By Paul Ring

NRG Energy has partnered with the Huffington Post in what is essentially a glorified advertisement in presenting a forum for discussion of all things green/smart energy and sustainability, called Generation Change, as NRG further attempts to position itself as a "progressive" energy company.

All well and good. Except in an opening post, NRG CEO David Crane compares himself to Howard Beale, the "mad prophet of the airwaves" from Paddy Chayefsky's 1976 Oscar-winner Network, and the implication is that NRG is a Beale-like refuge among backwards companies in the energy sector, with NRG striking out to advance the noble goals of energy choice and self-determination.

As Network is one of our most beloved films, we cannot let this gross fiction go unchallenged. I know Howard Beale, and let me tell you, David Crane is no Howard Beale.

Can you imagine Howard Beale siding with the incumbent corporations in playing a game of brinkmanship with the representatives of the people, by prophesying that if the people don't pay subsidies to corporations, people won't have enough electricity, and there are going to be blackouts which will be, "a threat to economic growth and [which] can endanger the public."

Maybe the Howard Beale at the end of Network, the one that has been co-opted by the corporations, but not the original mad prophet.

Crane's NRG repeatedly and we can assume to this day -- since we have seen no public repudiation of its stance -- sought an anti-competitive, anti-choice, anti-end user capacity market in Texas, the type of symptom of a broken government and failed system of free enterprise Beale would rant against.

The capacity market is a centrally planned electric system without price controls. The government -- driven by industry-dominated stakeholder processes -- tells customers what to buy, how much to buy, when to buy it, how long to buy it for, and what price to buy it for. Any pretense that this is a market is fatally undone when considering that customers are mandated to participate, prices are driven by design decisions made by regulators, and the fact (witnessed repeatedly in the East) that if the auction prices depart from what bureaucrats think the price should be, the government will continually change the market in an attempt to get the "right price" (a notion so fundamentally antithetic to free markets we cannot conceive there is any real debate on this issue).

Compare the reality of the capacity market with Crane's lofty words from the initial "Generation Change" post.

Crane urges readers to, "rail against a sclerotic and tangled regulatory system and statutorily mandated industrial framework that denies you choice in terms of your own energy destiny, frustrates your ability to get maximum value out of your own clean energy resources, and puts the interest of the energy production and transportation complex ahead of you, the end-use energy consumer."

Taken at his word, Crane is inviting a repudiation of the existing Eastern capacity markets, and assurance that one will never be adopted in Texas.

Let's break Crane's statement down word for word.

A capacity market certainly is a, "sclerotic and tangled regulatory system," and essentially reflects a, "statutorily mandated industrial framework" (in so far as capacity market tariffs have the force of law).

A capacity market unquestionably, "denies you choice in terms of your own energy destiny." It's one size fits all; everybody has to buy the same government-defined capacity product.

A capacity market indisputably, "frustrates your ability to get maximum value out of your own clean energy resources," with static capacity tags, mandatory multi-year forward auctions (which don't recognize short-lead times for distributed installations), and disparate treatment of behind-the-meter generation and demand response (if they are allowed to compete at all).

And finally, a capacity market, "puts the interest of the energy production ... complex ahead of you." Indeed, it is the ultimate example of compelled collectivism. Because of phantom fears about the economic and health impacts from never-seen blackouts due to a lack of "resource adequacy", we need to put a capacity market in place to subsidize power plants to be available -- something they need to do in any case to make any sort of profit.

On the broader point of sustainability, we can't think of a larger hindrance to clean energy than a centralized capacity market, for a variety of reasons.

First, we already saw in PJM that the introduction of RPM did not usher in a new future of cleaner, more efficient plants, but only prolonged the lives of older, dirtier assets that were originally expected to retire due to their age (hence the reliability "crisis" and need for subsidies for new plants). Of course, in what should not have been a shock given the strong incumbent supplier support for RPM, the PJM capacity market extended the lives of older, dirtier, and less efficient plants, by erecting barriers to entry for new plants, through creation of an artificial divide in compensation for fixed and variable costs and creation of a market-skewing preference for power plants with low fixed costs (the old, dirty existing fleet) regardless of whether they were the economic choice on an all-in cost basis. This kept newer, cleaner-burning plants out of the market, because with their higher fixed costs from new construction, they could not clear the artificial capacity market which was skewed by dirtier plants with lower fixed costs (but in reality, high variable costs).

Second, if we are to believe the claims of capacity market supporters, the capacity market should eliminate scarcity pricing, since we will have attained resource adequacy. However, this lowers the inherent value in distributed generation and load response, and will discourage its installation. The true value of these cleaner resources, such as solar, is from avoiding super-peak prices, but the capacity market is pitched as eliminating such prices, and will therefore stunt the growth of peak-shaving, load-managing products that we are seeing develop currently in Texas (but not the Eastern RTOs).

Which also brings us to the third point. Due to their intermittent nature, many clean power resources will be undervalued by the capacity market, further inhibiting their development. In the energy-only market, these resources are paid the same as all other units -- for their performance when called. However, in the capacity market, some bureaucrat has to determine how to establish the capacity value of each class of intermittent resource, and the resource no longer receives the same value from being available when truly needed (since we have eliminated super-peak pricing with the capacity market, the distributed resource no longer has that revenue stream, but also can't enjoy full capacity revenues as competing, dirtier power plants do).

Finally, as noted above, capacity markets are not designed to accommodate customer-side resources, with their forward procurement and static capacity tags, essentially making the customer wait to realize the value of their energy choices.

Of course NRG, though not directly, does try to smooth over this bald incongruity of its support for clean energy and energy self-determination, yet its devotion to a capacity market, with its standard refrain that, "We are running flat out to embrace the clean energy future, while at all times being mindful of our critical role in keeping the lights on in all of the markets we serve." (emphasis added).

Simply put, that's trying to have your cake and eat it too.

Though not specifically here, NRG has in other places emphasized that a transition period will be needed before we reach the clean energy future of self-determination.

Even if we were to grant that argument, nothing in NRG's support for a Texas capacity market was premised on the market being a transitional mechanism. At no point did NRG commit that, once new technologies -- such as more distributed resources, EVs selling back to the grid, its Beacon 10 solution, etc -- were thoroughly adopted that the need for a capacity market would be eliminated. Nor did NRG even discuss, let alone propose, a sunset date for any capacity market adopted by Texas.

Back to Network.

We have to marvel at the audacity of invoking Howard Beale -- apparently without irony -- in a "partnership" between a Fortune 500 company and an ostensible "news" organization (or content provider). This "synergy" seems like the thing Beale would rail against.

Above, we called the partnership a glorified advertisement. We wish to stress we have no knowledge as to whether NRG is monetarily compensating Huffington Post for its inclusion on Generation Change, but Huffington Post clearly labeled Crane's post as an "advertisement." (Other content hosted on Generation Change are non-advertisement news stories by various authors).

As Howard Beale said, "[W]hen the twelfth largest company in the world controls the most awesome, god-damn propaganda force in the whole godless world [meaning television], who knows what sh-- will be peddled for truth on this network."

We stress again we do not mean to imply NRG has control over content on Generation Change, but merely point out the mix of news and corporatism in light of Beale's warning.

We further chuckle at the idea of NRG launching Generation Change as some sort of forum for a, "realer than real dialogue around climate change, global warming, clean technology and energy-efficiency," as described by an NRG blog post.

The Huffington Post is many things, but it's probably not thought of by many as a forum for "real dialogue." It was specifically founded as a "liberal" alternative to the Drudge Report, was described as "pugnaciously liberal" by Washington Post media critic Howard Kurtz in 2007, and is essentially a left-leaning echo chamber.

In his post, Crane even throws some red meat out to the HuffPo commentariat, taking a potshot at the Koch brothers, and condemning the, "climate change denial industry." Although Crane initially puts forth these notions as skepticisms of the reader, he then goes on to say that readers are "right" for having these notions.

Is that what real dialogue is? Ad hominem attacks?

Which brings us back to Beale. Beale's words were about television, but were he here today, we are confident that he'd apply them to the internet as well.

Beale warned:

"Television is not the truth. Television's a god-damned amusement park ... We're in the boredom-killing business ... [Y]ou're never gonna get any truth from us. We'll tell you anything you wanna hear. We lie like hell."

We wonder what Beale would say about Generation Change.

Crane's HuffPo piece is subtitled "Why We Should All Be 'Mad As Hell' About Energy Freedom In America."

Texas customers -- the only customers in the U.S. to have true energy freedom -- should be mad as hell David Crane wanted to take this freedom away. We publicly challenge NRG: If it wants to lead the revolution in energy freedom, it should immediately and unequivocally disavow, in a docketed filing in PUCT Project 40000, any and all support it previously gave for the anti-choice and anti-consumer capacity market.

Tags:
NRG Energy   Texas   Capacity Market   David Crane   Clean Energy   Solar  

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