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Americas Energy CEO Series: Mauricio Gutierrez, NRG

NRG CEO Mauricio Gutierrez sees renewables, shale gas, and digitalization as the three most important factors impacting power markets near term.

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In an interview with Platts on Wednesday, Gutierrez, who joined NRG in 2004 and took over the CEO spot from David Crane in 2015, reflected on these trends and how NRG is responding strategically.

Renewables, he said, will be the least expensive form of generation in the future. Shale gas is domestically abundant and will be the fuel of choice for power generation. And digitalization will give retail, industrial and commercial customers a wide array of "differentiated products.”

On the final point, he explained that customers are becoming "more powerful,” and electricity providers must be able to give them "customized energy.”

"We are entering a new phase, I think. There is technology interaction like never before,” and, he said, all of the company's customers should be consulting the NRG app on their phones.

"Look at what Uber and Airbnb did for their industries,” he said.

Gutierrez support energy-only market construct

Texas' ERCOT power market "has the best competitive model,” Gutierrez also said in the Wednesday interview.

The NRG CEO said he can see the benefits of capacity markets — which ERCOT does not have — and assured that NRG will work with all power markets "as they are.”

But, he said he appreciates how energy-only ERCOT "just lets the market work.” Price signals, he said, will tell you when to build and when not to build, and he noted that new power plants are 30-year investments.

Out-of-market actions — such as reliability-must-run, or RMR contracts — only "impede” an energy-only market. Over the last few summers in Texas, when demand is strongest, prices were "too low,” at around $35/MWh, he said.

Now, following coal retirements, ERCOT is entering 2018 with "the lowest reserve margin on record, at 9.3%,” which, he noted, is well below the target reserve margin of 13.75%, and, as a result, forward prices have risen out of concern the market will be caught short of power.

"For two years I have been talking about this. If we have the right price signals we will know where and when to build,” he said, adding that the more localized the price signals, the better.

"We need to let the market work, without compromising reliability,” he said.