Utilities Dive into Home Energy Services and Products

(3BL Media/Justmeans) - We’ve written in the past about the challenges facing the utility industry, with Barclay’s downgrading the entire industry as a poor investment prospect. The phenomenon of grid defection, customers cutting their ties with the utility in favor of a solar array with batteries, or a grid-tied system enabled through net metering is taking its toll on profitability. Traditional electric utility business models have rather suddenly become an endangered species. Not that the companies will necessarily disappear. Some might, of course, but those that remain will look very different than they do today.

Take a look at NRG, one of the nation’s largest power companies, operating in the Midwest, that has traditionally burned coal for about a third of its power. CEO David Crane, who has a degree in Public Policy from Princeton and a law degree from Harvard, has apparently seen the writing on the wall. The company has taken dramatic steps over the past year including natural gas conversions and plant closings to reduce its dependence on coal. One plant is even being converted to run on low-sulphur diesel. When combined, these changes will result in a 25% reduction of coal purchases.

There was a time not long ago when such moves would be considered iconoclastic for such a staid industry. But that is just the beginning of this latest chapter in the NRG story. Last week NRG announced the acquisition of Goal Zero, a manufacturing start-up that produces small solar charged battery packs. Their products are popular in big box sporting goods stores, ranging from solar powered speakers for camping to 1250 Watt-hour solar home generators.

“It allows us to expand the opportunity of solar,” said Crane. “Our ultimate goal is to energize people wherever they are.”

It sounds reasonable enough, though it’s a big move for a utility company to start selling consumer products. That might just be what it takes to stay afloat in this changing world.

The company has announced a reorganization into three distinct business units: NRG Business, NRG Renew, and NRG Home. The first will continue the traditional utility model. The second will focus on renewables at the commercial level, including wind and solar as well as microgrids.

NRG Home is clearly the new frontier, where the company will focus on residential energy services and products including solar installation. They have also acquired Rooftop Diagnostics a NJ-based solar company in what appears to be an if-you-can’t-beat-‘em,-join-‘em move. They also acquired the electricity business of Dominion Resources who has been expanding rapidly into solar.

There looks to be a bit of a technology land grab underway as large utilities look for new ways to provide value to customers who are being swept up in a wave of changing energy options. In doing so they might find themselves squaring off against other newcomers to the home energy services market including Google, Apple, Nest, and Time Warner.

Smart home systems could indeed be the next frontier. Sales are expected to hit $18 billion this year, and grow to $39 billion in five.

NRG has taken the plunge with Goal Zero. Give them credit for being nimble despite their size. It remains to be seen whether they will sink or swim. Their mobile solar solutions could provide an excellent bridge between providing power and providing home energy services.

[Image credit: Richard Farnsworth: Flickr Creative Commons]