In the wake of Hurricane Katrina, oil companies are running scared and running ads. Raising the specter of diminishing oil reserves, Chevron promises to process oil more efficiently and exhorts automakers, scientists, government, and consumers to join the conservation effort (www.willyoujoinus.com). Consumers "must be willing to pay for some of these solutions," says Chevron, and warns "Inaction is not an option." BP’s advertisements tout natural gas.
David Crane, CEO of NRG Energy, a merchant power generator based at the Carnegie Center, also worries about the energy supply but has a different perspective. "We have been through an event that almost changes the whole rules of the game," says Crane. His 2,500-employee company, which uses coal, oil, and natural gas to fuel power plants, moved from Minneapolis to Princeton last year (U.S. 1, January 26).
Electric prices are temporarily frozen by regulation but can be expected to rise, says Crane. "Everyone is commenting that it costs $85 to fill up an SUV, that’s the single whammy. But there will be two more whammies. Home heating bills will be substantially higher. Ultimately, the higher fuel cost will be passed through with higher electricity rates. Some middle income people will get sticker shock this winter."
Crane hopes that Katrina and her sister hurricane, Rita, will trigger less dependence on oil. Just 30 percent of our oil is produced in the United States, and most of that comes through the Gulf of Mexico.
As for natural gas, that supply is dwindling and expensive, says Crane. Drilling has increased by 175 percent since 2002 and production since 2002 has declined by two percent. "So we are more dependent on imports." Crane compares burning natural gas in power plants to washing your hair with Evian. "It is too precious a fuel to be used that way."
Crane’s favorite topic is coal. "This country has only one affordable fossil fuel and that is coal," says Crane. "I’m not going to tell you that coal is a clean fossil fuel, but it is much cleaner than in the ’60s or ’70s," he says, citing a $50 million expenditure for environmental improvements at NRG’s coal fire plants. "A lot more needs to be done, but coal should not be a four-letter word."
"Ultimately this company (NRG) will do better because we make significant amount of electricity from coal fire generation. Even though it provides more than half of our power, we have enough coal for the next 300 years. By then we may be able to efficiently harness the wind, the son, and tidal power," says Crane.
NRG burns western coal rather than eastern coal, partly for environmental reasons (lower sulfur content) and partly because it is more abundant. Just the coal in the state of Wyoming could supply the country for 200 years, says Crane.
Crane tells of a school book cartoon that showed a smiling sun handing a check to a school boy. "I remember when I was 12 years old, hearing that by the time I was an adult, all my electricity bills would be free – paid by the sun," he says. "But we are really no closer to solar power than we were 46 years ago."
As for Hurricanes Katrina and Rita – they damaged 11 rural co-ops in that are NRG’s customers in Louisiana. The Washington Saint Tammany Parish cooperative was badly hit by Katrina, and Rita took out 100 percent of the power in the Jefferson Davis co-op.
"We were fully prepared," says Crane. His first goal was to protect power plant employees – and their families – by bringing them inside the plant. "Power plants tend to be quite secure places. As it happened the storm passed to the east of where our facilities were."
Then NRG helped its client power companies and the areas they serve. Immediately after the storm it extended its microwave communications network to allow local officials to communicate with recovery agencies. The officials are still using these transmitters. NRG also sent more than $500,000 in donations, including $100,000 in cash, a three-to-one match of employee contributions amounting to $290,000, plus the proceeds from a company picnic and charity auction, and three truckloads of food, water, and emergency supplies.
On Monday after Katrina’s weekend rampage, NRG’s traders at the Carnegie Center had to scramble. "On Friday the natural gas market was at $9 per BTU and it opened on Monday at $11. Anytime gas prices are double digits, that’s a very high price," says Crane. "It was quite warm in the northeast, and all our plants were running. Everyone had to be on top of their game to be sure the plants were supplied."
"We are all in for a substantial increase in energy costs, so don’t shoot the messenger," says Crane. "A company like us is passing through these costs. We are looking to be part of the solution, to expand the energy infrastructure around the United States rather than having it all come through Louisiana. There is a lot for all of us to do – in the public sector, the private sector, and as individual consumers and conservationists."
NRG Energy Inc. (NRG), 211 Carnegie Center, Princeton 08540-6213. David Crane, president and CEO. 609-524-4500; fax, 609-524-4501. Home page: www.nrgenergy.com