Duke Energy Is Well Positioned To Make Good On Its Solar Investments

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Duke Energy (NYSE:DUK) is the largest fossil fuel power holding company in the world, but in the past few months it has significantly ramped up its investments in solar PV (photovoltaics). In February, the company announced the acquisition of a majority interest in REC Solar, a provider of commercial solar solutions in the U.S. and internationally. [1] The acquisition increased Duke’s presence in the large-scale commercial solar sector. Now the company is planning to install 500 MW worth of utility scale solar projects in the state of Florida by 2024. [2] This move is atypical for a utility company, where most of the players are still fossil fuel based. It is also atypical for players in the solar energy segment, which is typically populated with companies with much smaller asset bases than Duke’s. The ignorance of solar by large utility players and Duke’s huge asset base gives it several competitive advantages in both the solar space and the utility space. Below, we discuss some of these in more detail.

Competitive Advantages

The solar energy segment is mostly filled with companies that are small and relatively new compared to established players in the power and utilities segment. In contrast to those companies, Duke Energy is a company with a massive asset base and a significant advantage in securing finances compared to pure solar players. This means that while the company has a solar asset base far smaller than established solar players like First Solar or Sun Power, it can increase its solar installations at a very fast pace, if it wants to. What’s more, Duke also has the added advantage of having access to a huge customer base should it choose to increase its presence in the solar energy market. The company’s regulated utilities business has almost 7 million customers in the states of Florida, North Carolina, and South Carolina alone. This means that should Duke decide to sell solar power to residential customers, it can do so to a market in these states alone compared to the entire residential solar segment (500K) in the U.S.

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Under-penetrated Markets

Duke has a lot of customers in states that are under-penetrated by solar players. Last year, the company announced that it plans to invest $500 million in 278 MW worth of utility-scale solar PV projects in North Carolina. [3] When the company completes that investment, it will become one of the leading PV providers in the state. Similarly, the company announced plans of building 110 MW worth of Solar PV in South Carolina over the next six years, making it one of the biggest PV providers in that state as well. [4] The 500 MW investment in Florida will do the same for Duke in Florida, which is a promising market for solar, but only the 13th in terms of actual solar PV capacity installed. The company’s massive customer base in the region will allow it to cross sell its solar products should it feel the need to. Additionally, the absence of competitors in the state will allow it to establish a strong solar presence over the next few years.

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Notes:
  1. Duke Energy and REC Solar team to make distributed solar more affordable and accessible to commercial customers, Duke Energy, February 2015 []
  2. Duke Energy’s Ten-Year Site Plan calls for more solar in the Sunshine State, PR Newswire, April 2015 []
  3. Duke Energy commits $500 million to North Carolina solar power expansion, Duke Energy, September 2014 []
  4. Duke Energy’s Ten-Year Site Plan calls for more solar in the Sunshine StateDuke proposes 110MW PV for South Carolina, Recharge News, February 2015 []