Doubling down on its net-zero efforts, Duke Energy will retire all coal-only units in the Carolinas, multiply its renewable portfolio, and cease emitting methane in its natural gas business by 2030.
The company made the announcements on Oct. 12 at its first environmental, social and governance (ESG) day, a virtual event geared toward its investors. While Duke Energy’s efforts are rooted in a clean energy transition to address climate change, the company also views the changes as a “compelling investment story,” Lynn Good, Duke Energy’s chair, president and CEO, told attendees.
“As we pursue this clean energy transition, we see the path to accelerate capital investment and deliver a 7% rate-based growth by the end of this planning period,” she said. “And we also see an opportunity with this capital investment as well as the great work we’re doing around productivity and cost reduction to have the opportunity to earn at the high end of our 4% to 6% earnings guidance range.”
Huge Jump in Capital Investment
The event comes just weeks after Duke Energy filed Integrated Resource Plans (IRPs) for its subsidiaries Duke Energy Carolinas (DEC) and Duke Energy Progress (DEP) that hinted at multiple potential pathways the largest U.S. generator was willing to take to achieve its net-zero carbon goals by 2050.
All six potential pathways the utility proposed within the 15-year planning horizon seek to achieve a carbon dioxide emissions reduction of at least 50% by 2030, compared to 2005 levels. However, they show Duke Energy will need to make significant grid investments and may rely heavily on a slate of new technologies, including battery storage, offshore wind, and small modular nuclear reactors (SMRs), as well as natural gas power, and pumped hydro storage.
At the event on Monday, Steve Young, Duke Energy executive vice president and chief financial officer, offered a wide range for the incremental investment these options could require over the next 15 years. “I want you to think about two numbers, $20 billion and $50 billion,” he said. “The lower line leads to $20 billion of incremental investment opportunity. That is associated with the base case runs, the scenarios that yield roughly 55% carbon reduction. The upper line accumulates to $50 billion. And that is associated with scenarios that drive to 70% to 75% carbon reductions.”
The utility’s 10-year capital plan will require substantial near-term investment, but it will provide for much more. Duke Energy said it will double its enterprise-wide renewable portfolio from 8 GW to 16 GW by 2025 and bring its regulated renewable capacity to 50 GW by 2050. It will also add more than 11 GW of energy storage across its system by 2050. Along with retiring its coal-only units by 2030 in the Carolinas, it will accelerate the amount the coal it plans to retire. Since 2010, the company noted, it has already retired 50 coal units, a combined capacity of 6.5 GW.
But to enable these changes, the company now expects that its current five-year capital plan will increase by about $2 billion to approximately $58 billion. And beyond that, Duke Energy’s 2025 to 2029 capital plan will be in the range of $65 billion to $75 billion. However, officials said that to keep customer bills affordable, the company will mitigate these capital increases by reducing other costs.
“As you transition out of coal, you will have lower fuel costs. As you transition out of coal, you will have lower non-fuel owing in. There are less people. The outages are less complex. The third area is our continual pursuit of efficiencies across our footprint to our business transformation model,” said Young.
“We have a good track record here as well. We will continue to find digital applications to automate processes,” he said. “We will use data analytics to tell us how to do things and when to do it better. And we have learned from the pandemic how to virtually move our workforce from areas of lesser importance to emergent work to help us displace the need for contractors.”
Going Net-Zero Methane
Duke Energy also Monday announced it set a net-zero methane goal for its gas distribution companies by 2030.
“First we’re moving forward with advanced technology to increase our monitoring and measurement of methane emissions. We’ve started a pilot for the use of fixed wing and satellite detection of methane leaks. We’re analyzing the effectiveness of these techniques to detect leaks compared to our traditional means that we’ve used,” said Sasha Weintraub, senior vice president, Natural Gas Business.
“Second, we are improving our operational efficiencies and damage prevention initiatives,” Weintraub said. “Now we’ve already made good progress in achieving this goal with all of the work we’ve done to eliminate our cast iron and bare steel main piping from our LDCs, a significant source of methane leakage.”
However, he acknowledged the company “may need some offsets” in order to achieve these goals. “And if we do, we’ll be using renewable natural gas,” he said. So far, Duke Energy plans to do that by partnering with industry. Weintraub said the company is a member of the One Future, a coalition of natural gas companies working to voluntarily reduce methane emissions.
“The collective goal of One Future is to reduce the methane intensity across the entire natural gas supply chain to be less than 1% by 2025,” he said. “This is going to require coordination and collaboration. We’ll be using our purchasing power to encourage our natural gas suppliers to use low methane emission practices while maintaining affordability for our customers. By purchasing responsibly produced and transported natural gas, we can reduce methane emissions across the entire natural gas supply chain for Duke Energy and the industry.”
Over the next decade, however, Duke Energy plans to invest heavily in renewable natural gas—which is essentially pipeline compatible gaseous fuel derived from biogenic or other renewable sources that has lower lifecycle carbon emissions than geologic natural gas. “When you think about the future of this business, renewable natural gas stands out as a cleaner viable option to continue serving our customers and supporting economic development. We’re executing a five-year plan to be a leader in the renewable natural gas space,” Weintraub said.
Hydrogen and Advanced Nuclear
According to other officials, Duke is also evaluating a number of emerging technologies. According to Doug Esamann, executive vice president, Energy Solutions, and president, Midwest Region, the company—along with Siemens—is testing hydrogen as a fuel source for a 15-MW combined heat and power plant it owns and operates at Clemson University in South Carolina. “We’re applying at the DOE for a grant to actually demonstrate that technology can work in that scale of an investment,” Esamann said. Duke Energy is also working with Bloom Energy to explore hydrogen fuel cells, and it is looking into advanced nuclear, long duration battery storage, and carbon capture as part of industry consortiums.
“Any one of these emerging technologies I mentioned or combination thereof will help fill that [zero-emitting load-following resource (ZELFR)] gap to allow us to manage the grid and continue to deliver the good product that our customers come to expect today,” he said. A ZELFR is essentially a “clean energy fuel source that can be dispatchable,” he explained.
Duke Energy has meanwhile moved to renew the licenses of all 11 nuclear units in the Carolinas, which provided half of the region’s power in the region in 2018. “To say that fleet is reliable is really an understatement. The capacity factor of the fleet, a measure of reliability, has been over 90% for the past 21 years,” noted Dhiaa Jamil, executive vice president and chief operating officer.
Over the long run, as outlined in the Carolina IRP, the company is exploring small modular reactors (SMRs) as an option. “They come in a variety of smaller sizes up to 300 MW. They are of the light water reactor technology that means they are similar to the reactors we currently run. And they are further in development so they can be ready to be deployed late 20s, early 30s,” Jamil explained.
“The second exciting opportunity is the advanced non-light water reactors. These are carbon free generation that also have the distinction of being designed to load follow from zero to100% on demand. That is the type of breakthrough capabilities that we’re looking for in the mid-2030s and beyond to supplement our growing renewable portfolio,” he said, adding, “So that’s the future.” Later during the event, Jamil noted the company is part of a partnership with TerraPower and GE Hitachi Nuclear for the Natrium reactor design, which this week won funding from the DOE for a demonstration.
Responding to questions about its ESG initiatives, Good acknowledged that the changes would have an impact on Duke Energy’s workforce, especially for workers whose plants will be shuttered. “We work on agility of our workforce, really focusing on the skills that they have so that we can offer other opportunities,” she said. The company last year launched a skills-based deployment and re-deployment strategy for employees so they’ll be ready for the changes that are coming.
“And it’s not just in connection with generation,” she said. “It is changes throughout the company as we perceive productivity. It’s taking IT professionals and making them cyber professionals. It’s taking finance professionals and making them project management professionals. We think this is an important way for us to continue to drive productivity and create career opportunities for our employees.”