Dramatic changes are coming to the electric industry, sparked by a surge of renewable energy and related transmission. Growth in demand-side resources, conservation and smart technologies will add...
Renewables attract utility investment dollars.
the first requirements in 2009. In both cases the programs are brand new. We have efforts underway, but we’re in a different place than states that have had an RPS in place previously. We’re trying to position ourselves to make investments.
On the regulated side, Duke is focused on ensuring we’re compliant with renewable energy requirements that we face now or that we anticipate going forward, at the state and federal level. We’re doing a variety of things to meet those standards, including entering power purchase agreements (PPA) with third-party generators. We’re developing a program to purchase renewable energy credits (REC) from other companies. And also we are pursuing investments the utility would make to directly own and operate renewable energy projects.
We’re more inclined to own and operate certain forms of renewables than others. We’re particularly interested in solar and wind projects, and we’re interested in continuing our investment in hydro projects as well. Within the biomass space, we think co-firing biomass at our base-load fossil stations appears to be highly cost effective, as opposed to building a brand-new biomass-fired facility. We’re doing testing and analysis, and getting a handle on the biomass fuel-supply market.
With respect to wind, our most promising areas are in the Midwest as opposed to the Carolinas. We’ve entered into a PPA with the Benton County wind farm in Indiana. In Ohio, the PUC hasn’t established the RPS rules yet, so we’re at a bit of a standstill. We’re not able to do a whole lot without clarity on the rules.
Building wind facilities is an option we’re considering. It’s something we’ll look at very closely.
Regarding solar energy, we signed a PPA with SunEdison for a 16-MW solar project in Davidson County, North Carolina. That will be one of the largest solar PV facilities in the nation. Also we filed for approvals to build a total of 10 MW of distributed solar generation, in the form of several hundred installations. We’ve gotten approvals from the North Carolina Utilities Commission, but they include problematic conditions. The stumbling block involves normalization of federal ITCs. Rather than passing tax credit benefits to customers all at once, you have to pass it on ratably through the economic life of the project. So if you have a 30-percent tax credit for a project with a 30-year life span, you account for a 1-percent credit each year. That makes utility-owned projects with federal tax credits less cost-effective than they are for a non-utility entity, where the owner can benefit from the tax credit immediately. Normalization has pushed our costs higher than the commission felt comfortable with, and as a result they’ve limited our ability to recover costs to the point where we can’t execute the program.
Dickson, Duke: I’m in the non-regulated part of the company, the core part of Duke that has invested in renewables. Duke has been pretty active in the last two years entering the renewable energy space, making investments primarily in wind power. In May 2007, Duke acquired the wind-development business of Tiara Energy, based in Austin,