This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.Guest Blog | March 7, 2014
Over the past few months, we have seen several signs that Duke Energy has shifted its attitude towards renewable energy and solar power in particular. The three most critical signs are:
- Duke Energy has rolled out a campaign to mislead the public about customer-owned solar generation.
- Duke Energy still refuses to evaluate solar power as an alternative resource in its planning process.
- Duke Energy rejected our call for additional solar power that costs less than operating power plants.
In 2009, we saw Duke Energy begin to take steps to experiment with how solar energy could be supported and even expanded on its system. For example, SACE supported a moderately controversial proposal by Duke Energy to own a significant amount of customer-sited rooftop solar as a way to try out different models of supporting solar energy. Duke Energy has also talked to us about how rooftop solar might be tied in to emerging smart grid technology to improve system reliability. Neither of these steps was a game changer, but both were “forward leaning.”
We kept reaching out to Duke Energy in different ways, looking for that “game changer” step. Along the way, some Duke Energy staff told us that after the merger, it would take a little while for things to move forward. Unfortunately, it seems like after waiting, we’re seeing retrenchment towards a “compliance-only” business model. And we’re not the only ones who are concerned: former Duke Energy CEO Jim Rogers has spoken out with criticism of the approach being taken by current utility management.
Jumping to conclusions about solar
In several recent filings, Duke Energy indicated that it was studying the impacts and benefits of solar energy. We were excited about this, because various “Value of Solar” studies have shown that utility systems often benefit so much that simple “net metering” deals actually underpay for solar power. Instead of waiting for the results of its own studies, Duke CEO Lynn Good and other Duke Energy executives are now engaged in a broad attack on solar power, characterizing homeowners with solar power as taking advantage of low-income customers and not ‘paying their fair share.’
Duke Energy’s hidden agenda in attacking solar net-metering policy is the simple fact that customer-owned solar generation challenges their central utility business model. Just as telecommunication companies had to adjust to cellular phone technology or how digital cameras changed the way we take photographs, Duke should embrace the technological advancement that allows customer-owned solar power rather than feebly attempt to cling to a crumbling business model. – Stephen A. Smith, SACE Executive Director
Duke Energy’s rhetorical attack on solar has hurt businesses (words can hurt). As stated in a filing by the North Carolina Sustainable Energy Association, “Duke Energy Corporation’s mere messaging is contributing to potential rooftop solar customers sitting on the sidelines.”
Planning in the dark
Sometimes I wonder if Duke Energy’s planner’s work in windowless offices. There’s no sunshine in their models.
In reviewing Duke Energy’s resource plans for the Carolinas, I was struck by how carefully Duke Energy considers natural gas and nuclear power resources, but how sloppily the company evaluates solar power. In one location, solar energy costs are forecast to go up, in another, they are forecast to go down. Guess which forecast matters most to their final decision?
Well, actually its neither, because Duke’s model doesn’t even allow solar power to be selected, even if it is the least-cost resource. And even when they evaluate additional solar power costs in a “sensitivity” study, they miscalculated the costs, and didn’t compare the financial analysis fairly with their preferred plan.
Won’t even test drive the hybrid
It seems like every car company these days has a hybrid model. You know, it runs on electricity when the battery is full, but runs on gas when the battery is drawn down. For me, and many other drivers, it makes good economic sense to invest up front in a vehicle that uses less fuel.
This strategy makes even more sense with a combined cycle natural gas power plant, as utilities across the country are beginning to realize. While costing hundreds of millions to build, in reality over 80% of the cost of the power plant will be spent on fuel and other operating costs. The opportunity to save costs is mainly in looking for ways to not run the power plant.
But when we proposed a hybrid power plant to run on solar when the sun is shining, and natural gas when solar power can’t be generated – Duke Energy rejected the concept. Even if a condition was met that the solar power had to cost less than just the cost to operate a brand new natural gas power plant.
Why should Duke have taken this strategy? Three reasons:
It’s a no-lose strategy. We proposed that bids be solicited, and only accepted if their price beat a benchmark set by the forecast price to operate the new power plant. It was a mandate to offer contracts, not a mandate to contract for any specific amount.
It cuts customer risk. Duke Energy routinely hedges natural gas prices for up to two years in the future. But markets rarely, or perhaps never, offer price guarantees for natural gas beyond ten years. The price of sunshine won’t go up, once the contract is signed for the plant, the price is locked in for decades to come.
It’s a profit opportunity for Duke Energy. Utilities do not earn profits on the fuel cost to operate power plants (rightly so). The price of natural gas is passed through to customers, along with the risk of higher prices in the long run. But a solar plant can be built by Duke Energy, with an opportunity to earn profits if the plant is successful.
Lower costs, lower risks, and more profits. Three good reasons Duke Energy should go beyond compliance on solar.