Duke Energy Carolinas’ program offering renewable energy to large customers, announced last week, is part of a new strategy to green up the parent company’s regulated business.
Until now, Duke Energy’s alternative-energy credentials have been earned chiefly by its commercial business, Duke Energy Renewables. That unit operates mostly outside the regulated Duke’s six-state territory.
Duke Renewables owns 100 megawatts of solar for commercial customers and is one of the nation’s largest wind developers at 1,600 megawatts.
But as Duke Carolinas showed with its new Green Source Rider, big energy users on the regulated side of its business also have an appetite for renewables.
For a premium, the program will connect North Carolina data centers, manufacturers and other high-demand customers with new renewable energy supplied by Duke or independent developers.
Most of Duke Energy’s new generation will be solar, which is becoming cheaper by the year. And much of its initial focus will be on North Carolina because of its ground-breaking, 2007 green-energy law and tax credits.
“There was a combination of customer need and a recognition on our part that we can work with a customer to say those of you who want green energy, recognizing that it costs more today, we need to figure out a way to let you do that,” Rob Caldwell, who heads Duke’s new renewable generation development team, said of the Green Source Rider.
“But at the same time, we can’t pass those incremental costs to our other customers.”
Contract terms, the resource used and other factors will determine how large a premium participating customers will pay, Caldwell said. He’s a 30-year utility industry veteran who spent 16 years at Progress Energy before its mid-2012 merger with Duke.
Duke said in April that it would develop the green rider. At the time, Google was announcing a $600 million expansion of its Lenoir data center.
Google has endorsed an approach that lets customers buy renewable energy in a voluntary program that doesn’t pass its higher cost to all customers. It has not said whether it would enroll in Duke’s new program.
“We’re pleased that Duke has offered this program in response to Google’s request,” Michael Terrell, Google’s senior policy counsel for energy and sustainability, said in a statement. “The next step is for the (N.C. Utilities) Commission to approve the proposal. Once that happens, we’ll be able to fully evaluate our options.”
Microsoft is exploring powering data centers with fuel cells, technology that Apple has installed – along with solar farms – at its Maiden data center.
Duke Carolinas put a 1 million megawatt-hour cap on the green rider. That’s about the amount of energy a facility that needs 125 megawatts of new, round-the-clock electricity, such as a data center or manufacturing plant, would use in a year.
If residential and commercial customers ask for the same type of program, Caldwell said, Duke will try to offer it through NC GreenPower, a nonprofit that connects customers to green-energy providers, or in other ways.
A developing market
Duke once worried that it would struggle to fulfill its solar mandate under North Carolina’s 2007 green-energy law within the cost cap legislators placed on it. Burning wood waste, called biomass, was expected to fulfill most of the state mandate.
Instead, the opposite happened. Duke easily met its solar target, under the cap, as the cost of panels dropped and North Carolina grew a solar marketplace of developers and suppliers. The state ranked fifth-highest in installed capacity last year.
The price of biomass energy, Caldwell said, has not seen a similar price drop. Wind, he said, remains an expensive and more distant option.
New U.S. solar installations have doubled through October of this year, compared with the same period of 2012, the Federal Energy Regulatory Commission reported. Despite that, solar still makes up less than 1 percent of the nation’s generating capacity.
Duke Energy Carolinas’ latest long-range plan shows renewable energy growing from less than 1 percent of its generating capacity in 2014 to no more than 6 percent in 2028.
Duke has about 10 megawatts of solar in North Carolina, most of it from roof-mounted systems. But Caldwell expects large, ground-mounted arrays – which can total 20 megawatts or more – to be its new focus.
“When I think about really advancing solar generation as part of our portfolio, it’s going to happen in megawatt sizes as opposed to kilowatt sizes,” he said.
Caldwell said it’s too soon to tell how much new renewable energy Duke itself will generate and how much will come from other developers. Duke hasn’t set generation targets, he said.
Utility customers pay for conventional power plants and infrastructure, and transmission and distribution upgrades linked to large solar projects might be recovered through Duke’s future rates, Caldwell said.
“I see renewables and solar in particular as just the next evolution of that generation path that we’ve been part of for 100 years,” he said.
Henderson: 704-358-5051; Twitter: @bhender