McGuire Nuclear Station is located on Lake Norman in Mecklenburg County, North Carolina. Lake Norman– the state´s largest man-made lake–was built by Duke Energy in 1963 by damming the Catawba River with Cowans Ford Hydroelectric Station. The lake provides cooling water for both McGuire and Marshall Steam Station. All photos courtesy of Duke Energy.
SS: At what point did you and your company determine that sustainability was, in your opinion, "no longer optional?" Was there a crisis or other event that precipitated this shift in corporate strategy
Sustainability is grounded in the fact that when I became CEO 20 years ago, I began addressing my annual letter to customers, employers, suppliers, communities and policy makers. I have taken a stakeholder approach my entire career. I have been on many sides of all these issues. True sustainability is when you can create value for all the different stakeholders. When you learn to create value for all the stakeholders, you create a tradeoff. What´s best for your customers often isn´t what´s best for your investors. Only recently, Jack Welch announced that he was wrong in the early 1980s, and now says that the only way to run a company is the stakeholder approach. We do business for the people, planet and profit. Reducing carbon dioxide won´t be cheap or easy or quick, but it has to be fair and we have to start now.
SS: What is your projection, in real costs, of cutting Duke´s CO2 emissions in half by 2030? ROGERS:
"Reducing carbon dioxide won´t be cheap or easy or quick, but it has to be fair and we have to start now."
We do have some rough estimates and different scenarios, but we are not in a place to predict what those costs will be. We are not yet comfortable releasing that estimate. 2010 is hard; 2030 is harder. We have not released the numbers; we have a range of numbers. We have a feel for it. It will cost in the billions of dollars. Our budget is $25 billion over the next five years. I believe we will be able to do this and maintain our competitive rates, vis-à-vis our competitors, over that period. We recognize how technology evolves. Every plant we operate today will be retired by 2050. If everybody replaces every plant by 2050, the guy who gets the head start will have a lower cost by 2050.
We were one of the leaders on nuclear. Some 96 percent of our electricity comes from coal and nuclear. We were never one of these people that got hooked on the crack cocaine of natural gas. California gets 40 percent of its electricity from natural gas. Its cost ranges from $3 to $12 [per thousand cu. ft.] in the last 18 months. We are looking to the future. My goal line is whatever rate advantage we have today, I want to still have that rate advantage over every other region of the country. This will enable us to compete for manufacturing plants. We serve Ohio and Kentucky, major manufacturing states. North and South Carolina are different. There is some growth in manufacturing here. Most of our growth will be in residential and commercial energy usage.
SS: Duke will invest $1 billion in smart-grid technology over the next five years. By 2014, how different will that grid look, and how will the new grid technology impact industrial end users?
I am meeting tomorrow with the U.S. Energy Secretary [Steven Chu] to talk about the smart grid, stimulus dollars and standardization. If we can use the stimulus dollars, that will mean lower costs for our customers over time. It will allow us to take energy efficiency to the next level. It will help us provide energy efficiency for our industrial end users. When we look back 10 years from now, what we think of as energy efficiency today will be very primitive then. Smart metering will become standard. We will also have standardized Internet protocols. SS:What further regulatory and legislative changes are needed to assist Duke in your goal of decarbonizing your fleet?
We have to get the passage of cap-and-trade legislation because we need a price on carbon and a cap on emissions. We have to get the transition right so that the people who are dependent on coal are not required to pay twice for the transition. We must minimize the price impact until the new technologies are available.
SS: Have the advances in clean-coal technology and carbon sequestration achieved the level that makes burning coal safe again for the environment?
The Duke Energy McGuire Nuclear Station is the second of three nuclear stations designed and built by Duke Power
These technologies have really advanced. The technology is so advanced that our new plant did not even have to be regulated. There are so little emissions. And we are building a coal gasification plant in Indiana that even has lower emissions. Its carbon intensity will be even better than the one in North Carolina. We are advancing the ball. On carbon capture and sequestration, we haven´t met the goal yet. We are making superior advances on clean-coal technology as defined by the generation of electricity, but we have only begun on carbon capturing and sequestration. At the largest coal gas plant in Indiana, we are creating the largest carbon sequestration plant in the world. An incredible amount of work has to be done on sequestration. That is the key to using coal.
SS: Duke is taking extraordinary measures to control costs, even as you are modernizing your fleet, rolling out extensive new alternative energy programs and embarking on various marketing initiatives. How are you able to fund everything you want and plan to do as part of your strategic plan?
Yes, we are taking measures to control our costs. Our prices are going to go up anyway. We are retiring 1,000 megawatts of power plants. The carbon intensity of our product will go down. We are in a very, very interesting place. The real price of electricity has actually fallen over the last 20 years. Over the next 20 years, the real price of electricity will actually go up. Investments in efficiency, smart grid and new plants will be factors in that – just from steps taken to decarbonize the existing fleet. We will see price increases across the country. You asked, "Are you able to fund everything you want?" There has not been another company in our industry that has raised as much capital as we have in the past year. We have raised about $5 billion since June 1, 2008, in the toughest capital markets we have seen in the U.S. and the world since the 1930s. We have maturities that are slightly longer, and we have one of the strongest balance sheets in the industry. We have an A-minus credit rating. In a capital-intensive industry, our prices will be lower. I want to be able to attract more business to the five states we do business in. Our prices are dramatically lower than the national average, with the exception of Ohio. I think we can maintain that differential going forward. SS: The South has long competed for manufacturing plants and other energy-intensive projects on the basis of affordable power. Do you foresee this location advantage being neutralized in the future?
Our location advantage will not be neutralized in the future. We are going to maintain our cost advantage, which differentiates us on electricity. Yes, the South will maintain its price advantage in all areas of power. We have taken a more conservative approach historically. We have been slow to adopt renewable portfolio standards until we see the costs come down. We have been early adapters of nuclear. We have a constructive regulatory environment and we know that the way to raise the standard of living in the South is to keep prices down and keep creating jobs. This is true for Southern, FP&L and Progress Energy. We are all in this together.
SS: How does your plan to grant carbon emission allowances to local electric utilities help America´s manufacturing operations?
"Our prices are dramatically lower than the national average, with the exception of Ohio. I think we can maintain that differential going forward."
Carbon emission allowances, for states reliant upon coal, means our rates don´t go up. Obama´s 100-percent auction was a plan that would have really driven up our rates. The new bill would give us 90 percent of the allowances from day one. SS: You have said that "if you´re serious about climate change, you need to be serious about nuclear power." What role will nuclear energy generation play in the Duke Energy future generation platform, and how will that component help our industrial manufacturing infrastructure?
I think nuclear is going to play an increasing role going forward. It is hard to see that today. In the past 30 years, we have not built a new nuclear plant. But carbon regulation will drive us to nuclear. We need zero CO2 emissions. We need to replace our old plants. People who live closer to nuclear are more positive than people who live farther away. It will prove to be a very important source. Solar, coupled with nuclear, will be the key to the answer. Great things are happening in Charlotte. It is becoming a cluster city. An incredible number of companies in nuclear engineering are there. Toshiba and Siemens are both moving 400 people to Charlotte. I think Charlotte is on its way to being a cluster city for energy, smart tech and smart-grid technology.
To view Duke Energy's Sustainablity reports go here.
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