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NRG Partnership With Renew Home Gives NRG "Exclusivity" On New Google Nest Demand Response Enrollments In Texas
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NRG Energy's new partnership with Renew Home to create a 1 GW residential virtual power plant (VPP) in Texas provides to NRG "exclusivity" to all new Google Nest enrollments into demand response in Texas, Rasesh Patel, President, NRG Consumer, said in an earnings call today
See background on the VPP partnership here
In a presentation, NRG also described that it is, "the partner for all new Google Nest VPP enrollments in
Texas".
Under the partnership, Renew Home will provide "significant" co-funding of customer
acquisition costs for the VPP
Specifically, during an earnings call, Patel said that Renew Home will co-fund up to $150 of customer acquisition costs under the VPP partnership.
NRG has a profit sharing agreement with Renew Home for the supply-side benefits of the VPP. Patel said that NRG will retain over half of the economic benefit from the supply-side of the VPP
NRG will retain 100% of the economic benefits of the consumer side of the VPP (e.g. arising from the sale of the products and services). NRG said that it expects that the VPP offer, which will be part of a new smart home services bundle (Home Base Essentials), will increase customer margin, engagement, and retention, while also providing incremental recurring revenue from additional smart home services that customers may purchase
At scale, for a 650 MW VPP, NRG anticipates approximately $110 million in annual recurring margin to NRG from the VPP -- $80 million from consumer value (retail and smart home), and $30 million (after the profit sharing) from supply-side value.
For a 1 GW VPP, NRG projects the total annual incremental margin to NRG to be about $162 million
NRG's new smart home bundle (called Home Base Essentials), to be offered to residential customers in Texas, will include at no additional cost a smart thermostat and a doorbell camera, with professional installation. The plan will include a single interface for convenience and control, NRG said
The smart home bundle will not have an additional cost for NRG customers. To the extent a customer leaves NRG retail electric service, the bundled smart home services will cost $14.99 per month
NRG will begin Texas market-wide enrollments for Home Base Essentials in spring 2025, after having tested the product this year
Generally, Patel said that NRG is seeking through Home Base Essentials and the VPP to leverage its approximately 40% residential market share in Texas to expand NRG's "wallet share" for customers
NRG will be responsible for the customer relationship, experience, and dispatches for
VPP events
NRG said that the VPP delivers capacity at 10% of the cost of a physical plant -- citing ~$1,000+/kW for a peaker versus ~$100/kW for the VPP
NRG also said that the VPP serves as an alternative to insurance products for superpeak swing retail loads
NRG confirmed that it will consider expanding the VPP to markets outside of Texas
NRG provided the following interim targets in achieving the 1 GW VPP in Texas:
NRG will also expand its C&I offerings with advanced products such as load management and reduced carbon options, the company said
Turning to quarterly results for the third quarter of 2024, NRG reported, "expanded margins across all segments".
For NRG's Texas segment, third quarter 2024 Adjusted EBITDA was $584 million, $32 million higher than the third quarter of 2023. This increase was
a result of higher gross margin including lower supply costs and higher revenue rates, partially offset by asset sales in 2023, NRG said
For NRG's East segment, third quarter 2024 Adjusted EBITDA was $164 million, $7 million lower than the third quarter of 2023. This decrease was
driven by higher operating expenses, partially offset by increased retail natural gas margins and increased customer counts, NRG said
For NRG's West/Services/Other segment, third quarter 2024 Adjusted EBITDA was $50 million, $25 million higher than the third quarter of 2023.
This increase was primarily driven by lower retail power supply costs, partially offset by the timing of outages at Cottonwood, NRG said
Addressing both the East and West/Services/Other segments, NRG said that improvements were primarily driven by lower power and natural gas supply costs resulting in margin expansion and an increase in average customer counts of 7%.
NRG said that, for the third quarter, its Home Energy subscribers were +4% YoY
NRG provided an update on the proceeds from the sale of its HVAC business unit Airtron, which closed in the third quarter. NRG had originally announced a purchase price of $500 million for the sale of Airtron subject to customary adjustments. In an update, NRG said that it sold Airtron for net
cash proceeds of $484 million, with approximately $425 million expected after taxes and fees.
In providing its 2025 capital allocation, NRG allocated $40 million to acquisitions of small books of retail customers, the same level allocated in 2024
NRG reported retail energy volumes as follows:
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Renew Home To Provide "Significant" Co-Funding Of Customer Acquisition Costs, NRG Says
November 8, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
MW Customer Count
(in 000s)
2025 20 150
2027 300 300
2030 650 450
2035 1,000 625
3Q24 3Q23
Texas EWO Texas EWO
Home Power (TWh) 13 5 15 4
Business Power (TWh) 11 15 12 16
Total Power (TWh) 24 20 27 20
Total Natural Gas (MDths) -- 358 -- 400
EWO: East/West/Other; includes Services
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