Duke Energy and its critics battle over its 'clean energy transition'
Energy production is the second largest source of the heat-trapping gases that cause global warming, both in North Carolina and nationwide — after transportation. That's why federal and state officials are pushing electricity producers to shift away from fossil fuels. Here in North Carolina, state regulators are drafting a plan this fall to do that.
Duke Energy executives are busy right now talking up the company's plans for a "clean energy transition." At every step of the process, critics are trying to steer the conversation toward a faster and cheaper shift to renewable energy.
The company recently made its case during a contentious three-and-a-half-week
hearing before the North Carolina Utilities Commission. That courtroom-style hearing gathered expert witness testimony on Duke's proposed "carbon plan" submitted in May. (More on that below.)
And on Oct. 4, Duke delivered a two-hour"Energy Transition Update" for investors, where it outlined climate goals across its utilities in the Carolinas, Florida and the Midwest. The slickly-produced video session for Wall Street analysts and other investors was titled "Ambition. Action. Results." It included pitches from CEO Lynn Good, new Chief Financial Officer Brian Savoy and other executives.
Duke's message has been consistent: we can make the transition, but it will be gradual and require rate increases.
And critics have been just as firm in saying Duke's plans are too slow and too expensive.
Last week, the company outlined a slightly bigger 10-year, $145 billion clean energy transition plan and a new interim goal for reducing pollution from electricity production (80% from 2005 levels by 2040). The plan repeated Duke's pledge to close all remaining coal plants by 2035 and to add more gas-fired power plants as well as solar and wind farms.
Duke said the plan also would increase profits. He sought to reassure investors that Duke has a way to pay for all that new investment, saying: "Ninety percent of our electric capital investments are eligible for modern recovery mechanisms.”
That means applying to state regulators for rate increases. Savoy didn't mention customer rates.
"We do not have a ballpark figure to provide you at this time,” Duke Energy spokeswoman Jennifer Garber said in an email. “(Savoy's) point was that unlike in the past we now have modern-day rate recovery mechanisms that improve rate certainty for customers in the future and enhance capital planning.”
We do have a hint of what rate increases might look like in North Carolina. When Duke submitted its North Carolina carbon plan this spring, it said the various scenarios could mean annual increases of 1.9% to 2.7% for a decade, subject to regulatory approval. That's 19% to 27% over 10 years.
And that doesn't take into account other factors that require price hikes. Duke blamed higher natural gas prices for a9.5% increase that took effect Sept. 1 at its western and central North Carolina division, Duke Energy Carolinas. An even larger increase is coming on Dec. 1 at Duke Energy Progress, in Raleigh, eastern North Carolina and the Asheville area.
And just this week, Duke Energy Progress asked regulators for a 16% increase over three years for grid upgrades and to improve reliability — not related to the carbon plan. A similar request will come early next year for Duke Energy Carolinas customers.
Still, Good argues that the transition won't be disruptive to service or rates. Here's how she put it during last Tuesday's presentation:
"We will never put a plan together that does not achieve the reliability 24/7 every season that our customers count on. And affordability is front and center, not only for our industrial customers who are competing globally with their products but for our vulnerable customers who are having to make tough choices about their income."
We'll be debating for a long time over just how affordable rate increases will be.
Carbon hearing ends, regulators' work begins
Duke's North Carolina carbon plan is actually multiple scenarios for how the state's biggest utility might meet state goals for ridding its plants of the heat-trapping gases that cause global warming. As a reminder, those goals inHouse Bill 951 adopted last year are to reduce carbon emissions from energy plants by 70% from 2005 levels by 2030 and to net-zero carbon by 2050.
Duke's own goal is 50% by 2030. At last week's presentation, Duke executive Katherine Neebe said Duke is now at 44%. And the company announced a new "interim" goal of 80% by 2040.
Duke's plans were the subject of hearings at the North Carolina Utilities Commission held Sept. 13-29. Veteran energy reporter John Downey of the Charlotte Business Journal watched and reported on most of the hearing. (Downey's wrap-up story and other coverage are on the Business Journal website, which requires a subscription.)
Downey said the various sides "sort of talked past each other" during the hearings.
On the table were not only Duke's plan, but alternative plans submitted by various business and environmental groups, known as "intervenors."
"Opponents came up with five plans of their own, often developed by consulting firms attempting to replicate Duke's own long-term modeling and arguing that Duke was making insufficient use of renewables," Downey said.
"The business groups are very concerned about the ultimate price of the plan," Downey added.
Tech companiesApple, Facebook and Google submitted one of the alternate plans.
"They were much more focused on whether Duke had approached it in an adequately least-cost manner and whether Duke was making significant enough use of renewables — because they all have major renewable goals of their own."
Another concern is that Duke's longer-range plans call for the use of unproven technologies, such as small modular nuclear reactors and converting gas plants to use hydrogen fuel.
Environmental groups made similar cases, and many argued that renewable energy like solar and wind would be cheaper, Downey said.
The big question is whether the utilities commission will approve some version of Duke's $90 billion to $120 billion plans, or exercise independence by crafting something that incorporates aspects of both Duke's plans and the alternatives.
Downey said commissioners appeared not to take sides during the hearing.
"The commission tried to be skeptical of everybody," he said. "The commission takes very seriously the fact that it has to develop a plan and it has to be able to defend the plan."
The utilities commission has given all the parties until Oct. 24 to file proposed orders and final comments. The commission has until Dec. 31 to adopt a plan, as required by House Bill 951.
And this won't be the last we hear of carbon plans. Under the law, regulators must review the plan every two years.
Sierra Club gives Duke climate efforts an 'F'
The Sierra Club has been among the groups to push back against Duke Energy's clean energy plans, saying they don't go far enough. A report out last week gives the utility company an "F" for its efforts. And it accuses Duke and other utilities of "greenwashing" — trying to portray their plans as acting more environmentally responsible than they actually are.
“The Dirty Truth About Utility Climate Pledges” looks at how quickly companies are retiring coal-fired power plants, whether they're adding gas-fired plants and how they've added renewable energy like solar and wind.
"And unfortunately for all of us, as customers of Duke Energy here in North Carolina, both Duke Carolinas and Duke Progress receive failing grades," said Dave Rogers, a Durham-based deputy regional director with the Sierra Club's Beyond Coal campaign.
Duke Energy argues in forums like those mentioned above, as well as advertisements, that it's in the midst of the biggest clean energy transition in the country, and making good progress. It has pledged to close its remaining coal-fired plants by 2035.
But, said Rogers, "As a parent company, Duke has the largest proposed gas build-out in the country. They're proposing more gas than any other utility. And they're really lagging on coal retirements."
He added that the pace of the transition is important.
"If we're really going to avoid the worst impacts of climate change, we need to transition now and start moving quickly," Rogers said.
The Sierra Club says Duke also got an overall "F" last year.
The report does note that Duke has increased its forecast for new clean energy since last year's report. But it calls the commitment "inadequate."
A version of this article originally appeared in WFAE's weekly Climate email newsletter, which is published Thursdays.