NRG targets solar on low power prices, wind output

OREANDA-NEWS. NRG Energy is focusing more on expanding residential and distributed solar across its retail electricity service area as a result of lower wholesale power prices and weaker wind output during the first quarter.

NRG, which operates merchant generation and retail services across the US Northeast, Gulf Coast and California, today said its original earnings guidance was not met as a result of a lower natural gas and electricity price environment in the PJM and Electric Reliability Council of Texas (ERCOT) grids, in addition to weakening wind output in California and Texas.

"We realize that we are in the midst of a persistently challenging commodity price environment," NRG chief executive David Crane said. "Average peak prices in PJM in the first quarter of 2015 were just 50pc of what they were in the first quarter of 2014," Crane said. "In ERCOT, the average on-peak prices were just 40pc of what they were last year."

In diversifying its generation portfolio, the company will create a \$100mn fund for new distributed solar assets. That fund will build on a separate \$150mn fund directed at residential solar leases through NRG's home solar business, which aims to bring 90MW of solar capacity on line through 20-year lease agreements. The overall \$250mn in funding will likely be dispersed by the end of the year, NRG chief financial officer Kirkland Andrews said.

The company aims to grow its residential solar base to 40,000 customers by the end of the year, up from 13,000 at the end of the first quarter.

Much of NRG's solar growth strategy is premised on cross-selling retail electricity customers on distributed products. The company says about 22pc of its retail customer base has purchased more than one electricity product, particularly in its northeastern market. That represents a significant swath of NRG's retail business, which contributed to about 20pc of the company's first quarter earnings in 2015, or about \$166mn. Distributed and residential solar currently comprises just 55MW of NRG's operating portfolio of about 50,830MW.

On conventional generation, NRG said it is confident that its Maryland fleet would incur minimal costs from the emergency NOX rules the state recently adopted. The rules requires coal-fired units to run existing NOX controls through May and September to meet a daily emissions rate. The regulations include a system-wide emission rate of 0.15lb/mmBtu averaged over 30 days during the ozone season.