Duke increases 10-year capital plan to $145B, updates emissions targets

Duke Energy Corp. is adding $10 billion to its planned capital investment for the next decade, raising the overall plan to $145 billion, with the majority of spending focused on transitioning to net-zero emissions and grid modernization.

"It's driven by higher clean energy transition investments in the Carolinas and in Indiana," Duke Executive Vice President and CFO Brian Savoy said during an Oct. 4 investor presentation. Savoy added that the investment profile gives Duke confidence in its long-term 5%-7% earnings per share growth trajectory.

Company Chair, President and CEO Lynn Good said the Inflation Reduction Act, signed into law Aug. 16, has made a "meaningful impact" on lowering the cost of renewables that will benefit Duke's capital plan, and incentives for existing nuclear generation could bring hundreds of millions in savings.

About $75 billion from the plan is targeted for grid investments such as modernization and grid hardening, including investments needed to connect 30 GW of renewables by 2035, improve reliability and resiliency and protect the grid from physical and cybersecurity threats, Savoy said. Of those 30 GW, Good said Duke assumes it may own about half of the generation and the other half may come from power purchase agreements.

About $40 billion from the plan is for regulated zero-carbon generation including solar, wind, battery storage and extending the life of Duke's nuclear fleet. About $5 billion is intended for hydrogen-capable natural gas generation and about $25 billion is for other projects, Savoy added.

Duke is also looking to reduce rate volatility and mitigate future rate increases through investment in renewables and gas-fired assets; utilization of nuclear, solar and battery storage incentives from recent federal legislation; and internal efforts to reduce costs in response to inflation, Savoy said.

Duke's $145 billion capital plan supports an approximately 7% compound annual growth rate in its earnings base through 2032, Savoy said.

If Duke moves forward with a potential sale of its commercial renewables business, Good said it could strengthen the balance sheet and "postpone even further issuance of equity as we expand this energy transition.

"As you know, through 2026, [there is] no equity in our plan and we believe the commercial renewable transition, if we're successful in executing that, will also delay that equity even further," Good said.

Emissions

Duke executives also announced the company aims to reduce scope 1 emissions by 80% by 2040 and scope 2 and 3 emissions by 50% by 2035 compared to 2005 levels.

The company is already on track to exceed its 50% scope 1 emissions reduction target by 2030 and expects to exit coal by 2035, subject to regulatory approvals, said Senior Vice President of Enterprise Strategy and Planning Swati Daji. Duke executives reaffirmed expectations that the company will reach net-zero scope 1, 2 and 3 emissions by 2050 with some technological advances.

"While we have clear line-of-sight on how we can achieve 70%-75% carbon reduction using technologies available today, that's not going to be enough to reach net zero," Daji said. "Technology innovation is essential."

Duke anticipates being able to add dispatchable, zero-carbon resources beginning in the 2030s to allow for a transition away from natural gas.

Those new technologies could include hydrogen- and biofuel-capable gas turbines, long-duration energy storage such as increased pumped storage or battery technologies and advanced nuclear such as small modular reactors.

Recent federal legislation may help support research and development of those technologies, Daji added.

Duke has already begun the process of presenting its carbon reduction plan for its Carolinas utilities — Duke Energy Carolinas LLC and Duke Energy Progress LLC — including a set of potential pathways to achieving North Carolina's state-mandated carbon reduction goals. The utility recently told North Carolina regulators that the Inflation Reduction Act could shift its plan.

Good said she expects North Carolina regulators to approve the company's carbon reduction plan by the end of the year, and Duke plans to file an updated integrated resources plan in South Carolina in 2023. Initially, Duke requested that the states work together to consider its carbon plan, but withdrew its request after pushback, largely from South Carolina.

"We're confident we'll be able to meet the energy policy objectives of both states, continuing to demonstrate the benefits of the dual-state system reliability and affordability," Good said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.