Groups want solar to accompany Duke combined-cycle project in South Carolina

Friday, December 27, 2013 2:50 PM ET Extra
Groups want solar to accompany Duke combined-cycle
project in South Carolina

By Mark Hand

Environmental groups want South Carolina regulators to direct Duke Energy Carolinas LLC to solicit developer interest in a 375-MW solar facility near
its W.S. Lee plant to take advantage of potential synergies between the company's proposed natural gas-fired combined-cycle plant at the site and
solar generation.

Fuel and other variable costs are forecast to make up 80% to 90% of the revenue requirement associated with the company's proposed Lee
combined-cycle unit, the Southern Alliance for Clean Energy and the South Carolina Coastal Conservation League said in testimony filed with the
Public Service Commission of South Carolina.

"Therefore, DEC [Duke Energy Carolinas] should seek cost-effective alternatives to operating the unit even if the commission issues a certificate and
the unit is built and placed into service," the environmental groups said. "A large utility-scale solar power development could complement the
proposed unit, providing a cost-effective hedge against the risk to customers of future increases in natural gas prices."

On Oct. 24, Duke Energy Carolinas and North Carolina Electric Membership Corp. filed a joint application for a certificate to build and operate a
750-MW natural gas-fired combined-cycle generating facility at Duke Energy's existing Lee steam station near Anderson, S.C. North Carolina Electric
Membership Corp. will own 100 MW of the project.

Duke Energy Carolinas expects its electricity demand to grow by about 1.5% over 15 years. The company also expects that if it does not build the Lee
combined-cycle project, beginning in 2017 it would need an additional 317 MW. By the next year, that deficit is estimated to grow to 573 MW and up to
about 3,400 MW by 2028, according to Duke's application.

But the environmental groups, in their testimony, contended that the company has an adequate reserve margin for 2017. "To the extent that DEC does
need additional capacity in 2017, it could be met by short-term market power purchases or investment in a solar facility," they said.

Also, according to the groups, Duke Energy Carolinas and its sister Duke Energy Corp. subsidiary, Duke Energy Progress Inc., have not adequately
pursued cost-effective energy efficiency and renewable energy alternatives that could have deferred the need for the proposed Lee unit and that could
defer or avoid entirely their projected need for several more major generation facilities. Over the next four years, the proposed Lee combined-cycle
unit is only the first of four to five combined-cycle units that the two Duke Energy subsidiaries could seek to commit into the rate base paid for by their
customers, they said.

In rebuttal testimony filed Dec. 18, Janice Hager, vice president of integrated resource planning and regulated analytics for Duke Energy Business
Services LLC, the service company subsidiary of Duke Energy, said that if the Lee project is not operational by 2017, Duke Energy Carolinas' reserve
margin that year would be 12.9%, well below the company's minimum target planning reserve margin of 14.5%.

It is not unusual in integrated resource planning, given the economies of scale that support larger units, to add generating units in a manner that leads
to higher reserve margins for a year or two, Hager explained.

Hager also emphasized that the company is seeking approval of only the Lee project at this time. The future combined-cycle plants mentioned in
Duke Energy Carolinas and Duke Energy Progress' integrated resource plans are only projections, she said.

As for the environmental groups' request that Duke Energy Carolinas add 375 MW of solar energy at the Lee project site, Hager noted that the largest
solar facility in the world is under construction in Arizona and will provide 290 MW of capacity.

"It is unclear why [South Carolina Coastal Conservation League] and [Southern Alliance for Clean Energy] believe the Anderson, South Carolina, area
is a likely spot for an even larger facility," she said. "In addition, a 375-MW solar facility would be a poor substitute for the Lee CC project. It would only
provide approximately 150 MW of summer peak equivalent capacity compared to the 750-MW Lee Project and can only provide about 10% of the
energy that the Lee Project is capable of providing."

The environmental groups, in rebuttal testimony filed with the PSC on Dec. 23, said they commend Duke Energy for its regional leadership on
energy efficiency and for recent improvements in the way it models renewable energy resources in its integrated resource plan.

"Yet the fact remains that more aggressive, but still achievable and cost-effective levels of [energy efficiency] and [renewable energy] could defer the
need for new conventional power generation, reducing costs and risks to customers," they said. (Docket No. 2013-392-E)