Duke Energy partners with Japanese firm to extend U.S. renewables

Source: Daniel Cusick, E&E reporter • Posted: Monday, April 30, 2012

Renewable energy development has been slow to take hold in the Southeast, but that hasn’t stopped one of the region’s dominant utilities, Duke Energy Corp., from significantly expanding its renewables footprint, even if it has to go to Texas, Kansas and Arizona to do it.

Yesterday, Charlotte, N.C.-based Duke announced it had secured financing for 299 megawatts of new wind power generation in southwestern Kansas that it will build in a 50-50 joint venture with Sumitomo Corp. of America, a subsidiary of Japan’s Sumitomo Corp.

Last week, $353 million in financing for the two wind farms near Cimarron, Kan., was secured from three Japanese lenders, Sumitomo Mitsui Banking Corp., Mizuho Corporate Bank Ltd. and Bank of Tokyo-Mitsubishi UFJ Ltd.

Duke announced in March that it had sold a 50 percent stake in the Kansas wind farms — the 131 MW Cimarron II and 168 MW Ironwood projects — to Sumitomo, a Tokyo-based multinational company with extensive holdings in the global minerals, energy, transportation, infrastructure and real estate sectors.

As part of its environmental stewardship mission, Sumitomo has invested heavily in renewable energy projects over the last decade, both in Japan and abroad. The company owns and operates two wind farms in Japan, and in 2009 it purchased a 42.5 percent stake in the 120 MW Stanton wind farm in Martin County, Texas, marking its entry into the U.S. wind power market.

The partnership with Duke Energy will significantly strengthen both companies’ wind energy portfolios. In 2011 alone, Duke Energy Renewables announced the construction of five U.S. wind farms — the two in Kansas, two in Texas and one in Pennsylvania — that will expand the company’s wind power portfolio to nearly 1,800 MW.

In its latest environmental sustainability report, Duke said it had invested more than $2.5 billion in wind energy facilities since 2007 and that by next year its 15 wind farms should produce enough electricity to power more than a half-million homes.

Green power for other utilities

Most of that electricity will not be consumed in its North Carolina service area, however. Rather, it is being sold to other utilities seeking to meet state-based renewable energy standards. The Kansas wind farms, for example, will send their generation to regional utilities Kansas City Power & Light and Westar Energy under 20-year power purchase agreements, according to a Duke news release.

But Duke, whose core Carolinas service territory extends across 22,000 miles of North Carolina and South Carolina, has not remained stagnant in adopting renewable technologies closer to home.

Last year, the company brought five solar farms online in North Carolina, though all those facilities are outside Duke’s residential service territory. It also invested $50 million in a program to install rooftop solar systems on buildings and schools within its service territory, allowing for an additional 8 MW of generation capacity.

“The electricity produced — enough to power roughly 1,300 homes — is fed into the power grid that serves all our customers in the service area,” the company said in its 2012 environmental report.

In January, Duke Energy Carolinas announced a 20-year agreement to purchase all the output from Strata Solar’s 5-MW Kings Mountain Solar facility about 30 miles west of Charlotte. The plant is among the largest in the state.

Giant merger in the works

Meanwhile, Duke is seeking to extend its dominance within Eastern electricity markets.

In January 2011, the company said it would acquire Progress Energy, whose service territory covers much of the remaining areas of North Carolina and South Carolina, as well as a large swath of central and north Florida. The $16.1 billion deal would be Duke’s second major acquisition in a decade, after it completed a similar acquisition of Ohio-based Cinergy Corp. in 2006.

A Duke-Progress merger would create the nation’s largest electric utility, with roughly 7.1 million customers and extensive generation assets, including some of the nation’s largest coal and nuclear power plants. Together, the two companies have the largest fleet of regulated nuclear plants in the United States, with a dozen units in the Carolinas and Florida.

But the deal has been stymied by opposition from consumer advocates, environmental groups and federal regulators who have twice rejected the merger plan, citing concerns about insufficient competition in wholesale electricity markets, especially in the Carolinas.

Regarding its latest merger plan, filed with FERC last month, Duke Chairman Jim Rogers expressed confidence that the companies have successfully addressed issues that led to earlier rejections from the Federal Energy Regulatory Commission. Among other things, he said, the companies have pledged to build additional transmission lines that would ease the flow of electricity in and out of the Carolinas (Greenwire, March 26).

But environmental groups have said they want the two utilities to make greater commitments to both energy efficiency and renewable energy development before a merger is allowed to go forward. Based on current generation assets, the combined company would generate roughly 52 percent of its electricity from coal, while 30 percent would come from nuclear power (ClimateWire, Jan. 11, 2011).

Both companies have pledged to phase out older coal plants that are inefficent and contribute significant amounts of pollution to regional air and watersheds and replace them with cleaner generation sources.