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Duke CFO sees energy transition, NC legislation driving capital growth

  • Author Darren Sweeney
  • Theme Energy

Duke Energy Corp. plans to funnel billions of dollars in new capital into clean energy, emerging technologies and grid investments as the company continues to shut down coal plants.

In early 2022, Duke Energy expects to roll out a $60 billion to $65 billion capital plan for 2022 through 2026, an increase from the company's $59 billion capital plan for 2021 through 2025.

"As we advance through the decade, we're going to be advancing through our clean energy transition as well," Duke Energy Executive Vice President and CFO Steven Young said in a Nov. 4 phone interview prior to the company's third-quarter earnings call. "As we move forward, we're going to be working on retiring coal and replacing it with renewables, potentially gas [and] storage. That type of infrastructure change is going to drive the increasing investment profile."

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Duke Energy Executive Vice President and CFO Steven Young sees the company increasing spending on clean energy transition.
Source: Duke Energy Corp.

Duke Energy has laid out $65 billion to $75 billion in potential investments for 2025 through 2029.

The Charlotte, N.C.-headquartered investor-owned utility aims to achieve a 50% reduction of carbon emissions by 2030 from 2005 levels and net-zero emissions by 2050.

The company, which has retired 54 coal units since 2010, plans to retire the bulk of its coal fleet in the next decade while adding renewables, battery storage and natural gas to hit its emissions goals.

Another large piece of Duke Energy's energy transition puzzle is tied to the passage of House Bill 951 in North Carolina. The bill, which Gov. Roy Cooper recently signed into law, aims to speed the retirement of coal-fired units in the state and reduce carbon emissions by 70% by 2030 from 2005 levels.

After months of compromise, North Carolina lawmakers agreed on a bill that authorizes state regulators to determine the generation mix that will achieve the 70% emissions reduction goal and carbon-neutrality by 2050 while keeping costs low.

Duke Energy's CFO said the legislation is expected to "drive more capital investment through this decade."

"Certainly, we had put plans in place to transition our infrastructure to reduce carbon output," Young said. "So, that was going to drive an investment growth. But the North Carolina legislation ... that certainly laid the groundwork and framework for this transition for our Carolinas generation system, and that helps guide us."

The CFO called H.B. 951 "one of the most comprehensive energy bills" he has seen.

"It's not overly prescriptive," Young added. "It allows flexibility in dealing with achieving the carbon targets. I think it's a really strong piece of legislation that will be beneficial to the citizens of North [Carolina] and South Carolina."

The bill provides for the securitization of 50% of coal retirement costs. It also requires 45% of solar generation in the state to come from a competitive bidding process among independent power producers, with 55% coming from public utilities.

One of the more controversial aspects of the legislation is the inclusion of multiyear rate plans, a provision strongly supported by Duke Energy, that allows the utility to pursue regulatory approval for revenue increases up to 4% over three years in lieu of annual rate cases.

"Multiyear rate planning makes a tremendous amount of sense for our industry as a whole," Young said. "We're trying to transition a lot of infrastructure ... retire coal and build replacement facilities for it."

"Multiyear rate planning allows all of that to be more efficiently done," the CFO added. "You can engineer, plan, construct and finance knowing where you are heading over the next few years, and that is going to benefit everybody to be able to do that."