SAN FRANCISCO — A new venture from NRG Energy Inc. is devoted to transforming the conventional energy business into something more consumer-facing.
NRG Home is trying to break down the traditional barrier between customers and the electricity they consume, a model that has been rocked by state policies that incentivize switching from utility-provided electricity to rooftop solar systems installed by third parties.
Newly installed CEO Steve McBee is facing the threat head-on. NRG Home is a multi-pronged revenue-streaming platform that aims to reach all 120 million homes and 308 million people in the United States.
"I would say we are the opposite of the EEI report," he said, referring to a much-quoted 2013 report from the Edison Electric Institute that warned of "disruptive challenges" to the electric grid from distributed generation and other demand-side technologies.
NRG Home is part of a restructuring that NRG announced last August. The company split into four units — wholesale conventional generation, large-scale renewables, a small "dividend growth-oriented" generation portfolio and consumer services — in an attempt to get ahead of industry changes while shoring up what NRG CEO David Crane called "appalling" stock performance earlier this month (EnergyWire, Jan. 16).
It’s a major about-face for a company that started out in 1992 as an aggressive buyer of power plants and declared bankruptcy in 2003.
NRG Home, which accounts for more than half of NRG Energy’s annual revenue, is a diversified portfolio in itself. The company contains a retail electricity business, which sells to 3 million individual customers in 10 states plus Washington, D.C.; a burgeoning rooftop solar business, which has about 10,000 installations in 11 states; an electric vehicle charging business, called eVgo; a Utah-based company acquired last year, Goal Zero, that sells solar-powered charging devices; and home air conditioning, heating and plumbing maintenance packages.
The company also plans to target consumers even more directly through a "totally cool retail announcement we’re going to be announcing shortly," McBee said.
As NRG Home steps up its work, McBee is planning to move from Washington, D.C., to San Francisco, where NRG Home will be headquartered. San Francisco affords NRG access to technology, labor and companies that have contributed to major shifts in commerce, transportation, media, tourism and communication — and, McBee hopes, energy.
"When we step back and look at what’s going on in the energy industry today, I think what you can see are some seeds of change that, to me, look really similar to the transformational change that has swept through virtually every one of our peer consumer industries," he said.
"When we acquire a customer, in the home solar business, it’s the cornerstone of the relationship, but it’s not the totality of the relationship," he said. NRG can then sell the customer an electric vehicle charger, a portable solar charger and even retail energy, if the solar installation doesn’t produce all of his or her electricity.
Millennials are a cornerstone of McBee’s plans. The Goal Zero products are intended to appeal to their affinity for portability and sustainability, he said. And while most of them aren’t buying homes or solar panels yet, they’ll be a huge market when they do, he said. The Goal Zero website includes a link to NRG’s residential solar offerings.
"By 2018, if you believe the forecasting data, millennials will be the most powerful consumer segment in the country," he said. "Rooftop solar is huge. It’s the entry opportunity to what I call the personal power revolution."
NRG Home’s website for selling retail electricity looks more like that of a credit card or cellphone company, with sales plans that include 5 percent renewable energy credits, 1 percent cash back and even football helmets from area teams.
From K Street to Silicon Valley
McBee, 46, is an unconventional choice for an unconventional strategy. He came to NRG after representing it in Washington through his lobbying firm, McBee Strategic Consulting. His clients included other energy-related companies like General Electric Co., Honeywell International Inc., Opower Inc., and Pacific Gas & Electric Co., as well as a wide swath of other industries, but he has no specific energy or utility experience.
The work of managing a multi-service public relations firm has prepared him for the job of running a $6.5 billion energy business, he said. And the transformational times call for throwing out the rulebook.
"You have to sort of forget everything you think you know about technological curves, cost curves and adoption curves," he said. "Everything is happening at hyperspeed."
Out of all of NRG Home’s offerings, he said, rooftop solar exemplifies the paradigm shift.
"We think rooftop solar is a revolution, and we think it’s going to be an explosive market. But we don’t think it’s an outlier; we think it’s an indicator. My job is to figure out how we find the next two or three rooftop solars."
McBee’s job is also to connect the disparate strands of strategy that have led to the acquisition of Goal Zero, installation company Roof Diagnostics Solar and solar customer management platform Pure Energies in the past year.
"The business challenge for the company that we need to tackle this year is we need to take all of that and operationalize it," he said. "Cross-selling is going to be essential to operationalizing the business model and really driving the customer value that is going to make this business model work."
McBee can’t sell retail energy in regulated markets like California’s. But California accounted for 20 percent of Goal Zero’s sales last year and is a hotbed of rooftop solar activity and electric vehicle purchases.
"Part of it is to make sure that we have a really strong presence as a company in our largest adopter market," he said. "California is just the most important adopter market in the country, and maybe in the world."
Policy not needed
Now that McBee is on the industry side, he sees little value in participating in political debates in Washington or state houses around the country.
"As the leader of a company that’s seeking to revolutionize consumer energy markets, I don’t even think about the policy component of it, because at this time I think it’s irrelevant," he said.
His experiences in Washington, D.C., convinced him of the futility of depending on favorable political winds.
"It became clear to me, being in Washington the last five or six years, we have a complete failure of leadership when it comes to climate change and sustainability," he said. "There isn’t going to be any meaningful leadership in the foreseeable future."
McBee said a price on carbon would be sufficient to spur sustainable energy development but isn’t banking on that happening anytime soon. More complex policies like California’s, which set targets for large-scale renewables and give incentives for small-scale installations, are welcome, he said, but shouldn’t be depended on.
"The political process right now is so dysfunctional," he said. "You start making too many assumptions about what may or may not happen on the policy side, your business starts to get pretty shaky."