Duke Energy Breaks Its Commitments

March 18, 2024

Summary:

  • Duke Energy is required by law to reduce carbon emissions, but it may not happen 
  • Duke Energy’s new plan instead triples their investment into natural gas plants 
  • North Carolina ratepayers will wind up paying the difference

 

Behind the whirlwind of proposals for combatting climate change is the reality that electricity generation represents roughly 33% of US carbon emissions. Tackling climate change in a realistic way must mean decarbonizing electricity production – and virtually everyone in politics recognizes it. As North Carolina Republican Congressman (and, briefly, Speaker of the U.S. House) Patrick McHenry recently wrote, “I have long recognized the threat climate change poses to communities across America, and thoughtful climate policy—focused on the health and welfare of America’s working class—is long overdue.” 

In 2021, with his veto power still intact, Governor Cooper forced Republican leaders in the North Carolina state legislature into a compromise on climate goals. Though 2021’s House Bill 951 included most of the significant giveaways to Duke Energy that Republican leaders fought for, it also included significant carbon reductions demanded by Governor Cooper. It mandated Duke Energy to reduce emissions by 70% by 2030, and to net-zero by 2050. Though many observers pointed out that this goal is insufficient, it was still a major and positive step.

The problem? Now, Duke Energy isn’t holding up its end of the deal.

Duke breaks their commitment

In their latest carbon plan filed with the Utilities Commission, Duke Energy submitted three proposed long-range energy portfolios – only one of which would actually hit the 2030 target of a 70% reduction in carbon emissions.

Instead, the corporation’s preferred plan represents a massive investment in natural gas generation – triple the investment that they proposed in the 2022 version of the carbon plan. These new gas plants would replace existing coal plants. While natural gas is comparatively better for the environment than coal (in terms of carbon emissions), burning it not only still releases carbon, but also methane, which is far worse.

Duke Energy’s representatives insist that a transition from coal to clean energy requires gas as a stopgap measure. This argument does hold some merit, because solar and wind are weather and time-dependent; you either need significant “baseline” power sources that can be relied upon at other times, and/or utility-scale battery capacity to store excess power production, some of which are already being deployed elsewhere in the country.

One of Duke Energy’s submitted energy portfolios would hit the 2030 emissions target, but the corporation has pushed back that the plan is too expensive, and their proposal is the “least cost, least risk” plan. But this is false. In fact, only reason the portfolio is more expensive is because, according to the Environmental Defense Fund: 

“Duke adds a 20% cost adder based on their perceived execution risk — a premium they apply to build wind and solar, but not far less developed technologies like small nuclear and hydrogen”. 

Not only are wind and solar far cheaper on a per-megawatt basis than fossil fuels (and natural gas in particular), but they can also be subject to precisely the extreme supply shocks that the world has recently seen since the invasion of Ukraine.

The carbon plan bill gives Duke Energy significant leeway on the 2030 target; they need only do “what’s feasible.” And because Duke Energy is a private company, part of the feasibility for Duke is ensuring maximum returns for its shareholders. This problem is because Duke Energy, like most utilities, makes money by building infrastructure, not by selling electricity to ratepayers. I wrote about this last year:

Most utilities don’t make any money from selling services to consumers – just enough to cover operating expenses. Instead, utility companies make money by building new infrastructure. Say a company decides to build a power plant for $100. They will get a loan for that $100, collect $120 from consumers on power bills for the plant, give $105 to the bank for the loan, and collect the $15 as profit. Now, imagine this but at a much larger scale, with companies producing profits in the billions.” 

Thus, when Duke insists that they’re predicting record increases in electricity demand and that they need to build 6,000 megawatts of natural gas plants, what they’re really doing is padding their topline revenue. They’ll replace the coal plants with natural gas en route to the 70% emissions target and replace those natural gas plants in 15 years to get to net zero. 

Duke Energy does not work for North Carolina

The Duke Energy corporation reported revenues of $29 billion last year, $4 billion of which was profit — extracted from its millions of ratepayers, most of whom – like us in North Carolina – are captive customers, due to the company’s monopoly status. In theory, Duke Energy enjoys its monopoly in exchange for oversight by the North Carolina Utilities Commission, whose commissioners are appointed by the governor for 6-year terms; Gov. Cooper appointed all the current commissioners. One reasons why Duke Energy is likely to invest significant sums in electing Mark Robinson, the Republican nominee for Governor who doesn’t know the difference between climate and seasons and has repeatedly called climate change “pseudoscience,” is precisely because of this gubernatorial appointments power over the commission that regulates its bottom line. A Robinson-appointed Utilities Commission would be disastrous to North Carolina’s climate goals.

At the end of the day, Duke Energy is legally required to do all it can to reduce emissions to 70% of 2005 levels by 2030. If they get their way, they’ll build 6,000 megawatts of natural gas and delay renewable energy as long as possible. Duke Energy’s strategy is to drag out the process for as long as possible and extract as much profit as possible from its captive customers in the meantime.

Samad Rangoonwala is a writer for the Daily Tarheel based in Carrboro.

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