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Power-Plant Development: Raising the Stakes

Duke Energy’s Jim Turner and other utility executives weigh the odds on billion-dollar bets.

Fortnightly Magazine - May 2007

at particular times of the day and use new metering infrastructure as a way to facilitate that happening.” Turner would not hazard a guess as to how many power plants would not have to be built as a result of such efficiency measures.

But Dan Merilatt, manager of the demand-response program at Cannon Technologies/Cooper Power Systems, has worked on many of these programs and has a strong view of what can be achieved. He says many programs have garnered up to 30 percent of customers with central air conditioning, which represents a significant amount of dispatchable load control. “If you looked at that in the market nationally, that would allow maybe 10 percent of the summer-time peak demand that could be met through demand response alone or through these load-control programs,” he says. “It can be met at a cost that is about half what a greenfield combustion turbine would cost.”

Merilatt wouldn’t suggest that these replace combustion turbines, but as part of the supply mix, he says it is an economical way of meeting peak demand in the summer.

“I think these programs are full-cost in marketing and incorporating customer incentives, keeping customers engaged, and buying and installing the devices and servicing them. If you roll that up, the present value of a whole program is pretty close to half of what a combustion turbine would cost you over its life cycle as well,” Merilatt says.

He believes these programs bring “good value” for electric utilities because they do not discomfort customers. “Maybe less than 1 percent of customers are even aware that these cycling or control events are occurring. And those that do can probably call a customer-service center and have themselves removed from the event as the devices that are deployed are all individually addressable.”

The Long Odds on Coal

Even while some utility executives might be reluctant to bet on coal given impending climate-change legislation, many experts say it’s a bet they will have to make. “Carbon regulation does not mean the end of coal. I think the country would be foolhardy to think that. I think our commission in North Carolina got that very clearly,” Turner says. “To me [the TXU decision to not build coal plants] was not earth-shattering news that said, ‘Uh oh, coal plants are now off limits.’

“You are always going to have coal in the mix, even with TXU’s decision, even if Congress mandates carbon regulation. The country should want to have coal in the mix from an energy-security standpoint and a competitive standpoint,” he says.

Turner says Duke Energy has taken a novel approach to making coal a more reasonable alternative given emissions considerations. The utility gave several concessions, for lack of better word, that made coal more politically and socially acceptable, in exchange for building new coal units.

“We said we were going to spend up to 1 percent of our Carolinas revenues on energy efficiency investments. The number that was used in the case was about $50 million per year. We were putting our money where our mouth was