Duke Energy will overpay US$1 billion to solar developers for the energy they generate over the next 12 years, which will result in customers paying that in avoided costs.
The Charlotte Observer published an article last week reporting on Duke Energy's latest filings with the North Carolina Utilities Commission. Duke said its actual avoided costs have dropped – largely because of falling fuel prices for natural gas – to $35 per MWh. But it is paying solar developers $55 to $85 under long-term contracts based on avoided costs the commission previously set.
Duke said the difference comes to $80 million a year, or $1 billion over the remaining life of those contracts, which are typically for 15 years. For most residential customers, the excess payments work out to about $20 a year, according to the filing.
Now the Commission is waiting on responses from solar developers, so it can decide if Duke's avoided costs report is correct. The Commission will hold a hearing in April to consider changing the rates.
One of the developers involved, Strata Solar told the Charlotte Observer that "accurately set avoided costs" give solar a neutral impact on customers. Long-term contract prices that utilities pay for solar energy would serve as a stabilizing force, Strata's senior vice president of strategy, Brian O’Hara, said, if electric rates and natural gas prices rise in the future.
“Our view is that the statement Duke made that customers are overpaying for solar is just plain wrong,” he said.
Duke contends that generous state rules have resulted in too many solar farms with little utility input on whether they are needed, where they’re built or how large they are, according to the Observer report. Most farms are in eastern North Carolina and small enough to qualify for non-negotiated power purchase contracts. Duke has previously proposed switching to a competitive bidding process for new solar farms to allow “more orderly addition of new solar power” to its system.