Duke Energy Pursuing C&I Solar PV Leasing Options for Customers in Three US Regulated Retail Markets

Commercial and industrial (C&I) energy and sustainability managers are looking to deploy distributed energy resources like solar PV to meet their sustainability and energy management needs. However, pursuing solar PV deployments is challenging. Most C&I companies would prefer to spend capital (CAPEX) on improving core operations instead of energy, and those that might choose energy often struggle to justify the ROI needed to purchase these systems. Further, C&I energy users in the governmental, educational, and non-profit sectors cannot take advantage of the federal Investment Tax Credit (ITC) incentive for onsite solar PV to drive down costs. Such customers historically have turned to financing options like equipment leases or solar power purchase agreements (PPAs) to avoid CAPEX and the external investor to take advantage of the ITC, lowering the costs of deploying solar PV to reduce energy spend. 

C&I energy users and external investors interested in solar PV in certain US states have been prevented from taking advantage of these types of onsite solar PV financing innovations. Some states ban third-party financing instruments like PPAs or leases under state law. Where third-party financing is allowed, the business case to develop and deploy financed solar PV is limited. This is due to high project costs outside of the robust solar carveout in state-based renewable portfolio standards, where the sale of compliance solar renewable energy certificates improves the ROI. 

States Focusing on the Customer

Recent customer-focused efforts by Duke Energy in retail-regulated markets in North Carolina, South Carolina, and Indiana, however, may present C&I energy users with new options they did not previously have:

• In North Carolina, under the Competitive Energy Solutions for North Carolina law enacted in 2017, C&I energy users can now lease solar PV systems from regulator-approved third-party vendors rather than buying them upfront. Duke Energy has proposed to offer solar PV leases through a new, non-regulated affiliate called Duke Energy Clean Energy Resources (DECER) to design, build, own, and operate up to 1 MW systems under a 20-year lease. 
  

• In 2015, South Carolina began to permit third-party financing options such as a solar PV system lease without regulator approval. Now that North Carolina is moving forward with its leasing program, Duke Energy indicated that DECER will now pursue solar PV leases in South Carolina as well. 

• In Indiana, in September 2018, Duke Energy applied for approval to provide tariff-based onsite solar PV lease options to non-residential energy users. These leased onsite solar PV assets would not be included in the company’s rate base used to establish regulated electricity prices.

Despite the uncertainty surrounding non-utility based, third-party solar PV financing in Indiana, Duke Energy’s efforts will improve onsite solar PV project delivery ecosystems across all three states. Duke has indicated that DECER does not plan to construct the solar PV systems themselves, rather it will utilize solar PV vendors to support the project buildouts. This approach will allow Duke to use their customer relationships, brand, purchasing power, and low cost of capital to help C&I energy deploy onsite solar PV without CAPEX.