North Carolina regulators gave a green light for Duke Energy‘s (s DUK) Carolinas subsidiary to install 10 megawatts of photovoltaic systems at hundreds of commercial and industrial buildings, homes, and schools last week. But the energy company’s plan to recover costs for the $50 million project through rate hikes has come to a screeching halt — setting a precedent for utilities around the country.
In a ruling issued Dec. 31, the North Carolina Utilities Commission wrote that Duke could purchase the same amount of solar power from third-party providers at significantly lower cost than if it owns the photovoltaic systems itself, and therefore it cannot reasonably recoup the entire cost of the project through rate “riders” allowed under the state’s Renewable Energy and Efficiency Portfolio Standard. The law, which requires utilities to generate 12.5 percent of their energy from renewable sources by 2021, limits how much utilities must spend on clean power projects to avoid having huge costs passed onto consumers.
Forced to revise its plan, Duke expects a short delay for the program launch, spokesperson Paige Sheehan told the Charlotte Business Journal. The company had planned to begin installations early this year and launch the program within two years.
When Duke first proposed the North Carolina project in 2007, it requested bids from renewable energy providers. (The lowest bid came from Maryland-based SunEdison, and it led to an agreement for Duke to purchase the entire electricity output of a new PV farm to be owned and operated by SunEdison.) Duke argued that ownership would provide distinct benefits — developing solar expertise, evaluating the impact of distributed generation on its power grid, and creating jobs in the solar industry, for example.
Regulators, however, were not convinced that the plan would allow Duke to meet state clean power requirements within spending limits. And with so much outlay now, the proposed solar project might actually give Duke a way to skirt future renewable investments. From the commission’s order:
In combination with the SunEdison project, Duke’s program will produce much more solar energy than is needed for compliance with the solar set-aside from 2010 through 2014. [Public Staff] witnesses stated that, while solar generation should be encouraged, it should not be pursued at the expense of other, less costly renewable resources because this could result in Duke’s prematurely reaching the utility-wide ceiling established by [the Renewable Energy and Energy Efficiency Portfolio Standard]. If Duke generates an excessive amount of costly solar energy, the total amount of renewable energy it can purchase or generate within the limits of its utility-wide cost cap will be reduces. This may result in a need to operate Duke’s fossil-fired generating plants more often, possibly leading to increased emissions.
This is not the first glitch for Duke’s solar rooftop project. It initially envisioned a $100 million, 20-megawatt program, but was forced cut the project by half, Dow Jones reports, after public advocates protested utility ownership as anti-competitive.