Duke Energy Shortsighted on Efficiency, Again

Guest Blog | March 5, 2014 | Energy Efficiency, Utilities
Excerpt of Duke Energy and Progress Energy Settlement Agreement

In December 2011, Duke Energy and Progress Energy signed a settlement agreement with several groups, including SACE,to resolve legal issues raised during the Companies’ proposed merger. As mentioned in a recent SACE blog, the Company does not have a plan to deliver on its efficiency savings target.

The latest disappointment came with Duke Energy’s 2013 Integrated Resource Plan.  After reviewing the plans,  Southern Environmental Law Center, South Carolina Coastal Conservation League, Upstate Forever and SACE filed comments with the South Carolina Public Service Commission earlier this month.

As we have talked about in the past, an Integrated Resource Plan, or IRP, is an important utility planning process. It is a long-term energy supply plan that helps the utility make decisions about how to meet current and future electricity needs. It would be an appropriate place for Duke Energy to evaluate the impact of “an annual savings target of 1%.”

However, our comments on the 2013 IRP echoed our comments and conclusions from past IRPs – both Duke Energy Carolinas and Duke Energy Progress are not planning to meet the merger targets, or to save all the energy efficiency that is cheaper than the alternatives.

Therefore, the companies are planning to build too much capacity, and are not seizing the opportunity to reduce risks to customers from rising fuel costs and anticipated regulatory requirements.

Lets break down this analysis.

Duke Energy committed to a 7% target over five years, but Duke Energy is planning for less than 6% savings over ten years.

Duke Energy  is not planning to meet its merger targets.

There are two options in Duke Energy’s Integrated Resource Plan that we discuss here. The “Base Case” is an option that contains the assumptions that the Company believes are most likely to occur. The “Environmental Focus Scenario” considers higher adoption rates of efficiency, solar power and wind power than in the Base Case.

The “Base Case” for the Duke Energy projects savings of 5.6% of retail sales over ten years (see Table 1). That is not 1% of retail sales a year, the merger agreement amount. Some simple math (5.6%/10 = 0.56%) shows that Duke Energy is planning to meet about 60% of the 1% annual goal that they agreed to. I don’t know about you, but where I am from, 60% effort is a D-.

The “Environmental Focus Scenario” modeled about 75% more  efficiency than the “Base Case” and would save customers roughly $2 billion over the next 15 years across Duke Energy’s Carolinas service territory as compared to each company’s “preferred” plan. Regardless, Duke Energy characterized the “Environmental Focus Scenario” as aspirational. In other words: Not what they are using for their plans.

Duke Energy is Not Pursing All Cost-Effective Efficiency

In both of Duke Energy’s options, the plans do not include all economically available energy efficiency. In simple terms, this means that Duke is not choosing the cheapest way to meet electricity needs. All of the Integrated Resource Plan results come out of a big model. In Duke Energy’s model, they restrict the amount of efficiency that the model can choose, even though it costs less than other options.

Beyond not allowing resources to fairly compete with each other based on cost, it doesn’t produce good results. Energy efficiency is the cheapest, cleanest resource that is available. Without considering a broader range of energy efficiency opportunities, Duke Energy has placed unreasonable limitations in its IRP. Considering that many utilities across the nation are achieving levels of energy efficiency even higher than what Duke Energy agreed to in the settlement agreement, we know that Duke Energy could choose to defer and eventually avoid even more of the power plants that are currently planned in its IRP.

Shortsighted Analysis Provides Misguided Results

So, when you leave energy efficiency on the table, the results call for more conventional generation to meet electricity growth. That, unfortunately is costly and unnecessary. Instead of looking to restrict energy efficiency, Duke Energy should be thinking about how to expand its offering to customers that it is not currently reaching, such as apartment dwellers and other multi-family buildings, commercial commissioning and retro-commissioning, and  reaching out to cities and campuses.

As SACE Executive Director Stephen Smith recently said, Duke Energy is not showing leadership on clean energy. Over the past five years, Duke Energy transformed from a company with no energy efficiency programs, to being the region’s leader on energy efficiency. Unfortunately, since the merger we have watched this forward-leaning attitude relax into a slump. Duke’s Carolinas utilities are projecting better results than their counterparts in Florida, but even in the Carolinas, Duke’s attitude has shifted from “how” to “hrumph.”

If you want to see Duke Energy make smart energy investments, ask the company to be a leader.

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