid or selling power through the grid in a phenomenon we refer to as V2G, vehicle-to-grid. That leads to the third leg of the trilogy, which is the smart meter, because between a smart meter in your house, combined with time and use pricing, you essentially want that electric car to be charging between midnight and four in the morning. And you want to have it available to basically drain itself a little between 2 and 6 o’clock in the afternoon. But someone has to tell it what’s going on with the grid at that point. And that’s what the smart meter does.

Right now around the country people are trying to introduce smart meters as just another information device. In our view, no one wants to pay for another information device, particularly when the information being given is about something that people don’t care about, which is their electricity use. So smart meters will only be accepted by the American public when they do something of value. And the first thing that they’ll do of value is they will sense when it’s expensive to run electricity and they’ll turn appliances off around the house. But the next thing they’ll do, which is the most valuable thing that will actually put dollars in your pocketbook, is that when the smart meter recognizes that the wholesale system is getting tight and there is good pricing, it will actually sell into the grid from the car battery. Or if power from the grid is getting really expensive, the smart meter might just turn the house off from the grid and then run the key appliances in the house off the electric car in the garage.

Then you have the solar panels on the roof. If you tie in a rooftop solar panel with a smart meter, then it’s exactly analogous to the electric car battery. The smart meter could turn off the house from the grid at 3 in the afternoon and rely exclusively on the power that’s coming from the solar panels on the roof, saving the customer a lot of money on their bill from the grid. And if the person puts a big solar panel on their roof, they could sell power from that.

e360: Given the current cost of solar, how do middle-class families afford solar panels on their roofs?

Crane: This is something that most people don’t like to really talk about. But it’s just a fact of life that when you start talking about electric vehicles and solar on your roof, you’re talking about something that’s going to penetrate into the population top-down through the socio-economic strata. That’s just a fact of life. We’re very bullish on the electric car, but we don’t expect for another 20 years that a person who can only afford to have one car will have an electric car. But in America there are 60 million families that own more than one car, and that’s a big market. Ultimately, the answer to your question is this: If you assume that the average solar installation on the roof of a house is going to cost somewhere between $20,000 and $50,000, we think about one percent of the population is willing to write that check. So what the industry is already fast creating is lease arrangements, and power purchase arrangements if you’re a small business. Basically, a lease arrangement where someone like us actually owns the solar on your roof, and all the customer sees is an electric bill that’s no bigger than the electric bill they were seeing before.

We believe that in the next 3 to 5 years you’ll be able to get power cheaper from the roof of your house than from the grid. Solar is going to go from this thing that right now is like .1 percent of the market to 20 to 30 percent of the overall electricity mix. That’s huge…. If you go back about four years to where the price of solar modulars were, the prices have been cut in half in the last four years. I predict that the price of solar modules will be cut in half again in the next two years….e360: To an average American who hears about Solyndra and thinks the solar business is in the tank, how do you explain that dichotomy of what you see as the promise of solar and yet this news about how solar manufacturing in the U.S. is doing so poorly?

Crane: I would say look back at the early history of the high tech-industry. Companies and chip makers failed all the time. The manufacturing business in any new area is a brutally Darwinistic place. One thing Solyndra was impacted by is that the cost of their product dropped like a stone, which is our basic point. When the Chinese government gives the Chinese manufacturers basically free money, and then says dominate the world’s solar modular manufacturing business, it’s going to be tough for manufacturers in other countries to compete with that. So what’s bad for Solyndra is good for the American consumer.

For the full interview, visit Yale Environment 360.

For more on how solar costs will keep dropping, see Anatomy of a Solar PV System: How to Continue “Ferocious Cost Reductions” for Solar Electricity