Duke Energy Plans More Gas Plants Despite Risks

North Carolina-based Duke Energy is insisting that natural gas plants built today are critical lynchpins in its strategy to become 100% carbon-free by 2050, dismissing some stakeholders’ predictions that they will be stranded assets long before that date, with future generations left to pick up the tab.

While it’s committed to its 2050 target, the utility “plans to hinge its next 30 years on an ‘all of the above’ generation strategy with natural gas serving ‘as the backbone’ of its resource mix,” the company’s vice president of state energy policy, Diane Denson, told Utility Dive.

Having retired 6, 910 MW of capacity across 49 coal units since 2010, and with plans to shutter seven of its 22 remaining coal plants over the next three years, “Duke is replacing some of that leftover capacity with gas-fired power, which emits around 50% to 60% less carbon on average than a typical coal-fired plant,” the industry publication states. It’s planning 4.7 GW of new gas capacity in North and South Carolina between 2029 and 2034, two new gas plants in Indiana between 2028 and 2034, and an overall increase in gas capacity in Florida, from 64 to 77% of its generation mix, from 2017 to 2027.

Such buildouts concern some stakeholders who worry that customers “may be on the hook for the back end of those investments, as renewables prices continue to drop and the utility sheds more carbon resources in the late 2030s to meet its sustainability goals,” Utility Dive states. The article cites a September report from the Rocky Mountain Institute which found that surging renewables could leave up to 70% of current gas investments uneconomic by 2035.

Others, like Emily Sanford Fisher, general counsel and corporate secretary at the Edison Electric Institute, “say the low cost of natural gas makes it a rational investment in the next decade or so, even as a utility moves toward a carbon-free scenario”.

“If a gas plant’s operating life is expected to be between 15 and 20 years, it’s reasonable to assume that a utility with an aggressive carbon-free goal like Duke’s might be able to build, operate, and retire that plant before it runs the risk of becoming a stranded asset,” Sanford Fisher said.

Denton said the challenge of avoiding stranding assets will be “an accounting question” solvable “through front-loading some of those costs to decrease the overall depreciation life” of any natural gas plants that Duke still has in operation in 2035. But “accounting is also about accountability,” countered John Wilson, deputy director for regulatory policy at the Southern Alliance for Clean Energy. “With utilities, it’s not a one-time reprimand,” he added, since holding utilities “accountable for poor decisions is also to affect their future behaviour.”

Defending the role of natural gas as the “backbone” of Duke’s resource mix during its transition off carbon, Sanford Fisher insisted that “not all natural gas generating units are the same,” arguing that small turbine-based plants that “can pair well with renewables to provide flexibility for the more intermittent resources as battery technologies mature.” And Wilson acknowledged that “an individual gas peaker plant here or there is not going to make or break” a wider low-carbon plan.

“What really matters,” he said, “is whether they are revisiting their overall, long-term strategy and investing heavily in clean technologies. And I would say that [Duke’s] record on that is very mixed right now.”

Wilson urged Duke to heed its current, and justified, fears of pushback from state commissions over the cost of shutting down entire fleets of coal plants before they’re fully depreciated. Noting that regulatory anxieties about cost recovery are “a fundamental issue here,” he said utilities should recognize “the very legitimate concern with natural gas investments that you’re setting up that same dynamic again in 10 or 15 years.”