Duke Energy, which pollutes more carbon than any other US electric company, set a goal today to reach “net-zero” carbon emissions by 2050, but the company’s plans to expand its natural gas infrastructure calls the integrity of the new goal into question.
Duke Energy has told state regulators in the Carolinas and Indiana within the past two months that it is planning to build nearly 15 gigawatts of new gas-fired power plants in those states, with new gas plants coming online as late as 2034. Burning natural gas emits carbon.
The company does not seem to be shying away from the cognitive dissonance created by setting a zero-carbon goal while continuing to invest heavily in gas. In its announcement of the new goal, Duke Energy CEO Lynn Good said in a video that “we will need a diverse set of resources including nuclear, natural gas, renewables, battery storage, energy efficiency, and the electrification of transportation.”
With its announcement, Duke joins a rapidly growing club of investor-owned utilities that have committed to some variety of being zero-carbon by 2050, including Xcel, Southern Company, Idaho Power, and PSEG.
Some of those utilities, like Xcel Energy, have announced investment plans that mostly align w/ their decarbonization goals. Others, like Southern Company, which also announced a new gas expansion in Alabama this month, and now Duke Energy, are making zero-carbon pledges while they continue to plan to build new gas infrastructure which will have life expectancies that take them beyond 2050.
Duke tells regulators it plans to build new gas plants in Carolinas, Indiana
In the latest long-term resource plan that Duke filed with its regulators in North Carolina earlier this month, the utility asked for approval of a plan that includes the construction of as many as 14 new gas plants, for a total of 12 new GW of gas capacity.
While other utilities around the country are scaling back plans for new gas development because clean energy portfolios are beating gas on cost, Duke’s latest plan in the Carolinas is evidence that its gas appetite is only growing. The latest Duke Energy plan added 3 new GW of gas on top of the 9 GW of new gas that it had forecast building in its 2018 plan.
The plan entails Duke constructing new gas plants in 2026, 2028, 2029, and in every year from 2031 to 2034, the end of the 15-year planning horizon required by regulators.
Utilities generally build gas-burning plants with the intention to run them for 30 to 40 years to recoup costs from construction. In theory, Duke could plan to equip those new gas plants with carbon capture and sequestration technology (CCS), but it has not signaled any intention to do that with regulators in any state. Adding current CCS technology would dramatically increase the costs of building gas plants, and clean energy advocates have already presented models showing that Duke’s proposed gas plants in the Carolinas, even without CCS, will be more expensive than a portfolio of renewable energy, energy efficiency and battery storage.
Duke Energy is also the owner of a 47% stake in the Atlantic Coast Pipeline, an interstate gas pipeline that, if completed, would bring more fracked gas into Virginia and the Carolinas from West Virginia. Duke has justified the need for that project by saying that its own utility in the Carolinas will be the customer for that gas.
Duke plans to take 40 years to recoup the pipeline costs, plus profits, from customers, which would take the pipeline’s lifetime well past the 2050 “net-zero carbon” goal, according to regulatory filings. Other estimates from the Southern Environmental Law Center peg the lifetime of the pipeline as high as 80 years. If Duke plans to adhere to its new goal, either customers or shareholders will be left eating the costs for that stranded pipeline asset.
Duke continues its investments in gas in Florida, Indiana
Duke’s voracious appetite to profit from building new gas plants extends beyond its plants and pipeline in the Carolinas. In Florida, Duke tells state regulators that the percentage of its generation mix provided by gas will go from 64% in 2017 to 77% in 2027.
Duke Energy Florida 2018 ten-year site plan
In a similar long-term planning document that Duke submitted to Indiana regulators in July, the utility proposed building a 1,240 MW natural gas combined cycle unit in 2028 and an additional 1,240 MW unit in 2034, with a far smaller increase in renewable energy during the same time period.
This Figure from Duke Energy Indiana's IRP filing yesterday really highlights just how much their resource plan is a slow transition from coal to gas, with only a modest amount of renewable energy growth. pic.twitter.com/WRl2cu0s7h
Energy analyst Ben Inskeep’s twitter post on Duke Energy’s Indiana IRP
Other utilities, including some which operate in the same regions as Duke, are eschewing new gas investments. Northern Indiana Public Service Company, or NIPSCO, says that it will reduce carbon emissions by “more than 90%” by 2028 from a 2005 baseline. The company told Indiana regulators that of all the pathways it analyzed, skipping gas in favor of renewable energy was the one with the lowest cost to consumers.
That plan from NIPSCO and plans from other utilities, like Consumers Energy in Michigan, aligns with a new study from the Rocky Mountain Institute which shows that 90% of new gas investments planned for the next five years will prove more costly than a clean energy portfolio.
Even with upgrade, Duke’s near-term goals still reflects a slowing of decarbonization rate
In addition to its 2050 net-zero carbon pledge, Duke is also raising a nearer-term 2030 goal to reduce its carbon emissions 50 percent by 2030, from a baseline of 2005. The goal had previously been a 40 percent reduction by 2030 from the same baseline.
EPI had previously reported that Duke’s 2030 goal represented a significant slowdown in its pace of decarbonization compared to the pace it had achieved from 2005 to 2017.
Even with the more ambitious 2030 goal, Duke will still be cutting its emissions at a slower rate from 2017 to 2030 than it did during the 2005-2017 period. Duke is now saying that it will reduce its carbon emissions by an average of 2.1% per year between 2017 and 2030. That’s slower than the 2.6% rate that Duke achieved from 2005 to 2017, according to an analysis by EPI of the company’s data.
Duke’s new goal a response to increasing influence of climate-concerned investors
Duke’s new goal may be a response to the growing concerns from investors about climate change. Institutional investors escalated that pressure in February 2019, when pension funds with $1.8 trillion of assets under management, led by the New York City Comptroller, asked utilities to go carbon-free by 2050.
“The climate crisis is an imminent threat not only to our planet, but to pensions systems, and ultimately, our beneficiaries,” New York City Comptroller Scott M. Stringer said. “These are the biggest power producers and polluters in our country, which is why decarbonization is not just a moral imperative, it’s a financial necessity.”
Additionally, a younger generation of investors are considering climate change in their investment calculus. A 2017 Morgan Stanley study found that nine of 10 millennials want to invest in socially responsible portfolios. That trend has caught the attention of the electric utility industry.
“Investors are increasingly interested in the risks associated with climate change,” said one internal briefing from the Edison Electric Institute, the trade association for investor-owned electric utilities. The presentation, which Ameren shared with one of its regulators in Missouri, cited estimates from the accounting firm PwC that “a $30 trillion wealth transfer from Baby Boomers to Generation X and Millennials will occur over the next several decades,” and that “86% of millennials are interested in socially responsible investments, and 90% desire sustainable investing options in their 401(k) plans.”
Majority Action, the shareholder advocacy group that organized the $1.8 trillion Net-Zero Investor Coalition to demand top U.S. electric utilities commit to the 2050 net-zero carbon goal, welcomed the commitment in a statement, while calling on the company to align its gas investments with the new goals.
“As the $1.8 trillion Net-Zero Investor Coalition called for in March, Duke must now disclose their plans for how they will realign their capital spending, executive compensation, and policy influence to achieve this net-zero goal,” Eli Kasargod-Staub, Majority Action’s executive director, said. “Duke is investing extensively in fossil fuel infrastructure, such as its investment in the controversial and potentially uneconomic Atlantic Coast Pipeline project, at a time when the costs of carbon-free power are now on par with natural gas.”
Duke pledges “sound public policy advocacy”
In its announcement, Duke also said that it would “advocate for sound public policy that advances technology and innovation. This includes advanced renewable energy, longer-lasting storage, new nuclear technologies, low- and zero-carbon fuels and effective ways to capture carbon emissions.”
Those pledges run contrary to Duke’s recent history of advocating against federal limits on carbon pollution, as well as the company’s membership in several trade associations which have lobbied heavily against climate policies.
Duke individually, and via its membership in the now-defunct Utility Air Regulatory Group, sued the Obama administration’s Environmental Protection Agency to prevent the finalization of the Clean Power Plan, a policy to place modest limits on carbon pollution.
Duke Energy continues to be a member of the American Legislative Exchange Council, American Gas Association, Edison Electric Institute, and U.S. Chamber of Commerce, all of which have lobbied against various policies designed to address climate change. The U.S. Chamber, for instance, was challenged by 24 U.S. Senators earlier this year for opposing “congressional, executive, and judicial actions that would meaningfully address climate change.” Meanwhile, the utility contributed to the climate-denying ALEC even as corporations like ExxonMobil have departed in recent years. The utility, along with Peabody Energy and others, was a “Vice Chairman” level sponsor at ALEC’s States and Nation Policy Summit in November 2018.
For investors to evaluate Duke’s policy advocacy on climate change, they would need greater transparency from the company about those activities. Earlier this year, some Duke shareholders introduced a resolution calling upon the company to disclose its political and lobbying expenditures.
“Relying on publicly available data does not provide a complete picture of the Company’s political spending,” the shareholders said in their proposal. “For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In some cases, even management does not know how trade associations use their company’s money politically.”
Duke’s board of directors recommended a vote against the proposal, which failed.
Yesterday, another coalition of 200 investors with $6.5 trillion assets under management called upon corporations, including Duke Energy, to “align their climate lobbying with the goals of the Paris Agreement.”
“Climate change is one of the greatest risks facing long-term investors,” said New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund. “Many companies talk the talk when it comes to building a lower-carbon global economy, but some continue to support agendas and groups that oppose the goals of the Paris Agreement.”
Updated on Sept. 17 with information about an investor coalition calling upon corporations to align their climate advocacy with Paris Agreement goals.
Arizona’s largest investor-owned utility is telling shareholders that it has “surpassed the Paris Agreement” – even though the company has not established a goal to reduce its total carbon emissions, unlike most of its peer utilities. Misleading claims like Pinnacle West’s could undermine major investors’ confidence in electric utilities’ Environmental, Social, and Governance [ESG] commitments, as the sector’s decarbonization goals face increased scrutiny.
In a presentation for investors last week, Arizona Public Service Company’s parent company, Pinnacle West, made an extraordinary claim: “APS surpassed the Paris Agreement greenhouse gas reduction goal 9 years early.”
Pinnacle West’s claim appears to be based on a comparison of APS’ 28% reductions of its own carbon emissions since 2005, and the United States’ commitment to reduce economy-wide emissions 28% below 2005 levels by 2025.
The Paris Agreement, however, goes well beyond those near-term national commitments to reduce carbon emissions. The central aim of the global climate agreement is to keep global average temperature rise well below 2 degrees Celsius, and aim for no more than 1.5 degrees of warming.
That goal will require electric utilities to fully decarbonize their operations by no later than 2050 in any scenario, a reality that is well understood by several major investors. In February, a group of pension fund managers and other institutional investors that manage $1.8 trillion in assets called on major electric utilities to develop “a detailed transition plan toward achieving net-zero emissions by 2050 (or earlier target), with clear near-term benchmarks and plans for 2025 and 2030.”
Those institutional investors explained their focus on electric utilities: “Decarbonizing electricity generation is the lynchpin to broader decarbonization of the economy, empowering other sectors such as transportation to convert to emissions-free models. Therefore, establishing a net-zero carbon emissions target for electricity by 2050 at the latest must be the centerpiece of any plan to meet the goals of the 2015 Paris Agreement in terms of constraining global warming to well below 2 degrees.”
Xcel Energy decarbonization plan includes 80% cut in carbon emissions by 2030
When Xcel Energy, an electric utility with customers in Colorado, New Mexico, Texas, and the upper Midwest, developed its carbon reduction plan, the company asked climate modelers from the University of Denver to compare its goals to the Paris climate targets.
In a report, Xcel Energy said those researchers found that “Our goal to reduce carbon emissions 80 percent by 2030 and aspiration to serve customers with carbon-free electricity by 2050 appear largely consistent with the industrialized country electric sector carbon reductions in scenarios that achieve the Paris climate targets.”
As the climate modelers’ analysis shows, Xcel Energy’s plan for significant emissions reductions over the next decade, along with full decarbonization by 2050, are key components of the company’s plan to align its business with the Paris Agreement goals.
APS has not set a goal to decarbonize – or even to reduce total carbon emissions
In addition to Xcel Energy, other electric utilities in the western United States have also recently announced decarbonization plans. In March, Idaho Power announced that it had “set a goal to provide 100-percent clean energy by 2045.” In April, New Mexico’s largest electric utility, PNM, announced that it had “set a goal of ensuring all our electricity is 100-percent emissions-free by 2040.”
In contrast, APS has not set a goal to decarbonize its operations – or even any goal to reduce its total emissions. Pinnacle West’s investor presentation says the company plans “to reduce carbon intensity by 23% over the next 15 years.” Carbon intensity goals mean that the company plans to emit less carbon per unit of electricity it sells, which is not a commitment to reduce total emissions at any particular pace.
That lack of a total emissions reduction goal is unusual among major electric utilities. An Energy and Policy Institute analysis of 22 of the top investor-owned electric utilities’ carbon targets found that Pinnacle West is one of only five that have not established any decarbonization goals for 2030.
Without the guidance of a decarbonization plan, APS proposed building thousands of megawatts of new gas plants in its last Integrated Resource Plan [IRP]. The Arizona Corporation Commission refused to accept that plan, and instead moved to require utilities in Arizona to consider energy storage projects before pursuing new gas plants. This week, the Commission will consider updating its resource planning rules, including a discussion about extending its moratorium on new gas plants. APS filed a preliminary IRP last month that emphasizes its clean energy plans, while also foreshadowing that the company would continue to pursue more gas-fired power as well.
Misleading claims could undermine investor confidence in utilities’ climate goals
In addition toPinnacle West’s claims about the Paris Agreement, Southern Company has also made misleading claims about its emissions reduction goals.
Those misleading claims come as major investors pay closer attention to the ways that companies are aligning their businesses to climate change. An internal briefing from the Edison Electric Institute, the trade association for investor-owned electric utilities, explained that “Investors are increasingly interested in the risks associated with climate change.”
But that briefing also highlighted that investors “have a lack of confidence in ESG [Environmental, Social, and Governance] reporting from corporates.”
