Jim Rogers, Duke Energy’s Chairman, President, and CEO, is the first to remind people that if his company were a country, it would rank forty-first in the world in carbon emissions—just a notch above North Korea.
As it is, Duke Energy is the third-largest carbon emitter in the U.S.—a dubious distinction if you believe, as Rogers does, that society needs and will soon require big carbon reductions.
Duke Energy’s carbon footprint is driven by its heavy dependence on coal. But while burning coal is one of the biggest contributors to climate change, it has also allowed Duke Energy to provide low-cost, reliable electricity to 11 million people in the five states it serves.
To address this monumental task and strengthen the company’s strategy for meeting customer needs in a carbon-constrained world, Rogers challenged his team to try to reduce the company’s carbon emissions 50 percent by 2030. And Duke Energy’s leaders responded. They wanted the best and brightest minds thinking about the problem, so in addition to their own team, they went looking for thought leadership outside the company.
Enter Rocky Mountain Institute
Through conversations between Rogers and Amory Lovins, RMI’s Chairman and Chief Scientist, it became clear that Duke’s interests and RMI’s research and consulting work were not only complementary, but synergistic.
According to Roberta Bowman, Duke’s Senior Vice President of Sustainability, Rogers “does an enormous amount of listening to thought leaders and was aware of RMI. After having breakfast in Colorado with Lovins and RMI CEO Michael Potts, Jim came back excited about the possibility of his team working with RMI.”
The new collaboration took some getting used to. Duke executives wondered if RMI really understood the challenges utilities face and could offer realistic, pragmatic ideas. Similarly, RMI’s team wondered whether Duke Energy was really open to new ideas and change. These doubts and preconceptions aside, it quickly became apparent the two organizations were united by the same goal: a major reduction in carbon emissions.
“Duke was interested in our perspective on the status of low-carbon technologies, on their economics, and on how we think about planning for the future—given the huge number of uncertainties out there,” said Lena Hansen, RMI Principal. “But they’ve thought about these things a lot, too, so our collaboration turned out to be exactly that—bringing the best thinking from both of our very different organizations to bear on the problem.”
Recognizing that the electric utility industry is in a period of unprecedented change, one of the key topics that the group tackled was how to effectively plan for the future. For decades, the U.S. electric system has been based on large, central-station power plants serving customers who had little awareness or interest in how electricity was generated and delivered. Now, though, all those things appear to be changing. The costs of renewable technologies have come down; customers are becoming more engaged in how they use electricity and where it comes from; and carbon legislation is on the horizon.
All this means that, for utilities, the future will look very different than the past. By taking a scenario planning approach, the team painted several pictures of how the future might unfold—and how Duke might best respond to each. Each scenario reflected a combination of possible trends:
- How engaged customers will be in their electricity usage;
- How costs might trend for different technologies; and
- Whether key technological developments, such as carbon capture and sequestration, develop or not.
The team looked at the potential and costs of a number of low-carbon resources, including energy efficiency, wind, solar, biomass, nuclear, and carbon capture and sequestration. While each of those resources offers considerable opportunities, each has its own risks and costs. Understanding the various scenarios will help Duke adjust its strategy based on changing conditions.
“[Our work with RMI] has helped us identify key sign posts associated with various scenarios,” said Doug Esamann, Duke’s Senior Vice President of Corporate Strategy. “That gives us options. We are still laying these options out in an appropriate plan. We have bits and pieces already embedded. Continuing to make it a connected, cohesive plan is the challenge in the face of an uncertain future.”
In addition to making the right investment decisions, Duke must maintain reliable service no matter how the future unfolds—and that means matching electricity generation to demand, exactly, at every second. That becomes increasingly difficult as variable resources like wind and solar power are added to the grid.
RMI used its on-going research on the Next-Generation Utility Initiative and utility dispatch simulation model to help Duke think through how such a low-carbon system could work and what problems need to be solved.
Duke Energy’s low-carbon efforts are on-going, and Stephen Doig, RMI Vice President and electricity program leader is optimistic. “[Duke’s team] is as good as any I’ve ever worked with,” he said. “My hope is that our collaboration with Duke will help them have the confidence to push further and faster on their low-carbon strategy.”
“The challenge of producing energy for a low-carbon future is attracting some of the best and brightest talent around, and I think both RMI and Duke Energy learned a lot from this collaboration,” said Bowman. “When you think about the magnitude of the challenge of climate change, it’s an intellectual challenge, a technical challenge, a business challenge, and a human challenge. Being part of the solution appeals to our sense of mission and challenge at Duke Energy, and it’s at the heart of what RMI is about as well.”
Llewellyn Wells is a former VP of Outreach at RMI.
--Published October 2009