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Seeing Green

Renewables attract utility investment dollars.

Fortnightly Magazine - May 2009

Duke Gen: As a utility company and a long-term operator of assets, Duke always takes the ownership view toward energy infrastructure. There are a lot of small IPPs and development firms in the wind industry. They’ve been set up and capitalized to a certain point, but they can’t take a lot of projects forward at once. They tend to follow the develop-and-flip model. But Duke has an own-and-operate view on the world, and the expertise to manage the assets.

On the non-regulated side, we’re planning to build a large portfolio of wind.

Smith, Duke: We have an interest in being a direct owner-operator in solar, wind, hydro and biomass projects. So far our inclination is to sign PPAs with companies that own other types of technologies, such as projects burning swine waste and poultry waste in North Carolina. Those things stray pretty far from the sorts of things we want to be directly involved with.

We like to make capital investments that we can put into our rate base, and generally the types of assets we operate are highly capital intensive with as little O&M as we can manage. Solar and wind fit that description. They fit our business model, and so does hydro. Biomass co-firing is very similar to what we do today, using the same heavy fleet that we now operate, just with a different fuel source. It fits nicely.

Langston, OG&E: I haven’t thoroughly reviewed the bids that have come in, but so far we see the benefits of ownership as being better for our customers than buying wind energy through a PPA. Once you own those assets, they’re yours for life and the customer can continue to benefit from them. We’re about 5 years into a 15-year PPA now, and in 10 years we can anticipate a change in that contract. If it were in the rate base the customer would enjoy the benefits for the life of the product.

We need a mix to optimize the portfolio, and we will select based on the value of options in competitive bidding.

Stoering, Xcel: We seek to balance contracted resources with owned resources. We have such a big appetite that we can’t afford to either contract it all or own it all. We want a nice balance. The contracted resources will be a combination of traditional IPPs and community-based energy developments. We’re ready to partner with others to build projects.

 

Fortnightly: How have recent changes in federal law affected your renewable investment plans? Have tax credits, depreciation allowances and other financial incentives changed the economics?

Smith, Duke: The stimulus package makes renewable projects more possible. Obviously it helped late last year when the federal ITC became available to utilities. That certainly helped our solar effort. Also it gives third parties with whom we’d sign PPAs more tools to get their projects financed and delivering renewable power.

We’re certainly going after stimulus funds for some projects, where it means we might have a better chance of getting approvals from regulators or where otherwise we might run into hurdles, in

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