A Power Company President Ties His Future to Green Energy

David Crane, the CEO of one of the nation’s largest electric companies, has become a leading proponent of renewable energy. In an interview with Yale Environment 360, he explains how, in the face of government paralysis, the private sector can help lead the shift away from fossil fuels.

David Crane, president and CEO of NRG Energy, is not your typical power company executive, as becomes clear when he calls climate change a “slow-moving catastrophe” and “the fundamental issue of our day.” As head of a Fortune 500 company that produces electricity for up to 20 million U.S. households, he is still neck-deep in hydrocarbons, with more than 90 percent of NRG’s electricity production coming from natural gas, coal, and oil. But the future, vows Crane, will look radically different.

In an interview with Yale Environment 360 senior editor Fen Montaigne, Crane said he believes the U.S. electricity-generating market is on the verge of a profound transformation, not unlike the era two decades ago when the antiquated world of land-line telephones and “Ma Bell” companies was about to give way to cell phones and mobile communications. The electricity future, says Crane, will be transformed by the widespread adoption of three innovations: solar panels on residential and commercial roofs, electric cars in garages, and truly “smart meters” that will seamlessly transfer power to and from homes, electric vehicles, and the grid.

His long-term goal? To see the U.S. transportation sector kick the habit of imported oil and run on electricity generated primarily from renewable sources, especially solar power. Lamenting the political gridlock in Washington, Crane said, “We’re really putting our hopes in the free market system and the American consumer embracing technological innovation.”

Yale Environment 360: What’s your assessment of the energy politics in the U.S. now and what does it mean for a power generator like yourself, who is interested in moving the country in the direction of renewables?

David Crane: In the last four to five years, energy and the environment have become completely politicized along the same red/blue lines that divide every other major issue in Washington. I think that is extremely unfortunate because if you look at the history of energy and environmental policy – well, the last big energy bill, which was passed in 2005, was passed with bipartisan support. The Clean Air Act of 1990 was signed by George [H.W.] Bush. So the fall into partisanship is definitely a step backwards.

There was a fair degree of optimism on what I think is the fundamental issue of our day – climate change. That optimism peaked when President Obama was elected in 2008. Throughout that campaign he listed climate change as one of his three highest priorities. I would say that effort was entirely unsuccessful. Now we have shifted to a situation where the best you can hope from the government is to do no harm. And maybe help along the edges of facilitating things by eliminating red tape. So we’re really putting our hopes in the free market system and the American consumer embracing technological innovation, which will have the impact of promoting sustainability.

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.

I mean 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.

e360: Can you explain why a power generator who is making nice profits producing power from coal and natural gas would want to begin pushing his company in the direction of renewables?

Crane: It’s about energy market share. Historically, when the country and the world were growing, the energy industry was always in a struggle to provide enough energy in various forms for people to use it. It’s almost unheard of for an energy company to truly market its energy, because it didn’t need to. But the global recession of 2008, combined with some technological innovation that was playing off the high energy prices of the years before the global recession, have come together at the same time. So we now have these vast energy resources available to us, like natural gas as a result of hydraulic fracturing, and the demand [in the U.S.] for energy products is less. So various forms of energy have to compete with each other.

And by far the biggest opportunity for those of us on the electricity side is transportation energy, because the U.S. spends a lot more on moving cars on American roads than lighting houses.

The electricity side of the energy sector is 50 percent coal and 20 percent natural gas and 20 percent nuclear. The transportation side is almost all oil. And it doesn’t matter whether you’re on the left or the right of the political spectrum, no American wants to keep importing 3 million barrels of oil a day from the Middle East. So there’s huge public policy benefit to shifting the transportation sector to something other than oil.

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.

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