Q&A: Unfolding Duke Energy’s Proposed Customer-Facing Programs with NCSEA Regulatory Counsel, Ethan Blumenthal
Towards the end of January 2023, Duke Energy filed proposals for its new customer clean energy programs at the NC Utilities Commission. This came after multiple months of stakeholder convenings comprised of numerous advocates, large customers and manufacturers, municipalities, and many others with an interest in seeing the expansion of programs designed for users with large energy demands. We sat down with NCSEA Regulatory Counsel, Ethan Blumenthal, to provide some insight into program details, potential shortcomings, and what’s to come.
Q. What do we mean when we say ‘customer-facing programs’ in the clean energy context and why is NCSEA engaged in the conversation?
A. Generally speaking, customer-facing programs are meant to give customers greater access to renewable energy. These can take many different forms, but by and large, the purpose of these programs is to enable customers with a limiting factor- like physical space, rental status, or shading- to still be able to participate in the clean energy economy. NCSEA has a large membership network and many of our members, from individuals to large-scale corporations, are interested in supporting and getting better access to renewable energy. As an organization, we want to help our members accomplish these goals.
What are large energy consumers demanding from their utilities and why are these programs important to helping them meet ESG (environmental, social, governmental) goals?
A. Many large energy consumers in North Carolina and beyond have established goals to power their operations with renewable energy. For economic and environmental purposes, they are hoping to offset the energy use at their facilities with mechanisms like Renewable Energy Credits (RECs) and other environmental attributes associated with renewable energy including reduced carbon emissions. It is important to evaluate these RECs and environmental attributes, Duke Energy refers to these products as Clean Energy Environmental Attributes (CEEAs) when bundled together, for the impact the associated renewable energy resource has locally in terms of reducing carbon emissions in North Carolina.
Today, large corporations have a fair amount of visibility into what can be done in a given state as a result of policy, regulation, and other factors to incentivize the production of carbon-free electricity. Many are finding it easier to accomplish ESG goals in other states—either through customer program participation, power purchase agreements with third-party developers in competitive markets, or by investing money to install their own clean energy on-site. However, as more companies adopt and pursue decarbonization, they are looking for ways to offset emissions from a grid that is primarily burning fossil fuels.
Duke Energy filed a couple of new CEEA programs to allow customers to purchase credits from renewable projects here in the Carolinas, one for large energy customers and one for households and small businesses. CEEAs are RECs and carbon reduction attributes derived from the associated renewable energy resource. Previously, these RECs could have been from anywhere in the United State (for instance, a wind project in Texas offering RECs to an operation in North Carolina) but will now come from projects in Duke Energy’s local service territories. Alternatively, the new program also allows large customers to “bring their own developer,” like with the previously offered program, where the customer identifies a specific developer and project that they want to pull CEEAs from. At first glance, this may seem like a good thing, but upon deeper inspection, it begs two questions: 1) What is the larger impact of this program? and, 2) What is its true potential to deploy more renewables onto the grid here in North Carolina?
Though Duke Energy may indeed be exploring ways to expand clean energy opportunities for its customers in North Carolina, the current structure of the program would source renewable energy capacity from the required solar deployment already mandated by HB951 and the recent NC Utilities Commission Carbon Plan Order. Rather than creating new or additional clean energy capacity, the utility is proposing to charge a premium to customers for renewable capacity that is already required to be added to the grid. This could greatly limit the deployment of more renewable resources across the state in both the short- and long-term future that could be used to meet large customer’s clean energy goals by taking resources away from other development options or discouraging participation altogether because of an inability to afford to participate.
What are some of the proposed changes within these customer-facing programs?
A. The two new customer-facing programs that Duke Energy proposed are an expanded Green Source Advantage (now known as GSA Choice or ‘GSAC’) program and the Clean Energy Impact (CEI) program. Though it is important to note that both are considered ‘in-front of the meter,’ a key dividing line is the size of the customer in each program. The CEI program is only offered to customers with a max demand under 1,000-kilowatt kWh (or 1 MW), which includes most homeowners and small businesses in North Carolina. GSAC, on the other hand, is limited to customers who have over 1 MW energy demand.
The first of the programs filed, GSAC, would make up to 4,000 MW of renewable capacity available to large energy consumers in the state, at up to 250 MW per year. Utility customers would have the choice to work directly with an independent power producer (IPP) or to work through Duke via the projects they’re already procuring. If a customer chooses to work with an IPP, the amount of solar contracted will be deducted from subsequent solar procurement processes required under the Carbon Plan.
The other program, CEI, is an evolution of Duke Energy’s Renewable Advantage program, and is slated to switch over in 2026. It’s worth noting that CEI does offer some advantages to North Carolina customers that its predecessor did not. Namely, the CEI program benefits utility customers by producing CEEAs that result from resources on Duke Energy Carolina’s or Duke Energy Progress’ systems, rather than RECs sourced from anywhere in the country. It does so by offering eligible customers an option of contracting for a block or multiple blocks of CEEAs (either 250 kWh or 1,000 kWh). Blocks of 250 kWh are available to both residential and non-residential customers, while the 1,000 kWh blocks are available to non-residential customers willing to buy at least 10 blocks.
What concerns does NCSEA have about these programs? Will they help to deploy more renewables onto North Carolina’s grid?
A. A major red flag for NCSEA is that these proposed programs would add no additional renewable energy resources beyond those already required of Duke Energy by the Carbon Plan— they simply take the RECs and carbon emission reduction attributes of projects required under the previous mandates and allow customers to acquire them at a premium. While Duke is required to reach a 70 percent carbon emissions reduction by 2030, this design means that for residential customers or customers not willing to pay a premium, a larger portion of the carbon emissions in the remaining energy mix will be artificially attributed to their energy consumption. Going a step further, we have identified two major issues— additionality and affordability.
Additionality: Perhaps the biggest issue for many large-scale companies is additionality. Additionality, also known in this context as regulatory surplus, can be defined as building a renewable energy resource that would not have existed without a program. Simply put, it is more renewable energy on the energy system than existed before. The reality is that these programs would allow customers to purchase CEEAs from facilities that are already going to be built.
Affordability: NCSEA supports expanding clean energy opportunities and REC access to low- to moderate- income homeowners and these proposed programs would not further that goal. Even though renewable energy costs less nowadays than the fossil fuels tied to most of Duke Energy’s current system, there are no customer savings offered by these programs. Rather, the premium products would come at a cost to the customer because of the mark-up and administrative fee charged by the utility for participation.
Another thing to consider is that these programs are already somewhat interwoven into Duke Energy’s new rate case filings. This brings to light some interesting interplay, particularly with the large-scale GSAC. And while CEI is slightly different, both are included in Performance Incentive Mechanisms (PIMs) within the utility’s new Performance Based Ratemaking (PBR) filing. Duke Energy has proposed each of these programs be included in different PIMs, which is to say that Duke would be required to try and sign up more people, allowing them to earn more money on a percentage basis. On the other hand, if Duke failed to incentivize more participation, then they would not make less money. The bottom line: If these programs go nowhere, it will not affect Duke’s earnings, but if they are successful, the utility will make more money.
Can you talk about what NCSEA wants in new programs?
A. NCSEA and our partners want to see more North Carolinians get access to the clean energy economy. On top of GSAC and CEI-related issues, we are involved in numerous ‘behind-the-meter' dockets like on-bill tariff financing to help achieve this goal. NCSEA supports customer-facing programs that move away from the ‘pay-to-play' cost basis and towards supporting an inclusive energy system. Price points and market structures exist that can be both reasonable and participatory.
Unfortunately, Duke’s proposed customer programs would move in the opposite direction. These programs would serve a narrow range of customers that can afford a premium program, even while there is significant demand and interest in broader customer programs that would help residents, local governments, and business customers enjoy the benefits of clean energy.
Q. If you had a magic wand, what would be the ideal customer clean energy programs that Duke Energy could offer here in the Carolinas?
A. Though I am sensitive to the real challenge that transmission capacity and market structure present, I think there is more room for distributed energy resource (DER) aggregation. This presents an opportunity to offer a customer program that would truly add more clean energy to the grid while providing an additional economic incentive for those able to install solar on their own roof. As it stands, when a rooftop solar customer net meters, they turn over the RECs associated with their energy to Duke Energy. In turn, households cannot install any more than what they use. There would be much less grid constraint concerns with more of those systems installed.
The other magic wand would be directed at finding ways to effectively expand clean energy access to low-income communities through community solar and solar leasing. There are examples of successful programs from around the country, like Illinois and Minnesota, that offer lessons to North Carolina policy and decision-makers. My fingers are crossed that we see steps in the right direction in Duke Energy’s coming Clean Energy Connection program proposal, which we anticipate being filed in the coming months. However, we do expect this program to have many of the same issues as GSAC and CEI, particularly concerning a lack of regulatory surplus.