Duke Energy Corp. DUK recently unveiled its long-term investment plan along with increasing its current five-year capital target and clean energy projections at the company’s inaugural environmental, social and governance (ESG) day. This comes at a high time when a handful of Utilities across the board are steadily ramping up their carbon-dioxide (CO2) emission reduction goals.
The company now forecasts that its current five-year capital plan will increase by about $2 billion to approximately $58 billion.
Details of the Long-Term Plan
Duke Energy’s recently-announced plan includes acceleration of coal plant retirements in addition to the 50 coal units with capacity worth more than 6,500 megawatts (MW), which it already retired since 2010. The company aims to retire all coal-only units in the Carolinas and reduce methane emissions in its natural gas business to netzero by 2030.
In terms of promoting clean energy, the company now targets to bring its regulated renewable capacity total to 40 gigawatts (GW) by 2050.It also aims to add more than 11,000 MW of energy storage to its system by 2050.
For such clean energy expansion, Duke Energy aims to spend capital in the range of $65-$75 billion during the 2025-2029 period. Such clean energy transition will enable the company to increase its earnings at the upper end of its current long-term adjusted EPS growth rate of 4-6% through 2024.
Factors Driving Decarbonization
In the United States, most utilities significantly lowered their CO2 emissions since 2005. This was possible owing to sustained low natural gas prices and declining costs for renewable generation alongside technological innovations that promoted energy storage.
Also, improvements in power plant efficiency and shifts in investments towards clean energy within the power sector have been boosting decarbonization for a while now. Further, state energy policies like renewable standard portfolio as well as subsidies offered by the government like production and investment tax credits helped utilities expedited their carbon footprint reduction activity.
Duke Energy’s Decarbonization Progress
We believe, the aforementioned factors must have enabled Duke Energy to adopt aggressive decarbonisation goals in recent times. In fact the latest announcement comes only a month after Duke Energy Carolina submitted its 2020 Integrated Resource Plan (IRP), which included for the first time potential pathways to achieve up to 70% carbon emissions reduction with policy and technology advancements.
Therefore we may expect this IRP and the latest long-term plans provided by the company to duly achieve its earlier set goal of CO2 reduction by at least 50% by 2030 and the long-term target of reaching the net-zero level by 2050 in the Carolinas.
Other Utilities Following Suit
Edison International’s EIX subsidiary Southern California Edison (SCE) provided 48% carbon-free electricity to customers in 2019. The company aims at achieving 100% carbon-free electricity by 2045. Earlier in June, management updated that the company has already touched nearly 50% of its 2045 carbon-free energy goal.
In August, NextEra Energy’s NEE subsidiary NextEra Energy Resources announced plans to add 700 megawatt (MWs) of fully-contracted battery storage projects in California by 2022. Such investments will assist NextEra Energy in realizing its alternate energy production goal and lowering carbon emissions from the production process.
Xcel Energy XEL was the first major U.S electricity provider with a vision to serve customers with 100% carbon-free electricity by 2050 and to curb carbon emissions by up to 80% by 2030 from the 2005 levels. The company recorded its largest one-year decline in carbon emissions during2019, reducing carbon emissions by 44%.
Zacks Rank & Price Performance
Duke Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past year, the company’s shares have lost 2% compared with the industry’s 5.7% decline.
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