By Editors of Power Engineering

Duke Energy has estimated it will overpay solar developers $1 billion dollars for energy generated over the next 12 years.

The utility claims the overpayments will come from a combination of regulations, falling natural gas prices and explosive solar growth, the Charlotte Observer reported.

Federal law compels utilities to purchase power from qualified renewable energy projects, and pay prices equal to the avoided costs from not building traditional power plants.

Though the North Carolina Utilities Commission resets the avoided costs every two years, Duke said its actual avoided costs have dropped to $35 per MW/h of energy due to falling natural gas prices. However, the company is paying developers $55 to $85 per MW/h under long-term contracts.

Duke claims that difference will cost the utility $80 million per year, or $1 billion over the remaining life of the contracts. The utility claims that will result in $20 per year of extra payments to customers.

Additionally, Duke claims generous North Carolina rules have resulted in heavy solar growth with little utility input. Duke is calling for a switch to a competitive bidding process for new solar facilities.

Solar developers have yet to file a response with the commission, though Brian O’Hara, senior vice president of strategy for Strata, said long-term contract prices act as a stabilizing force against the potential for natural gas price spikes.