In this week's edition of Let's Talk Energy, Robert Gaudette, President & CEO of US power producer NRG joins Noah to talk about how companies like NRG are responding to rising electricity demand as the affordability and reliability of the nation’s power system becomes a central issue in US elections. Stream the full episode now: The data center power crunch: “Physics is going to win” — Robert Gaudette, President & CEO, NRG

NB: What exactly is NRG’s Bring Your Own Power (BYOP) strategy, and how is it different from the ways companies have traditionally supplied electricity to a large new customer? 

Robert Gaudette: "Electricity is the fabric that society is built on top of. You need electricity for every business, every home, it's important. It's become much more important over the last few years with remanufacturing and EVs and data centers. When you think about how you would supply a customer - one is you just plug them into the grid, right? Well, that works, and it's worked historically over time. But it creates strain on the system. It ultimately raises prices over time, and it can create disparities around who's using power and who's paying for what. The second option is you just plug a big load into the back of a power plant and some people have done that. You've effectively retired a power plant by doing that, and that creates problems around price, and it can create actual reliability problems around the system. And then you have our approach, which is Bring Your Own Power. And what that says is, hey, if you're a really big load, a very large industrial data center load, you need to be a good grid citizen. You need to bring power, so you bring your own generation and the product that we have - they're bringing state-of-the-art CCGT, so combined cycle gas turbine, which provides enough power to power their facility and contributes to the grid." 

NB: How do you respond to political criticism that data centers are not doing enough to prevent straining the grid and are not addressing local concerns about power prices and water use? 

RG: "So, rather than how we got there, I focus on how we move forward. We have always focused on what the right way to do this was. The product that we have happens to be that, and so we're focused on helping our customers or potential customers, the data center guys, think through. All right, look, these politicians and elected officials are protecting their stakes. I empathize with their needs. Their voters are my customers. I get it. The product that we have, the thing that we're offering you, can contribute from an affordability perspective. You can protect reliability. Our design is smart from a water perspective, which is important in some states like Texas." 

NB: Is the demand growth we're seeing from data centers a genuine supercycle, or is some of it speculative? 

RG: "I would say yes, and no. It is a demand supercycle. There's no question about it. I've been in the business for 25 years. Growth was about 1% on a good day over that time period, or at least the first 20 years, and then you saw Texas kind of explode as industry moved down here, and then you've seen it across the country. More electrification has occurred. Manufacturing's coming back. You have EV mandates in states. Homes use more power than they used to. All of those things already create growth in the sector that's kind of unheard of, or at least not in my time period. And then you add data centers. So, I would say we have a demand supercycle. I wouldn't question that at all. When you see some of the demand forecast for data centers - so in ERCOT, there's a number out there that says 500 gigawatts. Now that's on a system that has 91 as the most recent peak. That's not going to happen. Physics is going to win, and when you think more rationally, 40 gigawatts is probably the right amount." 

NB: Are competitive de-regulated power markets fit for an era of rapid growth? Or do we need to rethink how power systems acquire the generation they need?  

RG: "I'm completely biased. I'm a huge competitive markets supporter, and the reason I am is because they always put the risk to the right people. So as a company in a competitive market, I make a decision, I wear that risk. In a regulated market, somebody makes a decision, it's a bad decision, the rate base wears that risk, right? So I believe that the risk transfer is an important part that nobody talks about in the competitive markets." 

NB: NRG has put an emphasis on demand-response – this encouraging customers to use less energy at times of peak demand -  How has that business evolved and what's the benefit for customers? 

RG: "Through acquisition and otherwise, we have about 7,000 megawatts of DR, demand response. I have 25,000 megawatts of [generation]. I've got 7,000 megawatts of the opposite, right? We developed a product called VPP [virtual power plant] that we tested down here in Texas, had really good uptake, - 10 times what we thought was going to happen - and now we're moving that into the East. And that's working with consumers to just adjust their thermostat - not turn everything off for five hours - but adjust the thermostat to help them save money and ultimately provide a relief to the market. And the work we've done shows they can save $200 a year.” 

NB: Your growth strategy has been primarily focused on natural gas. Where do solar, wind, geothermal, small nuclear reactors fit? 

Rob Gaudette: "Look, we have been proponents of renewable energy over time. We have about 2,000 megawatts of solar and wind under contract. So we're believers in renewables. We don't dislike any of that stuff. We are also in contact with all of those technologies. So the leaders in geothermal, the leaders in SMR [small modular reactor] tech, batteries. We're talking to them from a contractual basis, not necessarily that I'm going to go build something, but I will take offtake because I believe they're important parts of the portfolio. Every component in the system plays a role, but no component can play it by itself. So SMRs, whenever you think those are going to be commercial, but let's just talk about nuclear generally, carbon-free energy, great baseload energy, not super flexible. But they have a role to play. Batteries are great, but they don't actually produce energy. They just move energy between time. Wind and solar are zero cost resources as long as the wind's blowing and the sun is out. All of them play a role." 

Stream the full episode now: The data center power crunch: “Physics is going to win” — Robert Gaudette, President & CEO, NRG