Planning for the power of the sun

The United States is in a state of economic and environmental crisis. President Barack Obama has been assigned the daunting task of drastically improving both, while still being at the mercy of volatile public opinion.

One of the first attempts that the president has made was to ratify the $787 billion stimulus on Feb. 17. Part of this package includes plans to encourage power companies to grow efficiently, thus creating jobs and helping power companies achieve their renewable-energy requirements.

However, power companies face a substantial economic burden as they begin to provide greater efficiency. Traditionally, there has been a direct link between public-energy consumption and utility profits in electricity pricing systems. The less energy one uses, the less one is charged. However, this relationship discourages the development of renewable-energy techniques because power companies will lose profits as the demand for their energy declines. Furthermore, many state utility commissions limit the amount of money an energy provider can charge for utilities. This has caused Duke Energy and many other energy providers to push for "decoupling;" that is, implementing a pricing system that breaks the link between utility company profits and energy usage. Thus, decoupling could provide incentives for both energy providers and consumers to improve efficiency.

Motivated by North Carolina's requirement that 12.5 percent of the state's electricity be renewable by 2012, Duke Energy recently proposed a plan that would allow customers to lease their roof tops to Duke Energy for the installation of solar panels. The $50 million project would produce enough solar electricity to power 1,300 homes. However, Duke Energy also planned to pay for this project by increasing current utility rates. Regardless, the state utility commission ruled that the power company could save more money by using a third-party solar-energy provider instead of producing the energy on its own. Furthermore, the commission put a limit on the amount of profit that Duke Energy can recoup from customers. This put the entire project in jeopardy and has caused Duke Energy to consider abandoning the plan.

Obama's stimulus package has come to the rescue of Duke Energy. Siobhan Hughes of The Wall Street Journal explains that "The biggest winner was Duke (Energy), the power company that has been leading the charge for decoupling. Under the plan, utilities are guaranteed enough revenue to make a profit, no matter how much electricity customers use. If demand comes up short, customers would pay a higher rate to cover the shortfall. In a conventional rate scheme, the utility company takes a loss when demand falls short." Therefore, the stimulus package will allow Duke to pursue its solar-energy plan while maintaining enough profit to make the project economically profitable. This project will also create jobs and could motivate the formation of future projects focused on renewable energy.

Duke Energy has also prioritized the development of a new "smart" power grid, which it expects to deploy throughout its five-state area within the next five years. This renovated power grid will incorporate new technologies that have several efficiency promoting implications. The new grid will allow Duke Energy to monitor customer usage in real-time, which will permit more efficient distribution automation and improved management of outage problems. These renovations will allow Duke Energy to increase its operational efficiency and, in turn, would decrease the energy output necessary to power the five-state area. This decrease in energy would also create a reduction in total emissions. The smart grid could also identify inefficiencies in customer usage, which would enable Duke to work with customers to enhance their individual efficiencies. Thus, Duke's plan for a revamped energy grid is likely to benefit from the stimulus package, considering $4.5 billion of the package is allocated to energy grid restorations at the state level.

These reformations in electrical-power production will directly benefit Duke's customers and investors. Importantly, they will also benefit the broader community as well. Increased energy efficiency will promote national energy conservation and lessen our dependence on foreign oil, as well as reduce our carbon footprint.

The United States is in a state of national crisis. President Obama is faced with the complex challenge of fixing the world's economy, but at no cost to the environment. Although early in his presidency, it is clear that the president is beginning to take the initial steps toward economic recovery through green innovations.

■ Matthew Smith is a student in mathematical economics at Wake Forest University. Timothy Griesser is a student in biology at Wake Forest University.