After more than 35 years in the energy industry, I have come to see solar power as one of the most promising options for our national energy portfolio. In fact, I’ve told many of my students at Duke University that if I were starting my career over today, I’d devote myself to expanding the use of solar power.
It wasn’t always this way, but today solar is as good for the economy as it is for the environment, making us more energy independent and competitive. In fact, North Carolina has a first-mover advantage to compete and win as a global hub of the solar industry. Last year, we ranked No. 2 in the nation for installed solar capacity.
Unfortunately, the business case for solar is not well-understood, and some powerfully funded special interests are working against it. Some of these groups have funded a campaign to try to abruptly eliminate tax credits in North Carolina and to change the rules about renewable energy in the middle of the game. The state legislature plans to vote on some of these proposals shortly.
North Carolina is a case study of what is possible when a forward-looking state makes judicious, long-term investments in a new industry. The state’s solar industry was born in 2007 when the state set a goal to produce 12.5 percent of its electricity from renewable energy and energy efficiency by 2020 and extended a little-used state tax credit to support it.
When I was CEO, Duke Energy supported these policies, which established clear, realistic goals that enable utilities to diversify their energy portfolios. Based on bipartisan support and the participation of a broad set of stakeholders, the Renewable Energy Portfolio Standard was adopted. This standard promised stability, an important consideration when making 20-to-50-year investment decisions about generation.
In 2007, we did not know when solar would be competitive with other energy options. But over the past seven years, the installed cost of solar plunged by more than half as a result of global economies of scale and other business improvements that occur with growing industries.
This rapid decline in the cost of solar is both a national and worldwide story. It has fueled tens of billions of dollars of investment in the U.S., with solar comprising nearly a third of all new energy infrastructure investment last year and generating more than 1 percent of all new jobs created nationally.
Special interests opposed to solar fail to see how it can lead to lower and more predictable long-term electricity rates. It costs less to operate and maintain and has no fuel cost. Despite its intermittent nature, solar often produces power at the times of day when utilities need it most, during peak periods. For example, Duke Energy purchases most of the solar power that is generated in North Carolina under 15-year, fixed-price contracts for about 7 cents a kilowatt-hour.
Investing in solar also helps utilities balance against the fluctuating cost
of coal and natural gas. As we’ve learned over the last three decades, these costs can be extremely volatile and must be hedged.
The long-term trends favor solar’s continued growth, even though today it generates less than 1 percent of America’s power. The cost of conventional generation is already pushing consumer costs of electricity up as companies replace old coal plants with natural gas units and retrofit existing power plants with modern emissions control technology.
This trend has already begun in North Carolina, where residential electricity rates increased about $40 a month from 2001 to 2014. Increased capital investments as well as increases in operations and maintenance costs attributable to conventional energy accounted for more than 75 percent of Duke Energy's cumulative residential rate increases during that period. Meanwhile, the costs of solar continue to fall.
Solar is proving it is an increasingly economically viable competitor to conventional energy sources. It also generates far more economic value over its lifetime than the subsidies it receives. One study by RTI calculated that every dollar provided in state tax credits from 2007 to 2014 in North Carolina generated $17.34 in gross state product from renewable energy investments. These investments, in turn, helped generate an estimated 26,667 jobs in the state.
North Carolina is in a competition. We have a first-mover advantage with solar because of smart, long-term investments we have already made. The way to win is to extend and phase down the renewable energy tax credit and to not change the rules in the middle of the game with our renewable energy standards. If we simply do this, North Carolina can stay at the forefront of an emerging global industry.
Jim Rogers is a Rubenstein Fellow at Duke University and former chairman and CEO of Duke Energy.