Last week, David Crane stepped down as president and CEO of NRG after holding the role for more than a decade.

Under Crane’s leadership, NRG launched a multi-pronged clean energy business with a unique focus on distributed, customer-centric products and services. Crane had a vision to transition the company from a traditional fossil-fuel power producer into a clean technology powerhouse. He wanted to make NRG the Google of energy.

“The riskiest thing in energy, and any sector, is to ignore the future change coming to your industry,” Crane said in a presentation to investors in January. “NRG is preparing for this future.”

In the wake of last week’s announcement, experts have been trying to parse out what led to Crane’s resignation and where the company will go from here, with Mauricio Gutierrez now at the helm.

In September, NRG introduced a “reset” plan. At that point, the company’s stock had lost more than 50 percent of its value over the previous 15 months. Crane announced the company would seek to cut capital by $1 billion next year, and move all emerging business operations into a “GreenCo,” with a strict spending cap of $125 million in 2016.

While investors had been calling for NRG to rein in spending, the stock dropped even further with news of the GreenCo, recently reaching a 10-year low.

“As part of the recent NRG Reset plan, the company laid the groundwork for reducing non-core operations,” Julien Dumoulin-Smith, equity analyst at UBS, wrote in an investor note last week. “But the question is how far...Gutierrez/the board [could go] in terms of reformulating the strategy.”

The end of NRG's green business?

During his tenure, Crane divided NRG into three distinct entities. NRG Business is the company’s conventional generation arm, with more than 45,000 megawatts coal, oil, nuclear and natural gas assets. NRG Renew develops and operates large-scale renewable energy projects, with roughly 4,000 megawatts of wind andsolar And NRG Home provides products and services directly to consumers, including retail electricity and home solar.

The newly formed GreenCo includes NRG Home Solar and NRG Renew, as well as EVgo, the company’s electric-vehicle infrastructure business, and Goal Zero, a portable solar device company NRG purchased last year. These businesses could now be on the chopping block.

At the same time, it’s unclear how NRG will continue to invest in carbon-capture technology and its secretive microgrid research arm Station A.

Dumoulin-Smith said he expects NRG to cut spending on EVgo “to the minimum required,” and for NRG to “divest what it can from the GreenCo to raise capital for further debt reduction/share of repurchases.”

Jigar Shah, president of Generate Capital and GTM contributor, predicted last week that NRG will very quickly start to look like Dynegy -- a major U.S. independent power producer that has doubled down on fossil fuels.

“If you’re the new CEO of NRG, your marching orders are to go back to owning very large power plants and keep giving [investors] a cash dividend,” Shah said on a recent episode of The Energy Gang.

Shah predicted that NRG’s Home Solar business would be one of the first things to go. And he’s not alone.

"I think the biggest thing about Crane's departure is that it solidifies the move away from home solar and distributed generation," Moody's Vice President and Senior Credit Officer Toby Shea recently told SNL Energy. "My understanding is that [Gutierrez] is a permanent CEO, and just given his background, the company is going to be going away from distributed generation and will be kind of sticking to its knitting."

Others believe that Crane could play a role in the company’s next transition.

“Some people in the industry think that he may have stepped down to essentially pursue GreenCo; basically, to go out and raise capital and essentially buy GreenCo from NRG,” said Michael Morosi, senior equity research analyst at Avondale Partners. “Some people think that we haven’t seen the last of David Crane in these renewable assets held by NRG.”

NRG representatives were unable to comment for this story. Passport Capital, the company’s largest investor as of Q2 2015, also declined a request to comment.

Balancing a clean and dirty energy mix

While David Crane will be remembered as the architect of NRG’s aggressive push into clean energy, NRG is still very much a traditional fossil-fuel power generator. Over the past decade, Crane invested around $1 billion in renewable energy, electric-vehicle charging, and carbon capture. But that’s only a fraction of the $10 billion he spent on acquiring large, centralized power plants.

NRG’s wholesale business, which holds 90 percent of the company’s generating assets, has seen significant losses this year. But NRG is not alone. American power producers are down across the board due to sluggish demand, rising environmental costs and plunging commodity prices.

NRG has also been hurt by its YieldCo. NRG Yield was the first YieldCo to IPO in 2013, and then saw modest growth through 2014. This year, the company's stock took a nosedive -- along with other YieldCos -- as investors questioned the model.

The most unique element of NRG’s story over the past few years is Crane’s push into the clean energy space.

NRG entered the distributed energy market in 2011 with the purchase of Solar Power Partners, a commercial solar firm. NRG launched into the home solar business with the acquisition of Roof Diagnostics Solar in March 2014. Since then, the company has purchased Verengo Solar’s northeast operations teams and Pure Solar’s customer acquisition platform.

The energy giant also sought to put solar-powered devices in people’s pockets with the acquisition of Goal Zero last August. At the same time, NRG has continued to grow its commercial solar business and pushed into the community solar space, while also expanding its electric-vehicle charging network and testing new microgrid solutions.

Earlier this year, Crane laid out a plan to double NRG’s earnings -- from $3.3 billion in 2015 to $6.6 billion in 2022 -- that hinged on targeting younger customers with cutting-edge technologies.

NRG has started to reap some benefits from its efforts. Rooftop Diagnostics was the eighth-largest solar installer in the country when NRG bought it last year. Today, NRG Home Solar is the fourth-largest residential installer in the U.S. with a 2 percent market share, according to the GTM Research U.S. PV Leaderboard.

However, the emerging businesses continue to lose money overall. Last quarter, NRG reported a $50 million loss from Home Solar alone.

Crane told the Wall Street Journal this fall that since he had tripled the company’s fleet of conventional power plants, he thought investors would be tolerant of the emerging businesses. Instead, they dismissed Crane’s strategy as risky and overly complex.

Stitching the NRG story together

NRG’s poor stock performance stems in part from a disconnect between the long-term underlying value of the company’s green assets and what investors are willing to pay for them today. While stocks are down, the renewable energy industry is growing rapidly. Technology costs are declining and projects are attracting record levels of investment.

But utility investors are typically risk-averse and expect stable returns. Pushing into new business segments -- especially residential solar, which has high customer-acquisition costs -- was probably “a tough pill for NRG investors to swallow,” according to one equity analyst, who spoke on background. “It’s not necessarily what they signed up for.”

At the same time, Crane couldn’t seem to get pro-renewable energy investors on board either, said Shah. And his core management team was only lukewarm on the strategy, which left the company with a handful of average clean energy businesses and a lot of pro-fossil-fuel investors.

“He was visionary, but he didn’t stitch it together,” said Shah. “When you’re spending as much money as NRG did, you should have bought the most valuable assets [...and] brought in the best executives and actually launched a profitable business.”

According to Shah, Crane would have been much more effective by investing in clean energy startups (the way Duke Energy bought a stake in REC Solar), rather than purchasing companies outright.

NRG has made strategic investments, however. The company has invested in EnTouch Controls, EcoFactor, Eos, FuelCell Energy and others.

And if Crane wanted to create the Google of energy, it’s hard to imagine how he could have done it at arm’s length. So he went all in, pushing NRG on multiple fronts at the same time.

“It’s all about customer acquisition, customer retention, cross-selling and up-selling,” Crane said during an investor day in January.

To help tell the story, Crane brought in veteran D.C. lobbyist Steve McBee to lead NRG Home. Over the past year, McBee has repeatedly made the case that the energy industry is on the brink of a major shift toward “consumerization,” much in the same way the transport, entertainment and music industries have been upended by user-oriented services like Uber, YouTube and Spotify.

“We’re in an environment where you’re much better off being aggressive, getting out on the edge of change, and dealing with the consequences of being too early, [rather] than waiting and trying to hedge against it and dealing with change once it’s already on top of you,” he said on a panel at Grid Edge Live in June.

Crane seemed to have a coherent strategy, but he ran out of runway before he could see his vision through. 

"Transformation is complicated"

“I wonder how much of the investor sentiment had to do with the actual strategy and the actual decisions and investments that NRG made, versus the way that David Crane talked about it,” said Shayle Kann, vice president of GTM Research.

In recent months, Crane spent the majority of NRG’s earnings calls talking about a small portion of the business. If he had focused more on shoring up the conventional business and downplayed the company’s clean energy investments, traditional investors might have eventually gotten on board.

An unfortunate side effect of Crane's resignation is that it may dissuade other CEOs from making similar moves in the clean energy space, said Kann.

The timing certainly didn’t help Crane's cause. If there hadn’t been a severe energy sector downturn as he sought to transform his company, he might have been successful.

“For me, the bottom line is that investors are not rational,” said Tom Konrad, manager of the Green Global Equity Income Portfolio.

“The investor appetite comes and goes with the tide,” he said. “When things are good, they’re all pushing acquisitions and rapid growth, and they’re willing to wait for the future for earnings. When things are tight, they say, ‘I want earnings now.’”

Over the next few weeks, Crane will assist with the leadership transition, and will likely try to help find a partner for NRG’s GreenCo. The tight $125 million budget gives the green businesses very little room to grow, and raises concerns about the pipeline of projects that could move into NRG Yield.

Before stepping down, Crane said that NRG would be willing to sell off pieces of its clean energy arm. He also reaffirmed his belief that investing in distributed clean energy is the only viable business model in the long run.

“The world is trending distributed; it's trending sustainable. […] That's where the future is, and that's where NRG, which started as a power plant owner, has been trying to move for the last five years,” he said at a Columbia University event last month.

"So we're in this surreal world where, strategically, no one is challenging us, but people say they hate it, because it's too complicated,” he said. “Well, transformation is complicated."

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Join GTM Squared for further insights on this topic and listen to the latest Interchange podcast episode, The World After David Crane: Will NRG Ditch His Visionary Plans for Distributed Energy?