Slow start for Duke Energy CEO Jim Rogers’ big plans

Friday, May 21, 2010 | Modified: Tuesday, May 25, 2010

Charlotte Business Journal - by John Downey Senior staff writer

Four years into an avowed effort to change the utilities-industry business model, Jim Rogers’ report card is filled with incompletes.

Observers give the Duke Energy Corp. chief executive high marks on vision and theory. He also scores well on visibility as his reputation has grown considerably since arriving at Duke four years ago.

That reputation is largely deserved, says John Gartner, a senior analyst with Pike Research, which follows the new energy industry.

“For the head of a big utility that makes its profits from traditional energy, he is perceived as being outside the industry norm and more in line with people with environmental concerns,” Gartner says. “I think he is making progress, but it’s going much slower than he or the company might like.”

That judgment isn’t universal, however.

“They shouldn’t be in the mode of just selling kilowatts — I agreed that he’s got the proper frame for the issue,” says Stephen Smith, executive director of the Southern Alliance for Clean Energy. “But I don’t have the sense that he is leading in that in a big way as much as maybe his rhetoric would indicate.”

Rogers has been clear on what he views as the future model. The industry must decarbonize, decentralize and sell energy efficiency as well as energy.

And he thinks Duke can lead the way.

But Duke’s ambitious Save-A-Watt initiative, giving power companies incentives to promote conservation and energy efficiency, got trimmed considerably in all five states the company serves. Indiana regulators have given a clear “go slow” sign on Duke’s efforts to push smart-grid programs to improve transmission efficiency and promote energy-control technology into customers’ homes.

In North Carolina, Duke proposed a modest foray into distributed energy that could move the company away from total dependence on large centralized plants. But state regulators cut in half its $100 million program to install solar panels on customer rooftops.

“It’s going to be a messy process,” Rogers concedes as he surveys how far Duke has been able to deliver on his vision. “You’re not going to always get what you want. And you are not always going to get even part of what you want when you want to get it.”

To expect strong operational results already on programs such as Save-A-Watt and smart grid would be expecting a lot. But even setting up the framework — regulatory, legislative and even internal — has been slow, observers agree.

John Buckley, who works in Charlotte for Power Plant Management Services Inc., says the recession has undoubtedly played a role in slowing initiatives in the energy sector.

State utility regulators and legislatures have become less open to experiments in rate structures and other initiatives as costs have become a bigger issue. And inside Duke itself, Buckley says, business constraints can make change a hard sell.

“It is probably unfortunate for Rogers that he really got his feet under him just about the time that the economy has slowed down,” he says. “If I was scoring him on how much he has accomplished, I would have to take into account the backdrop he’s operating in.”

Rogers says he isn’t discouraged. Partial victories are the nature of the business, he notes. “In West Texas, they say the pioneers get the arrows; the settlers get the land. In many senses of the word, we are pioneers.”

But he wants the land as well. In talking about his partial victories, he emphasizes the victory. Indiana cut Duke’s smart-grid proposal in half. But Ohio approved the whole proposal. North Carolina cut the solar program. However, “we move forward as best we can with the approval we got, and we prove the program,” he says.

The fight over Duke’s Save-A-Watt initiative has been typical of the fitful progress.

Within months of his becoming CEO when Duke bought Cinergy Corp. in 2006, Rogers began talking about making conservation and efficiency a profit center. Duke filed a proposal in North Carolina in spring 2007 to essentially make the same return on energy it saved as it did on energy it sold.

But regulators had doubts about how that fit into state laws governing the financial returns for utilities. Consumer and environmental groups that generally supported efficiency also had reservations.

The Southern Alliance for Clean Energy, based in Tennessee, took a leading role in challenging Duke’s initial proposal. Analysts with that group contended the program could lead to unjustified profits for Duke.

As the push faltered in North Carolina, Duke proposed Save-A-Watt in South Carolina, Ohio and Indiana. The company finally reached a compromise in Ohio late in 2008 that capped potential profits and cut its rate of return. That became the model adopted in each of the states Duke operates in.

Smith, the Southern Alliance for Clean Energy director, gives Rogers credit for moving Duke along on efficiency issues. But he disputes the idea that Rogers and Duke are national leaders on such issues. He ranks them toward the bottom on the national scale.

Even in the efficiency-challenged Southeast, Smith says Florida’s utilities have shown more innovative spirit. And several municipal power companies are well ahead of Duke. He says some, such as Georgia’s Southern Co. and Progress Energy Carolinas may lag more than Duke. But doing well in a slow class, as Smith put it, does not make Duke a showcase utility. “I know he’s turning a battleship. But he’s still been there long enough that if he was really going to be a revolutionary in the industry, you would see some action matching his words.”

While some doubt Rogers’ commitment to efficiency and sustainability issues, Gartner — the Pike Research analyst — sees evidence that it is real.

Where Duke can act without the need for regulatory approval, for instance, it has weighed in on the side of new initiatives. It has committed to buying electric vehicles for its fleet. And Duke’s largest investments in renewable energy have come at its unregulated Duke Energy Generation Services, which develops and operates power plants for commercial clients. DEGS ranks No. 10 in wind-power capacity in the United States.

In addition, Duke has started investing in solar farms and has a joint-venture agreement with Chinese company ENN Group to develop solar projects.

Regulators — and the regulated side of the business — will come around, Gartner thinks.

“But it’s a contentious issue all public utility commissions are facing, and the companies are facing themselves,” he says. “There is an upfront cost for renewable energy. How do you provide for a return for investors when you make that shift? And how do you incent public companies to sell less of their product?”

Rogers says Duke will make progress step by step, despite resistance to change.

“If you have the vision and you believe in it and you believe it’s good for your customers and it’s good for your state and it’s good for your country, the fact that you get your nose bloodied, that is just part of being in the process.”

This article brought to you by the Indiana Renewable Energy Association.

Join InREA for Webinar on IPL's New Renewable Energy Incentives Including FiT

Last summer, InREA brought you a webinar on Feed-in Tariffs (FiT) including information about Indianapolis Power and Light's proposal for a FiT that was part of their Demand Side Management (DSM) plan pending before the Indiana Utility Regulatory Commission (IURC). IPL's DSM plan was approved and now you can hear about the details and how to sign-up for these new renewable energy incentives.

See http://indianadg.wordpress.com/2010/04/01/final-ipl-feed-in-tariff-effective-march-30-2010/

If you can't join us on May 27th, we plan to provide web access to this presentation later.

The presenters for this webinar include:

John Haselden, Secretary of the InREA Board of Directors, is a Principal Engineer in Corporate Affairs at Indianapolis Power and Light Company (IPL). He works in the evaluation, planning and regulatory approval process of environmental compliance options, renewable resources and Demand Side Management (DSM) programs at IPL. He is the author of IPL’s Rate REP (Renewable Energy Production) feed-in tariff recently approved by the Indiana Utility Regulatory Commission. He has over eighteen years of experience at IPL and has worked in engineering, planning, fuel supply and marketing and was also the Director of Engineering for a regional railroad before rejoining IPL in his present position. He graduated from Purdue University with a Bachelor of Science in Civil Engineering. He also graduated from Indiana University with a Master of Business Administration. He is a Registered Professional Engineer in the State of Indiana.

Jake Allen is in Marketing and Program Management at Indianapolis Power & Light Company (IPL). During his tenure with IPL he has worked in numerous staff and management positions, including Engineer, Administrator of Rates, Director of Rates, and Manager, Energy Project Development. Since August 1997, he has been the individual who has primary responsibility for IPL’s Energy Efficiency or Demand Side Management (“DSM”) programs, including the development, research, implementation, planning, monitoring and evaluation of all DSM programs. He has been a witness in numerous Company proceedings before the Indiana Utility Regulatory Commission. Jake holds a Bachelor of Science Degree in Construction Engineering and Management from Purdue University and a Master’s Degree in Business Administration from Indiana University. He is a registered Professional Engineer in the State of Indiana.

InREA Webinar: John Haselden and Jake Allen explain new Indianapolis Power & Light (IPL) Renewable Energy Programs


Join us for a Webinar on May 27

Space is limited.

Reserve your Webinar seat now at: https://www1.gotomeeting.com/register/145063256
 
InREA Webinar: John Haselden and Jake Allen explain new Indianapolis Power & Light (IPL) Renewable Energy Programs

Join the first webinar by the Indiana Renewable Energy Association (InREA) using GoToWebinar on Thursday, May 27th from 10:00 to 11:00 am. John Haselden and Jake Allen with Indianapolis Power and Light (IPL) will describe and explain renewable energy incentives recently approved by the Indiana Utility Regulatory Commission (IURC).

These new renewable energy incentives include: 1) revised net metering tariff; 2) new Rate REP or Renewable Energy Production (aka Feed-in Tariff); and 3) incentives for small scale renewable energy projects.

The revised net metering tariff has been expanded to be available to all customers and the capacity limits have been increased from 10 kW to 50 kW.

IPL's Rate REP is:

• Available to all customers not on Net Metering Rider 9.
• Applicable to generating capacity of 50 kW (20 kW for solar PV) to 10 MW
• All production will be metered and purchased by IPL (not just net of use)
• IPL retains all environmental attributes (e.g. RECs) to be used for compliance with an RPS or sold to the market for the credit of all customers.
• Allows for multi-year contracting of production and pricing (allows for project financing)
• Standard pricing to be adjusted periodically using a 30-filing process and will take into account DSM incentives, tax credits and other influences so as to not create a windfall for developers.

A $2 per watt incentive available to IPL customers who install a small scale renewable energy project – capped at $4,000 per customer

This is a webinar you won't want to miss. We plan to record this webinar and make it available later so watch for more details.

Title: John Haselden and Jake Allen explain new IPL Renewable Energy Programs


Date: Thursday, May 27, 2010


Time: 10:00 AM - 11:00 AM EDT

After registering you will receive a confirmation email containing information about joining the Webinar.

System Requirements
PC-based attendees
Required: Windows® 7, Vista, XP, 2003 Server or 2000

Macintosh®-based attendees
Required: Mac OS® X 10.4.11 (Tiger®) or newer

Please forward this information to others who you think might be interested but each person must register for this webinar brought to you by the Indiana Renewable Energy Association.

IPL Offers RATE REP for Renewable Energy Production


Available to any customer of IPL that operates within the Company’s service territory a Qualifying Renewable Energy Power Production Facility (REP-QF).

A REP-QF is for the production of electricity with capacity no less than 50 kW (20 kW for solar) and no greater than 10 MW. It shall be located at one site and is not the aggregation of more than one site each less than 50 kW (20 kW for solar) and which produces electric power through the use of 100% renewable resources or fuel. Customer must sell the total production of the Facility to IPL.

Such resources or fuels include:

• Solar photovoltaic cells and panels

• Wind

• Dedicated crops grown for energy production

• Organic waste biomass

• Biomass will be consistent with the State’s definition in IC 8-1-8.8-10

IPL RATE REP Purchase Rates

Solar

• No capacity payment

• Energy payments

o For facilities generating 20 kW to 100 kW: $0.24 per KWH

o For facilities generating more than 100 kW: $0.20 per KWH

Wind

• No capacity payment

• Energy payments

o For facilities generating 50 kW to 100 kW: $0.14 per KWH

o For facilities generating 100 kW to 1 MW: $0.10.5 per KWH

o For facilities generating more than 1 MW: $0.075 per KWH

Biomass

• Capacity payment: $6.18 per KW per month

• Energy payment $0.085 per KWH

Biomass industry sees 'chilling message' in EPA emissions rule

EDITOR'S NOTE: I received these comments on the EPA final emissions rule and the E&E article below from Frank Hoffman with the law firm of Krieg Devault. Please let us know what you think. Emphasis added by Laura Arnold.

"...the current EPA emissions final rules that do not provide any exemptions for any type of biomass energy. Biomass has tremendous potential in Indiana. Needless to say these rules could significantly impact the ability to move forward with financing many new biomass projects until the rules and exemptions are more clearly defined. Based on these final rules "as is", projecting costs associated with the EPA's emissions rules will be challenging. Such additional unknowns are just enough to cause financing sources to stop current efforts.

Both Senator Lugar and Senator Bayh have supported the biomass efforts in Indiana, and I am sure they would very helpful in achieving a reasonable solution to address the EPA's concerns."

Frank Hoffman
fhoffman@kdlegal.com
CLIMATE: 05/14/2010
Robin Bravender, E&E reporter

U.S. EPA's final rule determining which sources will be subject to greenhouse gas permitting requirements does not exempt biomass power, a decision that has raised concern in the biomass industry.

Issued yesterday, EPA's final "tailoring" rule determines which polluters will be required to account for their greenhouse gas emissions in Clean Air Act permits when the agency begins to formally regulate the heat-trapping gases next January (Greenwire, May 13).

Emissions from biomass or biogenic sources are treated the same as other sources of greenhouse gases in the final rule, EPA spokeswoman Cathy Milbourn said. "We have not finalized any exemptions from applicability or different applicability thresholds for such sources at this time."

That decision "came as a bit of a surprise to us," said David Tenny, president and CEO of the National Alliance of Forest Owners.

Tenny's organization and other forestry groups had urged EPA to exclude biomass combustion from the requirements, arguing that the process is "carbon neutral."

Paul Noe, vice president for public policy at the American Forest & Paper Association, was one of several representatives from his organization who met last month with White House and EPA officials to push for a biomass exemption in the rule.

"When biomass such as wood is combusted for energy, it releases back into the atmosphere carbon dioxide that the trees had absorbed from the atmosphere during their growth," Noe said. "That is why CO2 emissions from biomass combustion are assigned an emissions factor of zero."

Without an exemption from the tailoring rule, Tenny said, "what you have is an incentive for biomass producers to turn back to fossil fuels," because they offer a more concentrated energy source.

"The question is, what is EPA going to do from here?" Tenny said. "This sends a bit of a chilling message to biomass producers."

EPA also received comments expressing concern that not all biomass combustion should be considered carbon-neutral.

Franz Matzner, a policy analyst for the Natural Resources Defense Council, said EPA's rule must distinguish between biomass that creates carbon pollution and biomass that does not.

"The science around biomass continues to make clear that not all biomass is good from a carbon footprint perspective," Matzner said. "Some sources of biomass can theoretically be carbon-beneficial: for example, taking waste streams from agricultural crops and burning that is most likely going to give you reductions in greenhouse gases compared to fossil fuels.

"On the other side of the fence, chopping down a swath of forest that then gets turned into a parking lot and burning it puts carbon in the atmosphere that's not going to regrow."

While EPA said it lacked sufficient basis to exclude carbon dioxide emissions from biogenic sources in determining permitting applicability at this time, it also said treating biomass combustion differently warrants further exploration.

There is flexibility to apply pollution control requirements to biomass sources in ways that "recognize the inherently lower-emitting characteristics of biomass," Milbourn said, and the agency will take that into account when it issues guidance later this year about what constitutes "best available control technology," or BACT, for specific sources.

EPA said it also plans to seek further comment on addressing biogenic emissions and could take further regulatory action in the future.

Agriculture Secretary Tom Vilsack yesterday welcomed EPA's plans to seek comment on how to address biomass under the Clean Air Act.

"As this process moves forward, USDA is committed to working with EPA to ensure that rules designed to reduce the buildup of greenhouse gases in the atmosphere also encourage the development and utilization of biomass energy resources and avoid unnecessary regulatory impediments and permitting requirements," Vilsack said in a statement.

This article brought to you by the Indiana Renewable Energy Association.

Alliance for Climate Protection Applauds EPA Final Rule on Large Emitters

For immediate release: May 13, 2009
Press inquiries: Laura Burton Capps, Giselle Barry, 202-567-6800, press@climateprotect.org

** CEO MAGGIE L. FOX’S STATEMENT ON EPA ANNOUNCEMENT OF FINAL RULE FOR GREENHOUSE GAS EMISSIONS FROM LARGE POLLUTION SOURCES **

Bobbie Stewart, Communications Director for Indiana Repower America asked that I share this information with you.

Bobbie can be reached at 812-360-7750 or Bobbie.Stewart@climateprotect.org. WASHINGTON, D.C. — Maggie L. Fox, President and CEO of The Alliance for Climate Protection, issued the following statement on today’s announcement from the Environmental Protection Agency (EPA) of the final rule for permitting requirements for large sources of greenhouse gas emissions:

“Americans can breathe a bit easier in the wake of today’s announcement from the EPA on regulating emissions from the largest sources of greenhouse gas pollution causing the climate crisis. This rule is a common-sense and cost-effective approach that will shield small businesses and small sources, and focus on the largest emitters. Coupled with historic national carbon pollution limits for cars, a first-ever mandatory greenhouse gas inventory, and efforts in the Senate to craft comprehensive clean energy and climate policies, America is closer to realizing the promise of a 21st-century clean energy economy.”

About the Alliance for Climate Protection:

The Alliance for Climate Protection was founded in 2006 by Nobel laureate and former Vice President Al Gore. With more than two million members worldwide, the Alliance is a unique non-profit, non-partisan organization that is committed to educating the global community about the urgency of implementing comprehensive solutions to the climate crisis.

This information brought to you by the Indiana Renewable Energy Association.