In a sudden, unexpected burst of concern about how mandates of renewable energy harm its low-income customers, a Duke Energy executive testified Tuesday that aspects of the government-imposed schemes (mostly welcomed by public utilities) cost far more than they save, and said they are net job losers.
The admission, by Duke’s president for North Carolina (the company’s home state), came during a hearing of a state legislative commission on energy. The specific policy targeted by Paul Newton was the practice of net metering, in which individual homeowners who have installed solar panels are able to sell their electricity to a utility’s grid at the same full kilowatt-hour price that it is delivered to them from the grid.
“While net metering customers use the same utility infrastructure as any other customer,” said Newton, “they pay a significantly lower utility bill due to the full retail rate credits they receive for the power their system produces. That full retail rate includes infrastructure costs, but that’s being reimbursed.”
In other words, despite the inconsistent generation of power from residents’ solar systems (because the sun doesn’t always shine), Duke’s customers still get to enjoy the constant availability and delivery of electricity to their homes thanks to the existing infrastructure. But with net metering, the customer does not pay for the capital costs of the grid system. The testimony was reported by Carolina Journal, a publication of the NC-based John Locke Foundation, a conservative think tank.
According to reporter Dan Way, Newton equated the scheme with freeloading.
“Because solar generators produce electricity about 20 percent of the time in a year,” Way reported, “Newton likened them to a neighbor whose car starts only once in every five attempts, and he borrows his neighbor’s car the other four times. He pays for the gas, but not the monthly payment, insurance, maintenance, and other costs of the vehicle.”
As a result, the solar owner reaps the benefit and reimbursement of what the full price of that kilowatt-hour is, even though the kWh he is selling to Duke Energy is worth far less.
“If we charge a customer 10 cents for a kilowatt-hour they use, we also pay them 10 cents for a kilowatt-hour they sell back to us,” Newton testified. “That’s more than the actual value of the energy when compared to other available generation sources.”
Worse, Newton said, is the fact that most people who take advantage of the solar installations and kickbacks are those who don’t need the break. He said the average household income of those in the program earn $110,000 per year, while the average household income of all Duke’s customers is $67,000 annually. All public utilities are required to offer net metering to their customers, a provision in the federal Energy Policy Act of 2005, but states vary on the implementation. So, just as we have with the Obama administration’s green energy program that includes billions of dollars in subsidies and breaks for electric vehicles and large-scale renewable energy boondoggles, so do we also have a government-driven wealth transfer from 99 percent to the “one-percenters” with net metering.
And showing how much he truly detests net metering, Newton argued how renewable energy is a net job loser — something rarely, if ever, heard from a Duke official before, since they are such big proponents. “…Once the high cost of renewables reaches a tipping point, states lose industrial and manufacturing jobs due to the high cost of electricity,” Newton told the committee.
Newton’s expression of concern about the poor and jobs might appear more sincere if his employer – the nation’s largest publicly-owned utility – hadn’t leapt in whole-hog on just about every other subsidy, mandate, tax break, and depreciation acceleration that governments offer for renewable energy projects. Those all drive up electricity costs as well.
Recently departed CEO James Rogers, an advocate for cap-and-trade carbon dioxide reduction policies, was frequently cozy with the Obama administration and Democrats who wanted emission limits. Among the ingratiation initiatives delivered under Rogers’s authority was a $10-million loan guarantee to support the 2012 Democratic National Convention in Charlotte – money that was never paid back to Duke. But the utility reaped many benefits because of policy decisions that favored it.
Thanks to the distorted renewable energy market incentives, Duke and Rogers have gone on a massive wind- and solar-project buying spree the last few years. The reason isn’t necessarily because of a principled stand in support of “clean” energy, but more importantly (to Duke) because – as Rogers has explained in the past – the utility earns a return on equity of 17 to 22 percent on the projects.
The exception, which Newton explained to the NC legislative committee, is when Duke has to pay out more money to its customers for electricity than it is making from buying their solar production. Rogers himself expressed concern about the trend toward rooftop solar – which many have said “democratizes” the grid – in a Bloomberg article last March, because it undermines the monopoly that utilities have.
“It is obviously a potential threat to us over the long term…,” Rogers said. “If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup.”
So while Newton accurately, and somewhat refreshingly, identified the harmful effects of net metering on his company’s lower income customers, it’s clear the larger motive is Duke Energy’s bottom line.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.