President and CEO of NRG Energy, Inc.
Grad school: MS, Petroleum Economics ’99, IFP; MS, Mineral Economics, CSM
Undergrad: BS, Industrial Engineering, Universidad Panamericana.
Hometown: I was born and raised in Mexico City, where I lived and worked for number of years until I was 27, then I went to grad school. As part of the Mines dual degree program, I did a year in Paris, then a year in the Golden, then ended up in Houston for a number of years. I’ve made Princeton, NJ my hometown for the past 13 years.
I remember Golden fondly. I was there two years ago and I enjoyed the smell of Coors, which we all get accustomed to when living in Golden. It brought back great memories.
I had a chance to meet some of the Mines students at Duke and it was great to interact with them. I was pleasantly surprised that we had a contingent of Mines students in the case competition at Duke Energy Week.
Why did you choose Mines, and more specifically, the Mineral Economics program?
It’s actually a funny story. Back then, I had already been involved pretty significantly in deregulation of the natural gas market in Mexico, so I got involved in econometric models. When we finished that process, I decided to pursue a graduate degree. Very quickly, I realized my passion was energy economics or applied economics, particularly in the energy sector. I made all the arrangements and was going to enroll at the University of Colorado Boulder.
Then, I met Carol Dahl. She’s a very well respected economist in econometric modeling. She talked to me about the dual degree program. I toured Mines, looked at the academic curriculum, and I was very impressed. I was particularly impressed with level of sophistication and the applicability of program. I remember having a conversation with Graham Davis about real option theory and applying real option on asset valuations, so I immediately got hooked. And, of course, the location is not too shabby. Spending a year in Paris, then a year in Colorado is everybody’s dream.
I knew that I was going to focus on the energy industry and economics was the right complement for my undergraduate degree. Most of the people that I know went directly to an MBA program and I wanted something more focused on the energy industry, with a high level of finance and economics. I was able to achieve that at Mines.
My undergrad was industrial engineering with a heavy emphasis on finance. So for me, this was a continuation of that in terms of applied economics. But of course, in industrial engineering, you have the foundation of electrical and mechanical engineering. I felt that I needed to expand my understanding of decision analysis, real options, econometric models, applied economics.
What stands out in your mind regarding your time at Mines?
First and foremost, it was the faculty. The professors, Michael Walls, Graham Davis, Rod Eggert, Carol Dahl, I remember all their names. They were all passionate about what they were doing. Not only did they have the patience and the aptitude to teach, but they are active in their respective fields outside of school. They’re very well recognized. The faculty makes all the difference in the world. It doesn’t hurt that my classes were in beautiful Colorado and Paris, but to me, the faculty is what stood out.
Where do you most use your Mineral Economics training and how did it prepare you for this position (and previous positions in the energy industry)?
I went into the business and my first area of focus was asset valuation. I was looking at power plants as real options right out of grad school. I hit the ground running after having Graham Davis as a professor. Very quickly, I went into trading, both at Dynegy in Houston, and then at NRG. I traded power and gas for a number of years before going into the management route. I became COO, and ultimately CEO a year ago.
The area that helped me was understanding the economics of projects, being able to quantify risk, and sensitize the value of assets within an uncertain framework. That equipped me with a set of skills and abilities I was able to immediately put to work as an analyst valuing generation assets. Over time, it changes. It allows me to think about the portfolio management/optimization, the optimal composition of portfolios, it always comes in handy with the valuation of assets, or projects. In my position as CEO, one of my main responsibilities is capital allocation. I have to decide from a number of projects, and perhaps all of them are good projects, but I have a limited amount of capital to deploy, so I have to prioritize what is the risk/reward on each project. I think back on my days in Golden and it helps me put it into a much better perspective.
What is your role at NRG Energy?
As president and CEO, I’m responsible for defining the long-term strategy of the company: the vision, mission, strategic objectives that we have. Part of that is also defining the culture that you want to have in a company. Of course, we have to live within our means, so when we allocate capital, we have to make sure that we prioritize all these projects, and that we do it in an efficient way.
I’m also the spokesperson for company, both with investors and stakeholders, who can be as varied as regulators, system operators, environmental and governmental agencies, and educational institutions. I have to be able to articulate the vision of company, not only defining it, but also implementing the strategy.
I’m fortunate to be in this position during a time of significant transformation in the electric sector with the amount of renewable generation that we’re seeing installed in the country, with the amount of innovation in new generating technology – like battery storage, rooftop solar, and fuel cell energy. This transformation is also about empowering customers at individual level, to understand where their electricity comes from, how it’s produced, and how much they want to use. It’s really about empowering customers with more information, not less information. Unfortunately, that’s been the norm in our industry. You just flip the switch, pay the retail rate and don’t ask questions. You just know that there’s a utility that provides energy/electricity. We’re trying to engage with consumers so we can better inform them of their options. Perhaps they want to install a solar panel on their roof or have a backup generator because they don’t want to run out of power, or maybe they want to have a smart home with appliances that turn on and off at right time of the day. That’s what we’re trying to do.
What is your vision for the company?
Our company is going through a significant transformation, which is the result of wanting a cleaner energy future. Our vision is to create a sustainable energy future and we will do that by providing reliable and cleaner energy for our customers. We believe that if we do that, we will create value for all our stakeholders. “Sustainable” is a powerful word, it’s not only having cleaner, faster, better, more reliable generation; it’s also in the context of a business model that can withstand very different commodity price cycles. That’s the objective of the company.
Not only are we optimizing the generation we have – which today is the largest competitive power company in U.S – we’re going into the renewable sector because it’s a significant opportunity to evolve from the traditional forms of generation, to new forms of generation. We’re doing that in a way that allows us to offer that electricity to our customers, and empowering them to make better choices.
For so long, consumers have taken what the electricity company gives them. You know it’s there and you have to pay your bill, or your electricity gets cut. Today, we’re trying to make it more palpable for individuals to interact with electricity. That means installing rooftop solar, putting electric car charging stations in your home, installing a backup generator or smart thermostats, connecting your refrigerator and HVAC together in a way that lets you use energy where you want. If you want to make a statement by having 100 percent renewable energy, we can work with you. Customers want that and we’re working hard as a company to provide it.
In your opinion, what is the future of energy in the U.S.?
For the past couple years, the big priority has been to decarbonize the grid. Everyone acknowledges climate change as a threat to our generation. Decarbonization is the response to ensure that we reduce the risk of climate change, With the outcome of the election, perhaps those efforts will slow down. It’s hard to tell, but from the remarks that have been made, I would think that climate change is not in the top of the Republicans priority list. Perhaps that could potentially slow down the implementation of renewable energy in the U.S., but on the other hand, this is driven primarily by the states. We have to see what is under state jurisdiction versus what’s under federal control. If I were a betting man, I’d say renewable energy might slow down somewhat and perhaps other forms of traditional generation that have a somewhat limited life, like coal and gas, they may get an extension.
What are the biggest challenges that new graduates face in the marketplace in terms of building a successful career?
- You have to have a solid academic foundation.
- Choose the industry wisely. If it ends up being the energy or oil and gas industry, you have to have an incredible amount of passion for the industry.
- Projection. You have to be able to communicate very complex problems into something that is easy to digest so people can understand easily.
If those are the three traits that employers are looking for, they also represent some of the key challenges. I see a lot of graduates that excel in one area, but they can’t do the other two. In the energy and power industry, the big challenge is that it’s an industry that is reinventing itself, so the old skills will not be needed for the new world. Making that transition can be difficult for professionals. On the other hand, because we’re in the middle of this massive transformation, it’s fertile ground for new students because this is the perfect time to get into an industry.
From a curricular perspective, identify key areas of excellence that MEE should emphasize to better prepare graduates for the workplace.
Mines does fantastic job in terms of risk management, asset valuation, and economics. Making the connection between theory and practice always goes a long way. One thing Mines could benefit from is that soft component. The students may be incredibly smart, but if they can’t articulate, it can be very difficult. Including communications skills and classes, ways to increase self-confidence, and helping students to better communicate and manage would be very beneficial.