By Chris Martin, Mark Chediak, and Ken Wells August 22, 2013
Illustration by Jordy van den Nieuwendijk
There are 3,200 utilities that make up the U.S. electrical grid, the largest machine in the world. These power companies sell $400 billion worth of electricity a year, mostly derived from burning fossil fuels in centralized stations and distributed over 2.7 million miles of power lines. Regulators set rates; utilities get guaranteed returns; investors get sure-thing dividends. It’s a model that hasn’t changed much since Thomas Edison invented the light bulb. And it’s doomed to obsolescence.
That’s the opinion of David Crane, chief executive officer of NRG Energy, a wholesale power company based in Princeton, N.J. What’s afoot is a confluence of green energy and computer technology, deregulation, cheap natural gas, and political pressure that, as Crane starkly frames it, poses “a mortal threat to the existing utility system.” He says that in about the time it has taken cell phones to supplant land lines in most U.S. homes, the grid will become increasingly irrelevant as customers move toward decentralized homegrown green energy. Rooftop solar, in particular, is turning tens of thousands of businesses and households into power producers. Such distributed generation, to use the industry’s term for power produced outside the grid, is certain to grow.
Crane, 54, a Harvard-educated father of five, drives himself to work every day in his electric Tesla Model S. He gave his college-age son an electric Nissan Leaf. He worries about the impact of warming on the earth his grandchildren will inherit. And he seems to relish his role as utility industry gadfly, framing its future in Cassandra-like terms. As Crane sees it, some utilities will get trapped in an economic death spiral as distributed generation eats into their regulated revenue stream and forces them to raise rates, thereby driving more customers off the grid. Some customers, particularly in the sunny West and high-cost Northeast, already realize that “they don’t need the power industry at all,” Crane says.