Duke Energy Corp. expects to funnel more capital into commercial renewables but will continue to focus the bulk of its investments on the grid over the next five years.
On the company's fourth-quarter 2017 earnings call, Duke Energy management outlined the continuation of a $37 billion growth capital plan for 2018 through 2022. This spending will largely mirror the organic growth plan unveiled in February 2017 that called for $30 billion to be spent on electric utilities and infrastructure with $6 billion split between local gas distribution utility and midstream pipeline investments.
The updated growth capital plan focuses $28.8 billion on electric utilities, including regulated renewables, and $6.7 billion on gas utilities. The plan also increases investments in commercial renewables to $1.5 billion from $1 billion.
"We have modestly increased our level of investment in commercial renewables and will look to utilize tax equity partners to continue investing in solar and wind projects," Duke Energy Executive Vice President and CFO Steven Young said on the Feb. 20 conference call.
Duke Energy was pressed on the potential for further growth in commercial renewables and the ability to compete in the market.
"I think there's some adjusting as the result of the tariffs that have recently been imposed, but we'll have to see how that landscape plays out," Duke Energy Chairman, President and CEO Lynn Good said. "We also are facing the lower tax rate. We'll have to determine how tax equity markets perform, although we still expect them to be there. So, we believe we have a very solid business, a business of scale. We believe we're capable of competing."
"But we have also been appropriately conservative with our assumptions around returns and are not going to chase it unless it's delivering a return above our cost of capital, and that will be our approach as we go forward."
Good added that the company is "optimistic" about investment opportunities in the tax equity market.
"We believe we'll be successful in that market with [the] size of our company, scale and credit profile. I think all of this is something that we'll continue to monitor," Good said. "We are actually in the tax equity market right now with a project and are seeing success in putting that together."
Duke Energy also sees opportunities for growth with regulated renewables based on solar policy reform in North Carolina and Duke Energy Florida LLC's commitment to develop 700 MW of solar over the next four years.
Good said solar policy reform tied to North Carolina's H.B. 589, the Competitive Energy Solutions Plan, "represents an opportunity for either our commercial or regulated business."
H.B. 589 includes provisions that require the development of more than 3,200 MW of solar within the next five years. As part of this plan, Duke Energy Carolinas LLC and Duke Energy Progress LLC must issue requests for approval to procure 2,660 MW of new renewable energy resources over a 45-month term.
The Duke Energy utilities plan to recover these investments through rate riders filed annually with the North Carolina Utilities Commission beginning in 2019.
Duke Energy Carolinas and Duke Energy Progress also have pending rate cases before the commission tied to recovering investments in coal ash management, storm recovery, grid modernization, clean energy and natural gas generation. A ruling in Duke Energy Progress' case could come March 1.