(Bloomberg) — NRG Energy Inc. is co-opting a key strategy that sped the growth of wind and solar farms to build new natural gas-fired power plants.
The electricity retailer is seeking investors to fund new gas plants that would mostly be used during high-demand hours, including in Texas, according to Chief Executive Officer Mauricio Gutierrez. NRG wouldn’t own the plants, but instead buy their output under long-term contracts — deals that can hedge against high power prices on days of high electrical demand.
Power companies are racing to find or add generation to meet demand when extreme heat or cold saps supplies. Those days are becoming increasingly common as the climate warms — especially in Texas, where NRG is a major retail electricity provider.
Electricity use is surging in the Lone Star State amid strong economic growth and extended heatwaves. At the same time, the state’s main grid has become reliant on cheap-to-build renewable plants that produce when there’s wind or sun, weakening the competitiveness of thermal power projects — and making it harder to build new gas-fired units. There’s also market uncertainty: Rules that would determine the profitability of new gas plants remain in flux more than 17 months after a winter storm in the state caused deadly blackouts.
Read: NRG to restart Texas coal-power plant unit by end of 2Q 2023
New gas projects could be financeable if they have long-term power-purchase contracts supporting them — a proven strategy for wind and solar development. California already relies on long-term contracts for gas generation.
NRG is seeking funders for a ready-for-construction project as well as another that’s being permitted, but didn’t disclose the fuel source or location of the developments. It shares rose as much as 6.1% on Thursday, the most in intraday trading in almost three months.
“We want to make sure that our supply is keeping up with the transition that we’re seeing in the electric grid,” Gutierrez said Thursday on a call with analysts.
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