Letter from David Crane, CEO of NRG

Letter from David Crane, CEO of NRG

In the energy industry, the landscape of innovation is expanding and changing every day. At NRG, we keep our eyes on the future, working to pioneer energy solutions that will sustain our planet for generations to come.

To our valued stakeholders:

Occasionally I make reference to the "four companies that will inherit the earth," by which I mean Amazon, Apple, Facebook and Google. While there is a hint of facetiousness in my designation – who can predict the future in the ever-changing business world – I do have infinite respect for them, their innovativeness, the quality of the service that each provides and, most of all, the comfortable ubiquity they have achieved in the hearts and minds and everyday lives of the vast majority of people, both at home and abroad.

What do these four very successful, but very distinct, companies have in common? They all provide products or services, directly to the consumer, which are deemed essential to the enrichment of their life experience, day in and day out. What causes these four companies to rise well above others that have similar offerings? The "Big Four" offer their own product or service in a manner that is more comprehensive, seamless, intuitive and, in the case of Apple, visually elegant, than their respective competitors. They enable, they connect, they relate, they empower.

There is no Amazon, Apple, Facebook or Google in the American energy industry today. There is no energy company that relates to the American energy consumer by offering a comprehensive or seamless solution to the individual's energy needs. There is no energy company that connects the consumer with their own energy generating potential. There is no energy company that enables the consumer to make their own energy choices. There is no energy company that empowers the individual wherever they are, whatever they are doing, for however long they are doing it.

And there is no energy company that the consumer can partner with to combat global warming without compromising the prosperous "plugged-in" modern lifestyle that we all aspire to - not just for us who are so blessed to live a prosperous life in the United States, but for the billions of people who live in the developing world and aspire to what we already have.

NRG is not that energy company either, but we are doing everything in our power to head in that direction…as fast as we can. But we need to pick up the pace further, and that is what we intend to do.

The good news is that we have been working hard over the past few years to put the pieces in place and, therefore, aren't starting from scratch.

Preparing to Win the Short, Medium and Long Term

So far in this letter, I have told you why we want to transform our company, our industry and our society. Now I am going to give you a glimpse of how we intend to do it, before ending with my vision of the outcome we hope to achieve. This is a bit of a broader and longer vision than you are used to, but as the owners of the company, you deserve to know where we are headed.

Just a few years ago the prevailing wisdom was that the path to a clean energy economy depended on our collective willingness to build a nationwide, high voltage transmission system in order to transport electricity in vast quantities from the relentlessly windy and brutally sunny parts of the country, where people generally don't live, to the more moderate places where Americans tend to congregate. The folly of that idea thankfully was realized before anyone actually began to build such an expensive and pointless white elephant. Now we are headed for the same goal BUT in the opposite direction: down the path towards a distributed generation-centric, clean energy future featuring individual choice and the empowerment of the American energy consumer.

The only real question is how quickly will this future occur?

Even if you believe, as we do, that this future world will be upon us with lightning-like quickness in electricity industry terms, in real time the distributed future is going to take a while to get here. In the meantime, the lights need to be kept on, homes heated and chilled and appliances powered up. So at NRG we are positioning ourselves to succeed during a prolonged period through which the traditional centralized grid-based power system co-exists with the fast-emerging high-growth distributed generation sector – much like fixed-line telephony has co-existed with the wireless world for a couple of decades.

So we are in the process of reorganizing ourselves from the customer's perspective. Our conventional generation business will be not only focused on maintaining our existing 50,000MW fleet in top operating condition, but also on repowering select plants with flexible fast start units located in advantageous positions on the grid. Furthermore, in response to the increasing realization in the business community that no serious industry or commercial enterprise can prudently run their business based on 100% dependence on the grid, we see a growing B2B opportunity for our wholesale business in "on-site" generation for industry and large-scale commercial customers. The cost to our business customer of maintaining localized generation will be defrayed by our ability to sell excess capacity and generation, on behalf of that customer, into the traditional grid.

As lack of confidence in the grid coincides with the introduction of new technologies, businesses and homeowners will realize that there is a better way. And, for them, that means generating most of the electricity they consume on the premises, from their own resources. In this new reality, our 'mass' retail electricity franchise becomes ever more important. Our retail focus is on ensuring that we remain a first mover in bringing technological innovation aimed at the home energy consumer to our customers, on terms that they find attractive. Our marketing relationship with Nest, and their award-winning learning thermostat, is a case in point. But it is only the beginning. We expect to be soon-to-market with a robust platform offering rooftop solar to homes and businesses and other forms of sustainable and clean generation that will offer our customers the ability to dramatically reduce their dependence on system power from the centralized grid.

And for the customer, business or individual who simply wants nothing to do with the grid, the centralized control it represents and the inhibition of individual choice and restriction of personal freedom that is implicit in being 'intertied' to the grid, there is the post-grid future – a future that is driven by renewables, incorporating both energy storage and sophisticated localized automation to balance production and load. There will be systems that harness thermal and electric synergies and incorporate not only clean energy, but also fresh water production, waste disposal and electrified transportation to create a virtuous circle of civil sustainability. We are just getting started in this area with, among other projects, our ground-breaking Necker Island announcement, but we expect to be a leader in the area of renewables-driven ecosystems. Our goal is to achieve the quality and ubiquity of energy outcomes on behalf of our customers that would one day cause us to be mentioned in the same breath as the "four companies who will inherit the earth." And in turn, our customers would have the same kind of experience with us that they have with the four of them, and we can emulate the shareholder value creation of four companies which, at present, have an aggregate market capitalization of over $1 trillion.

They Will Hold Us Accountable

As we forge ahead, I am mindful of the fact that the next generation of Americans – the generation around my soon-to-be adult children – is different from you and I. Somehow, some way, the next generation of Americans became "all in" in their commitment to sustainability, in every sense of the word, including clean energy. With them, it is built into their DNA, not just learned behavior as it is for us.

And make no mistake about our children. They will hold all of us accountable – true believers and climate deniers alike. The day is coming when our children sit us down in our dotage, look us straight in the eye, with an acute sense of betrayal and disappointment in theirs, and whisper to us, "You knew… and you didn't do anything about it. Why?" And for a long time, our string of excuses has run something like this: "We didn't have the technology…it would have been ruinously expensive…the government didn't make us do it…"

But now we have the technology – actually, the suite of technologies – and they are safe, reliable and affordable as well as sustainable. They do not represent a compromise to our ability to enjoy a modern lifestyle. They represent an opportunity for us to do the right thing while multiplying shareholder value through greater value-added services. And these technological solutions are focused on the individual consumer - both businesses and individuals – so the shameful passivity and failure to act of government is irrelevant.

The time for action is now; we have run out of time for more excuses.

You should know that I get up each day animated and motivated to lead NRG into a transformational role in the clean energy economy by my intense desire to have a better answer to that question when it comes from our children, whether it comes from your children or mine:

At NRG, we did all that we could, as fast as we could do it, and what we accomplished with our partners and customers turned out to be quite a lot. Enough, in fact, for you and your generation to finish the job …"

That would be a much better answer.

So let's make it happen.

David Crane
President and Chief Executive Officer

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