Can NRG and GE Save Electric Cars?

In recent weeks, NRG Energy (NYSE: NRG  ) , a wholesale electricity company, and General Electric (NYSE: GE  ) announced investments in the electric vehicle market. In both instances, the companies are attempting to solve chicken-and-egg like problems facing the mass adoption of electric vehicles -- and create a new revenue opportunities for themselves in the process.

Right now, electric vehicles are more expensive to produce than comparable combustion engine vehicles. Yet if more were produced, costs would decline. GE is working to remedy the problem by purchasing 25,000 electric vehicles over the next five years, starting with General Motors' (NYSE: GM  ) Chevy Volt.

In the words of GE CEO Jeff Immelt, "By electrifying our own fleet, we will accelerate the adoption curve, drive scale, and move electric vehicles from anticipation to action." The company estimates that it could generate $500 million in revenue from the electric vehicle market in the next three years, and presumably much more in the future if the market takes off.

With a paucity of charging stations, electric vehicle owners risk "running out of gas" before they reach their destination, deterring interest in the vehicles. Yet, a network of charging stations is unlikely to emerge until a critical mass of electric vehicles gets onto the road.

NRG plans to invest $10 million to build out a network of electric vehicle charging stations in Texas. The company is partnering with retailers such as Walgreen (NYSE: WAG  ) and Best Buy (NYSE: BBY  ) for charging-site locations. NRG aims to sell subscription services for its charging sites and for home-based charging. As an electric power producer in the state, the company could also benefit by increasing the demand for electricity, particularly during off-peak-demand hours.

Can GE and NRG solve these thorny problems in a profitable fashion? Only time will tell whether their investments pay off. Let us know what you think in the comments section.

Fool contributor April Taylor does not own shares of the companies mentioned. Best Buy is a Motley Fool Inside Value and a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended buying calls on Best Buy. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 22, 2010, at 10:04 PM, BobMichigan wrote:

    With a paucity of charging stations, electric vehicle owners risk "running out of gas" before they reach their destination

    Sounds like a rousing endorsement of the Volt to me.

  • Report this Comment On November 22, 2010, at 10:37 PM, kdt34wqx wrote:

    Look at his track record. Immelt has no clue what he's talking about. Immelt isn't even an engineer. He has no way of knowing if this product has any future or it's just another GM "concept car". Immelt needs to be fired before GE becomes Enron.

  • Report this Comment On November 23, 2010, at 4:45 AM, nunnatheabovetwo wrote:

    The word in this part of the country is that NRG plans to place charging stations in and around Houston, Austin and San Antonio. This would cover a significant area of Texas. Large enough to put this "trial ballon" to the test. It should be interesting.

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