Duke Energy (NYSE:DUK) plans to invest $500 million in solar power to meet North Carolina's requirement that more of its electricity come from renewable energy, the country's largest electricity company said Monday.
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The Charlotte-based company said it will build three generating facilities of its own and buy power from five other facilities built by investors in order to meet its requirement that renewables produce 6 percent of its 2015 retail sales. The new solar arrays will produce 278 megawatts of electricity, the company said.
"That's why we're doing this, for renewable portfolio standard requirements," said Rob Caldwell. Duke Energy's vice president of renewable generation development.
Environmental groups applauded the decision and urged the company to shift more aggressively to renewable fuels.
Seven of the eight new solar farms will be in rural stretches of eastern North Carolina, where land is relatively cheap and available, Caldwell said. The largest, a 65 megawatt facility in Duplin County, will spread 850,000 solar panels across about 550 acres, he said.
The new electricity and the solar power Duke Energy now buys from about 600 producers will total 748 megawatts by the time construction on the new solar farms is completed next year, Caldwell said. That compares to 825 megawatts Duke Energy's coal-burning Cliffside Steam Station in Cleveland County can generate.
The solar power also will cost about 20 percent to 70 percent more than that produced by a natural-gas plant, Caldwell said. The 2007 state law ratcheting up the use of renewable energy allowed utilities to pass the higher costs on to consumers.
But Duke Energy was able to hold down the cost of the sun-generated electricity by negotiating with solar power developers, Caldwell said. He wouldn't describe the cost of purchased power.
"One of the objectives of this (process) is to get as many megawatts as attractively priced as we can for our customers, since our customers are paying for this," he said. The prices for electricity from large solar farms are about a third of what Duke Energy pays for electricity generated by rooftop residential units, he said.
Duke Energy is asking state regulators to cut the rebate it gives homeowners who install rooftop arrays, and also wants to trim the price it pays for electricity produced by the units. The company says that would reflect falling costs. Duke Energy now pays 11 cents per kilowatt hour for electricity generated by rooftop units.
"The costs have fallen faster than everyone expected," said Ivan Urlaub, who heads the North Carolina Sustainable Energy Association, a trade association.
When renewable energy advocates and the state's electric companies discussed renewable energy standards for a 2007 North Carolina law that set utility benchmarks, they thought that burning wood would prove the cheapest method, Urlaub said. Instead, the cost of solar power last year was two-thirds lower than projected seven years ago, he said.
"I think it tells us there's more to come in the future as the cost of solar continues to decline," Urlaub said.
Solar has been hot lately, accounting for about half of all new electric generating capacity in the U.S. in the first half of this year, the Solar Energy Industries Association said in a report this month. In the past two years, installed solar power has doubled for homes and quadrupled for utilities, the national trade group said.