Solar energy giant challenges Duke Energy on power purchase terms

The complaint by California-based Cypress Creek Renewables focuses on an arcane topic – the term of power-purchase contracts by Duke. But its outcome could affect the way the solar industry continues to grow in the nation’s second-largest solar state.

The potential for change began in November, when Duke sought more control over solar development in a proposal to the Utilities Commission.

Duke wants to be allowed to solicit competitive bids for new solar farms, replacing a system in which developers line up to connect to its grid. The result has been a backlog of projects that often weren’t located where Duke wanted them.

A federal law, called PURPA for short, requires utilities to buy the output of qualified renewable energy projects. Duke contends North Carolina’s application of the law has been too generous to solar developers.

Duke advocates shorter terms for the non-negotiated power purchase agreements that are typical for small solar farms. Duke says it wants to avoid paying too much for solar energy as hardware and installation costs continue to drop.

That leads back to Cypress Creek’s complaint, which was filed last Friday.

The company, which has built 767 megawatts of solar capacity in North Carolina and has nearly 2,200 megawatts in development, said it has worked well with Duke over the years. That abruptly changed, it said, last September and October.

Cypress Creek approached Duke about power purchase agreements for six large solar farms, totaling 400 megawatts, before Duke had filed its competitive-bids proposal. But Duke offered only five-year contracts instead of the longer terms usual for big projects.

Cypress Creek said it has been unable to secure financing for the projects due to the short-term contract offers. The company claims Duke’s offers are contrary to the intent of PURPA.

Duke’s “unilateral and sudden refusal” to sign long-term contracts is an attempt to enforce changes it wants before the Utilities Commission rules on the competitive-bid proposal submitted in November, Cypress Creek claims.

“We have worked very closely and collaboratively with Duke Energy over the years and value that relationship,” said Steve Levitas, the company’s senior vice president for regulatory affairs and strategy. “We regret that we have been unable to resolve this issue with similar success.”

The Utilities Commission on Tuesday ordered Duke to resolve or respond to the Cypress Creek complaint. Duke spokesman Randy Wheeless said five-year contracts meet PURPA requirements.

“We think the five-year contract makes sense for us and developers,” he said. “There’s no benefit to locking in long-term contracts if the commodity price is falling.”

Duke has made exceptions to that rationale. In an effort to attract solar developers to western North Carolina, Duke offered up to 15-year contracts in a request for proposals last October for 400 megawatts of solar capacity. Duke has less than half the capacity in western North Carolina than in the state’s eastern half.