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Duke Energy’s solar effort clouding growth? June 1, 2010

Posted by Laura Arnold in Uncategorized.
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For more background, see http://indianarenew.blogspot.com/2010/05/slow-start-for-duke-energy-ceo-jim.html
Original article published at:
Charlotte Business Journal – May 31, 2010
Friday, May 28, 2010

Charlotte Business Journal – by John Downey and Susan Stabley Staff writers

Developers, contractors and renewable-energy advocates see Duke Energy Carolinas putting the squeeze on the local solar industry.

Independent solar companies say they can’t even get in the door to negotiate with the Charlotte energy giant.

“It’s not difficult to do a deal with them,” says Richard Harkrader of Carolina Solar Energy in Durham. “It’s impossible.”

Critics say that’s slowing the growth of the nascent solar industry despite major efforts by state and Charlotte economic developers to encourage it. Ultimately, fewer projects for local developers means fewer clean-energy jobs created in the region.

Duke has relied on buying power from a single, large solar farm and owning additional solar projects itself. That has often pushed local developers east or to the Asheville area, where Raleigh-based Progress Energy Carolinas has a different business model.

Progress does not plan to own and operate projects. And the projects it buys power from are much smaller than Duke’s. So a number of developers have gained agreements to sell solar power to Progress.

In Charlotte, Optima Engineering founder Keith Pehl says all 17 of the independent commercial solar projects his company brought to Duke Energy in the past two years foundered on failed power-purchase negotiations.

Pehl contends Duke’s approach is to control the local market and refuse to pay competitive prices for power from developers and building owners.

“It leaves everyone else out who is trying to make it happen,” Pehl says.

Owen Smith, Duke’s managing director of renewable energy and carbon strategy, denies that. He says Duke is simply maintaining discipline on the price it will pay for solar power.

A number of solar and other renewable companies have sprung up in North Carolina. But they cannot pursue sizable projects without an agreement from a utility to buy the power they produce, known in the industry as power-purchase agreements.

Duke wants a mix of projects it owns and power it buys through those agreements, Smith says.

Thus, it has agreed to buy power from a 16-megawatt solar farm SunEdison of Maryland is building in Davidson County. And it plans to build, own and operate 10 megawatts worth of solar panels on leased property.

There are rare exceptions. The city will soon choose a developer for a 250-kilowatt solar array near Charlotte/Douglas International Airport. Duke will pay 14 to 18 cents per kilowatt-hour for that project.

N.C. solar companies say that’s an unheard of price for Duke.

The company typically hasn’t offered more than 11 to 12 cents — a price developers and property owners say can’t justify the capital expense of installing photovoltaic panels.

Smith says Duke agreed to the airport-area project more than a year ago, before it settled on its current solar strategy. And it will honor that commitment, even though the price is higher than what Duke would be willing to pay now.

But lately Duke just isn’t doing any power-purchase agreements for solar at any price. It has already contracted for all the energy and renewable credits it needs through at least 2014. And that puts a crimp in the young industry.

“You get more private investment and more jobs if you involve more third-party developers,” says Kurt Olsen, staff counsel for the N.C. Sustainable Energy Association. “Duke is doing most of it on its own.”

Here’s how developers view the problem in a nutshell.

In 2007, the N.C. General Assembly adopted the Renewable Energy Portfolio Standard. It requires utilities to produce a specific percentage of the power they sell from solar and other alternative sources. One of the avowed aims was to encourage renewable-energy businesses in the state.

The industry’s development, however, is dependent on power-purchase agreements with utilities.

Duke did one big purchase deal with an out-of-of state solar firm and then used a few N.C. companies as installers for its company-owned distributed-energy projects. It’s buying a quarter of its renewable solar credits from outside the state. Little of Duke’s solar spending is going to N.C. companies.

“Duke is choosing to comply in a way that doesn’t happen to encourage folks outside of Duke Energy,” says Elizabeth Ouzts, Environment North Carolina state director and co-author of a new report on potential solar jobs in the state.

Progress has followed a different plan. It has no project bigger than 2.3 megawatts. And its SunSense Commercial program will pay 18 cents per kilowatt-hour for power from projects in the 100-kilowatt to 250-kilowatt range.

That is a premium price, but it’s paid only for modest-sized commercial projects. Progress spokesman Scott Sutton says the idea is to give startups and smaller developers a piece of the pie. Since starting the SunSense program last summer, Progress has agreed to buy power from eight projects already built or under construction. It hopes to sign deals for four more megawatts of capacity this year.

Solar companies have some issues with Progress’ SunSense program — Pehl is particularly critical of the company’s 250-kilowatt cap. But Carolina Solar’s Harkrader credits Progress with at least establishing a market for independent producers in the Carolinas.

And Harkrader’s company also has a purchase-power agreement with Progress for a larger, 550-kilowatt project in Pearson County.

He says he has found his dealings with Duke particularly frustrating. Carolina Solar wants to build a 2- to 4-megawatt solar farm at the proposed ReVenture eco-energy park near Mount Holly.

ReVenture offered to sell Duke the power for less than 14 cents per kilowatt-hour.

Duke said no.

ReVenture developer Tom McKittrick of Forsite Development Inc. says the site has about 25 acres set aside for a solar farm. But Forsite is too engrossed in negotiating a power-purchase agreement with Duke for its proposed biomass power plant to worry about solar right now.

“We gotta eat the elephant one bite at a time,” McKittrick says.

So Charlotte solar companies are generally looking eastward for business. Greenfield Power, based in Charlotte, has no significant commercial projects in Duke’s region. Its largest project is a 250-kilowatt rooftop solar array it’s building at the Global Transpark in Kinston — with Progress buying the power through SunSense.

And two of Progress’ three largest solar projects were developed by companies with Charlotte ties. Birds-eye Renewable Energy of Charlotte is developing a 2.3-megawatt solar farm near Laurinburg owned by MT² Capital. And Advanced Green Technologies, which is based in Florida but maintains its North Carolina office in Charlotte, developed a 1.27-megawatt project at a warehouse in Carteret County.

None of those companies have projects with Duke.

Smith says Duke supports solar development in the state. But he says it feels large farms and in-house construction of small projects offer economies of scale that cannot be matched by independent developers.

Harkrader disputes that. He says there is no evidence Duke can produce solar power for the 11 to 12 cents per kilowatt-hour it has pegged as its value, based on how much it costs Duke to generate energy by traditional means and the value of renewable-energy credits.

And he says the proper comparison would be with the cost of producing energy from new plants. Industry data indicate it’s likely to cost Duke 10 to 12 cents per kilowatt-hour to produce power from its Cliffside coal-fired plant. And Duke gets no renewable-energy credits with coal, making the equivalent price closer to closer to 15 cents.

“That is what solar power should be compared to,” Harkrader says.

Duke believes the market should set the price for solar, Smith says. In the company’s view, competition from Duke and large developers will bring down the price for solar projects and offer customers the best deal for renewable energy. Duke foresees prices going down, and that makes it even less eager to sign new purchase agreements now.

It will wait out the market and look for better deals, Smith says.


A green-jobs report released this week projects at least 28,000 new jobs in North Carolina could come from the solar-energy industry.

But that’s only if the state sets a benchmark of using the sun to generate 14% of the electricity consumed in the state by the year 2030. Current state mandates require power companies to produce only 0.2 % of the energy they sell in North Carolina from solar power by 2018.

Ratcheting up the requirements could boost annual wages by $1.6 billion by 2030, at an average salary of $45,000, according to the report from the Environment North Carolina Research & Policy Center. The solar industry’s annual gross investment in the state could exceed $2.5 billion by that year, the report says.

The 28,000 new-jobs figure is the low-end estimate, says Elizabeth Ouzts, the statewide nonprofit’s state director and co-author of the report, titled Working With the Sun: How Solar Power Can Protect North Carolina’s Environment and Create New Jobs.

In 2009, the green-power industry — which also includes wind, biomass and energy efficiency — employed about 10,000 workers and made more than $3.5 billion in revenue statewide, according to the report. More than 100 businesses in North Carolina either develop, build, install or sell solar energy systems.

Susan Stabley



1. Drew Haney - October 31, 2010

Not to mention the the coal-powered electricity is subsidized by the federal government. Many of the coal mines are on government land that they “lease” for as little as $1.00/acre to Coal mining operations in Appalachia. By rough comparison, farmland typically leases for about $50-$100 dollars an acre.

We pay additional electric feees every April 15 (well, some of us do!)

Drew H.

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