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Duke offloads distributed-generation business to ArcLight

Illustration of an electrical tower casting a dollar sign as a shadow.

Illustration: Sarah Grillo/Axios

Electric utility Duke Energy agreed to sell its commercial distributed-generation business to an affiliate of private equity giant ArcLight Capital Partners for $364 million.

Why it matters: The nine-figure deal is the latest step by Duke to extricate itself from unregulated electricity markets.

Details: Duke will sell its commercial solar business, REC Solar. It had acquired a majority stake in the business in 2015.

  • It's also offloading fuel-cell projects managed by Bloom Energy, the San Jose, Calif.-based fuel-cell manufacturer and installer.
  • The portfolios amount to about 200 MW, a Duke spokesperson tells Axios.

Zoom in: Duke says it expects to make $259 million in the sale, which it anticipates closing this year.

  • The deal comes a few weeks after the Charlotte-based utility announced plans to sell a 3.4 GW portfolio of large or "utility-scale" solar, wind and battery storage projects to Brookfield Renewables for $2.8 billion including debt.

Between the lines: Duke's utility-scale and commercial-scale portfolios were in unregulated markets. The company says it's pivoting to focus on its regulated assets.

Catch up fast: In traditional "regulated" markets, utilities build power plants and transmission lines, then pass the cost to customers in their electric bills. The process can be slow but brings predictable returns.

  • In unregulated markets, project developers and operators compete on cost — promising potential bigger upside but possibly more risk.

State of play: Solar and wind have faced mounting costs from supply-chain disruptions, trade disputes, grid-connection delays, labor shortages and inflation.

  • Project developers in the past two years have increasingly found themselves forced back to the negotiating table to revise power purchase contracts — an expensive and time-consuming process.
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