October 04, 2021

Lynn Good projects $100B in spending on 'clean energy transition' at Duke Energy in the next 10 years

Touting Duke Energy Corp.'s sustainability goals at a presentation an S&P Global Inc. conference, CEO Lynn Good said the company will spend close to $100 billion on its transition to clean energy over the next decade.

Good spoke Sept. 28 with Lindsey Hall, head of ESG Through Leadership — a title that refers to environmental, social and governance — for S&P. She promoted Duke’s commitments to reduce carbon emissions from 2005 levels by 50% in 2030, reaching carbon neutrality in its operations by 2050 and a separate net-zero goal for the more dangerous greenhouse gas, methane.

“It is a part of our business plan. It's a part of our capital plan. It's a part of the discussions we're having with our regulators and policymakers,” Good said. “We see, over the next decade, investing $125 billion, and about 80% of that is really directed toward this clean energy transition.”

She concedes that, after 2030, the road to net-zero carbon gets cloudier. The only clear thing, she says, is that reaching that goal will require the development of energy technologies that are not available in any commercial scale and some that don’t yet exist. 

Through 2030, she says, Duke (NYSE: DUK) can accomplish its goals by closing more coal plants, building more renewable energy plants and investing in battery storage.

“But when we get to kind of that 60%, 70%, maybe 80% reduction in carbon, we begin to look for technologies that don't exist today: zero-emitting, load-following resources that give us the opportunity to make that additional progress toward net zero,” she said. “So, when I say that, you should think about technologies like hydrogen. You should think about carbon capture, longer duration storage, advanced nuclear.”

Billions in the grid

Asked about short-term goals, Good said Duke would invest $600 million in battery storage and would be retiring at least five more coal units by that time. 

She said of the $100 billion needed for the clean energy transition in the next decade, $48 billion will be spent by 2025.

“We have several billion dollars of grid investment that we're planning by 2025, not only to increase capacity for renewable assets but also to address resiliency and hardening,” she said. “We have filed for a second (nuclear) license renewal at South Carolina’s Oconee Nuclear Station, and I would expect another one to be filed before 2025.”

She said achieving significant carbon reduction will require the use of the existing nuclear fleet and then development of technology like small modular reactors to continue to provide carbon-free nuclear energy in the out years.

“We are advocates for investment through research and development, federal funding, work with the national labs, work with our research and development institute in the industry to … continue investing in these technologies so that they're available at commercial scale when we need them, which is likely sometime in the 2030s,” Good said. “So, we're piloting hydrogen linked with solar, blending hydrogen with natural gas in a combustion turbine. We're working with long-duration storage, a molten salt battery technology, that we also think could be promising.”

Pushback from regulators?

She said electrification of transportation — from passenger vehicles to trucking and beyond — is also important to Duke’s plans. 

“The ability to enable electric vehicles and (industrial) electrification, we see, is an important part of the climate strategy for our communities,” she told Hall. “We're investing about $100 million in pilots around the Southeast to enable charging infrastructure, and we're partnering with cities like Charlotte to help them electrify transit. We're electrifying our own fleet and then also enabling our grid to be prepared for electrification.”

When she spoke about progress Duke is making with regulators and policy makers on reforming the regulatory system, Hall asked about pushback. Legislators in North Carolina have failed to date to agree on a framework for regulatory reform. South Carolina is advocating a more thoroughgoing reform than Duke wants. And the 15-year Integrated Resource Plans — the broad plant-construction roadmaps for meeting future energy demand — for Duke Energy Progress Carolinas and Duke Energy Progress have run into some opposition in both states. 

South Carolina flatly rejected the Duke utilities’ first plans and required them to be reworked. That could put Duke in the difficult position of having different plans for the two states, even though the utilities each operate as a single system across the border. More generally, opponents have criticized Duke's plans to depend on new natural gas plants through 2030 and regulators have raised questions about the proposals.

Good said she sees it all as constructive. 

“What you're seeing in South Carolina is really a part of the conversation that's underway in all of our states and also underway at the federal level, where policymakers and stakeholders and utility companies like Duke are wrestling with what technologies, what pace, what time frame, what cost, what impact on reliability,” she said. “And everyone at the table is trying to find the right balance between environment, affordability and reliability. And we are delighted, anxious to be a part of those conversations so we get it just right.”

While much of the presentation did turn on environmental issues, Good stressed that social and governance issues are important to Duke as well. 

Diversity and inclusion, our board, the governance policies that we have in place, those are also important conversations, and we welcome those,” she said. “As I look at the conversation we're having with investors, ESG is increasingly important — complementing the work that we do around, of course, earnings and dividends and the more traditional parts of an investor story.”

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