An affiliate of Duke Energy, the largest utility and electricity services corporation in the US, recently submitted an application with the North Carolina Utilities Commission (NCUC) to enter the commercial, third-party-owned (TPO) solar leasing business. Duke Energy is already the predominant force driving growth in the state’s installed solar energy capacity, which now ranks second in the US, but the commercial solar market has proven to be a tough nut to crack, not only in North Carolina, but across the US.

Non-Residential Installed Capacity by Ownership Type
Non-Residential Installed Capacity by Ownership Type | Source: Commercial Solar Consumer Finance Trends

A limited liability company wholly-owned by Duke Energy and registered in Delaware, Duke Clean Energy Resources submitted its application for a “Certificate to Engage in Business as an Electric Generator Lessor” with the NCUC on Oct. 26. The company, according to the regulatory filing, “will build, own and operate on-site solar facilities that will allow customers to access renewable energy without a large upfront investment.”

Duke Clean Energy Resources will build, own and operate non-residential solar energy systems of up to 1 megawatt (MW) in power capacity and contract with business customers to off-take the resulting electricity via lease agreements with terms as long as 20 years. “Customers want more solar power for their operations, but the large upfront investment can be an obstacle,” explained Rob Caldwell, president, Duke Energy Renewables and Distributed Energy Technology.

Through DECER, we will be competing to provide customers a turnkey solar solution to meet their renewable energy goals, while managing the ongoing operations and maintenance of the facility.

Making solar energy easier for utility business customers

Duke Clean Energy Resources will offer businesses the opportunity to negotiate the terms and conditions of non-residential, TPO solar leases, which at 1 MW capacity would be roughly 100-times that of a typical residential solar PV installation, according to Duke. Lessees will be able to off-take 100 percent of a solar energy facility’s electricity over a lease’s term, and they will be eligible for any rebates and net-metering options Duke Energy offers.

The Duke Energy affiliate will finance and take care of all regulatory requirements associated with the commercial, TPO solar leases, as well as provide operations and maintenance. The company aims to work with local solar energy companies to build and maintain the solar power generation facilities that will provide the electricity lessees contract for, Caldwell noted.

Duke Clean Energy Resources isn’t supported financially by Duke Energy Carolinas or Duke Energy Progress, the parent corporation’s operating utilities in the Carolinas, but it will seek to do business with business customers in their service territories.

Prior to submitting its application in North Carolina, in January 2017 Duke Clean Energy Resources received approval to do business as a certified lessor of Renewable Electric Generation Facilities from the South Carolina Office of Regulatory Staff. The Duke Energy affiliate has yet to finalize any commercial solar leases in South Carolina. Management says the company is “actively engaged in negotiations for several projects anticipated to begin construction in 2019,” however.

Duke Clean Energy Resources hasn’t built up a full head of steam in South Carolina yet, Duke Energy spokesman Randy Wheeless  explained in an interview. “We didn’t have to go through the regulatory approval process in South Carolina and we wanted to get permission from both states before putting a lot of effort into it, at least publicly,” he said.

Last year’s enactment of the Competitive Energy Solutions for North Carolina law (HB 589) opened the door for Duke to do that by allowing third-party-owned solar leasing in the state. It had been prohibited before then.

One North Carolina company applied for, and received, a license to offer TPO solar leases in the state prior to Duke Clean Energy Resources filing its application. Eagle Power & Light’s program appears to be geared towards residential customers, however.

The NCUC approved Eagle Solar & Light’s application to lease solar power generation in October. That marked a solar-market first in the state. “The leasing of solar energy facilities is a critical component of the bipartisan HB 589 ‘Competitive Energy Solutions for North Carolina’ that was signed by Governor Cooper in July 2017,” NC Interfaith Power and Light commented. “While North Carolina has experienced dramatic growth in utility-scale solar over the past decade, it lags far behind other states in rooftop solar. HB 589 will help meet the demand for rooftop solar by not only allowing leasing, but also by mandating the NC Solar Rebates for some Duke Energy customers who install rooftop solar until 2022.”

Expanding across the entire spectrum of solar energy market segments

The saying, “All roads lead to Rome,” dates back to medieval European times. When it comes to electricity in North Carolina, all roads lead to Duke Energy. The corporation, via its regulated utilities and unregulated energy services providers, has been the primary driver of growth in North Carolina’s installed solar power capacity. Nearly all of that takes the form of utility-scale solar power farms.

Duke Energy Carolinas is Ramping Up its Use of Solar Power
Duke Energy Carolinas is ramping up its use of solar power. | ​Image: courtesy of Duke Energy

Residential solar power capacity has been growing in North Carolina as well, and Duke’s resident, regulated utilities, Duke Energy Carolinas and Duke Energy Progress, have been contributing with solar rebate programs.

Duke Energy has also worked closely with large corporations to boost installed solar power capacity in North Carolina via so-called utility green tariff programs. Utility green tariff programs allow larger commercial and industrial utility customers to purchase electricity from a specific solar or other renewable energy resource at preferred rates.

In July, Duke Energy rolled out two new solar energy programs in North Carolina:

  • Solar Rebates – The five-year, $62 million solar rebate program is expected to more than double the number of private solar energy customers in North Carolina over the next five years, according to Duke Energy.
  • Competitive Bidding RFP – Duke Energy aims to add 680 MW of renewable energy in the Carolinas as it continues to diversify its energy mix. Management filed a request for proposal (RFP) for companies to build large-scale solar or other renewable facilities in Duke Energy territories in North Carolina and South Carolina. Achieving that goal would produce enough emissions-free electricity at peak output to power more than 100,000 homes, according to Duke Energy.

Peter M. Schwarz, professor of economics and associate at the Energy Production and Infrastructure Center at the University of North Carolina, Charlotte, was quoted as saying the following regarding news of the two programs being launched.

North Carolina has been able to achieve leadership in the use of solar energy, second only to California, spurred by a variety of programs that have helped to reduce the cost of installing solar systems.

“The new programs that Duke Energy is now introducing will continue to spur the growth of solar energy, contributing to economic development while helping to protect the environment.”

North Carolina PV Installation Forecast
North Carolina PV Installation Forecast | Source: SEIA – North Carolina Solar (Q2 2018)

Solar power options for big customers and utilities

All told, Duke Energy owns and operates more than 20 wind farms and 80 solar energy facilities across the US – 35 of them in North Carolina. In addition to North Carolina and South Carolina, the corporation owns and runs electric utilities in Florida, Indiana, Kentucky and Ohio. Its Piedmont Natural Gas subsidiary operates in North and South Carolina and Tennessee.

Management has been strategically shifting the corporation’s operations, new business lines and investments towards distributed, renewable energy in recent years. Its unregulated Duke Energy Renewables subsidiary has invested nearly $6 billion to expand its wind and solar power business since 2007. It now owns and operates some 2,800 MW of renewable power generation capacity in more than a dozen US states. That includes more than 50 solar PV generation facilities with a combined power capacity of some 500 MW which it delivers to utilities, municipalities, electric cooperatives and large businesses.

Besides owning and operating renewable energy assets on its own behalf, Duke Energy provides operations and maintenance services to third-party renewable power system operators via Duke Energy Renewable Services. Supporting this is the unit’s Renewable Control Center in Charlotte, N.C., which employs digital network and distributed energy Internet-of-Things technology to optimize performance of wind and solar power plants across the US.

In addition, Duke Energy bought an initial equity stake in commercial solar, energy storage and microgrid systems development specialist REC Solar in 2015, then wholly acquired the San Luis Obispo, California-based company in December 2017. It also owns a majority interest in Irvine, California-based energy efficiency specialist Phoenix Energy Technologies, which provides energy management systems and services to commercial customers. Duke Clean Energy Resources could make use of REC Solar’s services as it develops and grows its non-residential, TPO solar leasing business, but REC focuses primarily in markets in Hawaii and western US states, such as its home state of California, Wheeless pointed out.

Cracking the commercial solar market code

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Cracking the code that would accelerate growth of commercial solar energy is proving extremely difficult. The market segment is huge, but also tremendously diverse, and hence fragmented. That makes it exceedingly difficult to come up with a “one size fits all” formula that offers an attractive economic value proposition across the entire spectrum of commercial and industrial-sector businesses.

“It’s exciting [as well as potentially significant],” Wheeless told Solar Magazine. “We deal with lots of large energy customers all the time, but we really didn’t have much to offer them [in the way of customized solar energy products or services]. Now we can point them in this direction. They’ll be able to deal with a company they’ve dealt with for a long time, even though it will be through an unregulated subsidiary.”

“If I had to say what a [Duke Clean Energy Resources] customer might look like, I’d say it could be a commercial operation with a large warehouse and lots of rooftop space, and it will probably vary from that. It could be a smaller business with land on the side. There are a lot of manufacturing and warehousing operations in the state and a lot of rooftop space out there,” Wheeless said.

More generally, “I think [a commercial, TPO solar lease] is ideal for a customer who has been thinking about solar energy but has been put off by the capital investment. A third-party-owned solar lease can take that burden from them and they gain the benefit of the solar power without having to worry about all the finance, installation, regulatory, operations and maintenance issues that come with that.”

Might obtaining a license to offer non-residential, TPO solar leases pave the way for Duke to offer residential, TPO solar leases in the Carolinas? “Right now , there’s a growing rooftop solar market and we’ve spurred that on with our rebate program. Project developers can sell to residences, but anyone who wanted to be in solar leasing needed to apply to the public utilities commission for a license,” Wheeless explained.

Duke Energy appears to be downplaying Duke Clean Energy Resources’ potential at this very early stage in the affiliate company’s evolution, however. “It’s kind of hard to foresee the potential of this. We’ve seen an uptick in rooftop solar and increasing interest on the part of commercial entities. The [solar] market is definitely growing in all facets, but we’ll have wait and see what the future holds,” Wheeless concluded. comment

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