At the Democratic debate on Wednesday night, Hillary Clinton said that U.S. energy policy is moving from coal to gas, and eventually, to a lot more renewables. Who agrees? Surprisingly, the nation’s largest utility does:
As it weaves it way through the evolving energy and environmental landscape, the Charlotte-based utility says that it must balance its regulatory mission -- to provide low-cost power in a reliable way -- with the demands of its customers, which are to offer cleaner and more sustainable generation. To that end, the utility has substantially reduced its coal-fired generation and replaced it with modern combined-cycle natural gas as well as utility-scale solar.
“We are trying to get ahead of the curve” -- to comply with and to anticipate customers’ expectation and environmental regulations, says Steve Young, chief financial officer for Duke, in a interview with this writer. “We will need to decrease our carbon footprint over the long-term and we will need to work with our stakeholders to have this happen.”
How's all this playing out? When Young came aboard Duke’s ship in 1980, the utility generated 70 percent of its megawatt hours with coal, he says. Now that figure is 30 percent and within five years, it will be 25 percent. Over the next 15 years, he adds, the company will likely retire even more coal plants -- ones that have been retrofitted to curb those emissions regulated under the Clean Air Act. Natural gas, in most cases, will be used instead.
Consider: The company just got approval from state utility regulators to construct two 280-megawatt combined-cycled natural gas units in Ashville, N.C. to replace one 376-megawatt coal plant that will be retired in 2020. As the energy needs in Ashville grow, Duke says that it has plans to add more solar generation there.
The benefits of this one coal-to-gas move? Sulfur dioxide will be 99 percent less while nitrogen dioxide will be 45 percent less, the company says. Mercury emissions will be negligible, it adds, while carbon dioxide releases will be cut by 60 percent.
Duke is expecting similar results from its coal-to-gas changeout in Florida. In Citrus County, it is building a 1,640 megawatt combined-cycle plant that will go into service in two years. It will be replacing two 1960s-era coal plants, rather than make expensive retrofits.
“We are not at risk of having our eggs in one basket,” says CFO Young. “We have been heavy into the electric generation business in the past,” he notes, referring to the company’s investments in generation, transmission and distribution. “As we look forward to the energy future, we see gas and electric as important businesses to be involved in” -- things that he says diversify the company’s holdings and therefore cut its exposure.
As such, Duke has made three critical new investments in natural gas: Last October it made a cash bid of $4.9 billion for Piedmont Natural Gas, a regulated local distribution company -- something that returns 10 percent a year after a yearly $500 million capital investment, it says.
Duke is also investing in the Sabal Trail pipeline and the Atlantic Coast Pipeline. The former would run 500 miles and traverse through Alabama, Georgia and Florida while the latter would go through North Carolina, Virginia and West Virginia, and be part of a consortium that also includes
Does this trend toward more natural gas satisfy the environmental community? In the near-to-mid term, it will please some of them, although not all. Circling back to the presidential race and specifically to the Democrats running, Bernie Sanders of Vermont is opposed to hydraulic fracturing to drill unconventional gas from a mile beneath the ground. He says that it has an adverse effect on drinking water.
His views are echoed by many in the green movement but especially the Sierra Club, which adds that using more natural gas will do little to achieve the global goal of cutting carbon releases in half by mid century.
But former Secretary of State Clinton says that natural gas is the bridge fuel to when the nation can ultimately rely on green energy. Replacing coal with natural gas has helped the Obama administration get half of the way to its carbon reduction effort of 32 percent by 2030, from a 2005 baseline.
To this end, natural gas surpassed coal last spring as the leading fuel to power electric generators. Both fuels, generally, provide about 34 percent of the electric generation mix. Meantime, GTM Research says that the United States has installed 11,600 megawatts of total utility-scale solar: In North Carolina alone, Duke added 300 megawatts in 2015, it says, with another 75 megawatts to be built this year. In Florida, that figure is 500 megawatts.
“I do believe coal is coming under pressure,” says Tom Fanning, chief executive of Southern Company. “You will need combined-cycle natural gas plants. You will need to build peaking units to follow renewables,” when the weather doesn’t permit. “We are skating to where the puck may be.”
Duke started that transition a decade ago. And now, other utilities with heavy coal appetites are joining in: American Electric Power and FirstEnergy Corp. The main difference, though, is that Duke took a proactive position whereas the others only recently relented because of the stringent environmental rules combined with the availability of cheap natural gas and the increasingly affordable wind and solar power.
The advent of technology and consumer demand is forcing many utilities to adapt and to reduce their ecological footprints by offering their customers both affordable and cleaner energy options. Some may sink as the sands shift. Duke, however, views the evolution as vast opportunity.
