New Power Generation: Why America’s Largest Electric Utility Is Adding Renewables To Its Energy Mix

Electric power was still a luxury few could afford when American industrialist James Buchanan Duke and his partners decided to build a clever system of lakes and dams on the Catawba River, which runs through the Carolinas. Their first power station, which came online in 1904, used the river's bottled-up energy to generate a meager 6,600 kilowatts, barely enough to supply seven modern U.S. homes.

But Duke had a plan for growth. By building new dams and connecting them to the latest water-cooled transformers and other equipment supplied by GE - whose co-founder Thomas Edison built the world's first commercial central power plant - the partners were able to reach customers as far as 30 miles from their power stations and send electrons to the Cotton Belt's budding textile mills, including operations in which Duke's brother Benjamin invested.

It was a humble beginning for what is now the largest electric utility in the United States. Known as Duke Energy, the company provides electricity to more than 24 million people in the Southeast and Midwest - with GE innovation quietly helping fuel its growth along the way.

Duke's growth picked up steam during the boom years following World War II, when Americans started buying refrigerators, air conditioners and other big and power-hungry appliances and supplying them with electrons from large coal-fired power plants. In 1965, the company added its first nuclear power plant, and in the 1990s, it became a big player in natural gas.

Now Duke is changing again. Over the last decade the company has expanded into renewable energy, investing almost $6 billion in 60 solar installations and 20 wind farms, including projects using GE technology. Its home state of North Carolina is now second only to California in the use and generation of solar energy. 'In North Carolina, we own more than 35 large-scale solar sites,' says Robert Caldwell, the person leading Duke's renewables charge. 'We also purchase a great deal of solar power from other developers and plan to add nearly 3,000 megawatts of new solar in the state during the next five years.'

Caldwell is president of Duke Energy Renewables and Distributed Energy Technology, a division that already owns and operates more than 3,000 megawatts (MW) and manages another 3,500 MW of power produced by wind and solar plants owned by other operators. That number is still small compared with the 50,000 MW that Duke's conventional power plants generate, but it's quickly growing.

Caldwell says Duke is 'gearing up' to accommodate 7,000 MW from renewables in five years in response to customer demand and state directives. 'In the last decade, there's been a significant movement by some of our key stakeholders, whether it's environmentalists, key policymakers or customers, to adopt more renewable generation on the regulated side of the business,' Caldwell says. 'You've got a lot of corporate buyers like the candymaker Mars, Amazon, Google and Apple, universities and other buyers who have sustainability goals.'

Duke Energy Renewables has opened a digital renewables control center in Charlotte, North Carolina, to monitor its projects and ensure that they perform well and to help maintain the seamless flow of electricity across the nation's energy grid, an increasingly important job given that the sun doesn't always shine and the wind doesn't always blow. The power comes from a mix of sources: Duke's own wind and solar plants, as well as installations owned by independent operators like Deepwater Wind, the company that built America's first offshore wind farm near Block Island, Rhode Island. That wind farm uses GE's massive Haliade wind turbines to make electricity.

Duke is also modernizing the grid and adding battery storage to soak up excess electricity. 'It's a cliche to say that Thomas Edison would recognize the grid today,' Caldwell says. 'It looks the same, it's still poles and wires, but the functionality is significantly different. We've got control equipment where we can monitor the voltage much more finely than we ever could. We basically have a communication network as well.'

Renewable energy has become so important to Duke that it is one of the three core segments the company reports on during quarterly earnings calls with investors - together with its electric infrastructure and natural gas businesses. 'I'm the champion of the cool stuff,' Caldwell says. 'We've got a lot of things going on in the company. I tell people I've got the best job in the company.'

Caldwell sat down with GE Reports to talk about Duke's embrace of renewables. Here's an edited version of the interview.

GE Reports: Electricity from coal- and gas-fired power stations and from nuclear power plants fueled Duke Energy's growth for much of its history. What's changed?

Rob Caldwell: Duke started expanding into wind and solar energy 10 years ago. Renewables isn't just a compliance obligation for a utility, it's a business opportunity. True, as a regulated utility we had to buy renewables and they had to make up a certain percentage of our portfolio. But it's also where the future of the generation portfolio is moving. We had to start thinking how we embrace this technology, get the rules around it right and also make sure that we can invest in it and grow it as a business. Duke Energy Renewables, the commercial part of our renewables portfolio, operates in 22 different states now.

GER: It seems that the last decade was very different from the previous 100 years.

RC: I think that's right. There are days when it feels like I've been in the business a hundred years too, just so you know. But seriously, my role is about a year and a half old. We recognized that we need a single view of renewables. I have a responsibility for renewables in our regulated footprint and also on the commercial side. My charge is to grow this business at a double-digit rate over the next few years. We do that because we are bullish on renewables, we're bullish on the market and our customers are asking for more too.

GER: Can you explain the difference between the regulated and commercial segments?

RC: On the regulated side, our prices and tariffs are all set by state regulatory commissions. Really what that means is that our revenue stream is defined by what our investments are and what our operating costs are to provide electricity to our customers. In the last decade, there's been a significant movement by some of our key stakeholders, whether it's environmentalists, key policymakers or customers, to adopt more renewable generation on the regulated side of the business. We started with compliance and now we are starting to invest directly in renewable assets for the benefit of our regulated customers.

The commercial side of our revenue comes from negotiating terms and conditions and pricing with our customers. We build the solar and wind capacity for them, we deliver it to them and then they distribute it to their customers.

GER: How important are renewables for Duke?

RC: Starting in 2017, renewables is one of the three segments that our CEO and CFO report out on our quarterly earnings calls with investors. It's that important to Duke. True, it's still a pretty small part of our portfolio today. We have about 3,000 megawatts of wind and solar in our commercial portfolio. We have almost 50 gigawatts of generation in the regulated footprint.

But if you look where we stand in the country, we're among the top 10 owners and operators of renewables for both wind and solar. We see the renewables side of our business growing faster than our regulated businesses. Renewables account for a significant portion of the new generation that's been added in the United States in the last couple of years, and we see that trend continuing.

GER: What's driving this change?

RC: Our customers. We see the market moving and corporate and municipal buyers becoming bigger and bigger players. You've already got a lot of corporate buyers like the candymaker Mars, Amazon, Google and Apple, universities and other buyers who have sustainability goals. We can offer a national customer a broad range of solutions, from large wind farms in the wind belt and large solar farms, all the way down to solar on their rooftops and batteries to help them manage their load. We have a California subsidiary called REC Solar that handles a lot of commercial and industrial rooftop generation, installing solar on parking garages, office buildings and other places.

GER: What are the challenges to increasing the share of renewables in the energy mix?

RC: As an industry, we've made it easy for people to use our product. It's relatively low cost and we're probably 99.98 percent available. It's there when you want it. With renewables we need to manage power quality and also intermittency, meaning that the availability of solar power, for example, fluctuates from day to night, but also from moment to moment, for example when you have clouds going by. We have to operate our system differently to manage this challenge. We need more fast-start gas turbines to pick up the slack when the wind stops blowing, and we need more battery storage to balance out some of the frequency and voltage fluctuations we are seeing. We've got a lot of plans in place to manage it. I look at it as an opportunity for the company.

GER: Are you using software and data as well?

RC: We're doing a lot of work on more granular modeling and forecasting, so we can predict when a thunderstorm is going to pass through. But that's just one example. Data is a huge, huge driver for increasing the production of renewables and decreasing costs. For example, if we can be more accurate in terms of predicting when the wind is going to be blowing or the sun is going to be shining, we can schedule our maintenance around that. We have a digital control center for renewables in Charlotte, where we monitor all of Duke's wind and solar generation. As I mentioned, that's about 3,000 megawatts. We also monitor and control another 1,500 megawatts for customers like Deepwater Wind, which operates the Block Island offshore wind farm.

GER: How does the monitoring work?

RC: We can control the turbines, some of which are actually GE models. We monitor them for performance and we also provide the interface between the wind farm and the transmission provider. For Block Island, the system is a combination of Duke, GE and other software. There are several layers to it. It's all designed to optimize the economic value of the turbines and the amount of clean energy that goes into the Rhode Island grid. When the wind is blowing, we are putting that power on the grid so we can get paid for it. On the other hand, when the transmission lines get overloaded, we get a signal back in the control center and change the output of the turbines, say, by feathering the blades.

GER: Tell us about the utility's Power/Forward plan.

RC: It is helping us to increase the resiliency of our system and harden it against storm damage. But it is also changing the power flows, using smart sensors to create self-correcting segments of the grid. When these segments detect an outage or a voltage anomaly, it automatically changes the flow of power. A lot of that work will help us prepare for natural disasters, but it also can help with managing the intermittency of renewables. Even though the grid looks the same in many places, it functions dramatically differently and enables more options for customers.

From providing instant updates on outages to giving customers the ability to decide when their bill is due or helping homes and businesses maximize their savings, we want to make it possible for all customers to make smarter energy choices for years to come.

In my mind, all of the challenges we are facing today are opportunities for us to work with our customers and help them do what they want.