Is the Energy We Provide Clean?
Finally, to realize our mission we ask: Will the investments we make provide cleaner energy?
Cleaner energy includes our investments in new, more efficient and lower-emitting coal- and gas-fired power plants, as well as the approximately $5 billion we have invested over the last decade to significantly reduce sulfur dioxide and nitrogen oxide emissions from our existing coal fleet. We are also making significant investments in renewable energy in both our regulated and commercial businesses.
Including our renewables investments, our nuclear fleet in the Carolinas and our hydroelectric assets in North America and South America, we are now the third largest producer of carbon-free electricity in the Americas among U.S.-based, investor-owned utilities.
And we continue to reduce our carbon intensity, which is the amount of CO2 emitted per unit of electricity produced. Based on the latest available 2008 data, of the 20 largest U.S.-based, investor-owned utilities, we rank 10th in carbon intensity. In 2007, we ranked ninth.
Regulated renewables portfolio
Investing in renewable energy diversifies our fuel mix and reduces our carbon footprint. In 2009, we were active on many fronts to increase our renewable power portfolio.
To gain experience with the design, construction and maintenance of distributed solar generation on our system, last year we received approval from the North Carolina Utilities Commission to construct solar power systems on multiple customer properties. We brought our first system under this program on line in early 2010 — a 1-MW system with more than 5,200 solar panels on the roof of a large manufacturing facility in North Carolina. We are on track to construct a total of 8 MW of solar power systems by the end of 2010. That is enough generating capacity to power about 1,300 average-sized homes annually.
Last year, North Carolina’s policymakers put incentives in place to support the creation of a state offshore wind industry. As a result, we announced plans to construct up to three offshore wind turbines to be sited in state waters inside North Carolina’s Outer Banks. We are partnering with the University of North Carolina on this initiative, which could be the first wind turbines operating offshore in the United States.
In addition to the direct investments we are making to own solar and wind power in our regulated business, we are also exploring blending wood chips with coal as a supplemental fuel source that could reduce coal usage at our existing power plants. We have conducted successful trials of this process, known as biomass cofiring, and we are developing plans to make it a major part of our renewable energy portfolio.
We also continue to increase the amount of renewable energy in our regulated portfolio through power purchase agreements. In recent years, we have entered into contracts to buy more than 170 MW of renewable energy, including wind, solar, hydroelectric and landfill gas.
Frequently Asked Questions
Q: What is the value proposition for your commercial businesses, and how do they grow earnings and cash flow?
A: Our commercial businesses consist of: Midwest Generation, Renewables and Duke Energy International (DEI). Combined, these businesses provide diverse geographic, technological and fuel-sourcing advantages. This diversity is key to generating strong cash flows and earnings.
Q: What is the Midwest Generation strategy?
A: Midwest Generation includes about 4,000 megawatts (MW) of predominantly coal-fired generation plants that currently are dedicated to Duke Energy Ohio customers, and about 3,600 MW of gas-fired plants located in Ohio and other Midwestern states that serve wholesale markets. This is a mature business that has historically provided good cash flows and earnings.
In Ohio, generation is deregulated, which allows retail customers to switch to alternative suppliers. In 2009, we mitigated this threat by launching a strategy to attract customers through our own retail supplier. We expect this business to continue focusing on producing strong cash flows and solid returns. We don’t anticipate investing growth capital in this business over the next several years, and we’ll carefully manage our operating and maintenance expenses.
Q: What is the Renewables strategy?
A: We launched our Renewables business in 2007 with investments in wind energy. We now have approximately 735 MW of operating wind projects in Texas, Wyoming and Pennsylvania, and we expect to have nearly 1,000 MW of commercial wind power in operation by the end of 2010. Over the past two years, we have created solar photovoltaic, biomass and commercial transmission businesses. Like our wind business, the output from these projects will be highly contracted with creditworthy partners. Near-term growth in renewables will be driven by favorable federal and state public policy, including renewable portfolio standards and tax credits.
Q: What is the International strategy?
A: DEI consists of predominantly hydroelectric generation assets in Brazil, and a combination of hydro and fossil generation in Peru and other Latin American countries. DEI provides diverse and consistent earnings growth. Our strategy is to reinvest internally generated capital into growth projects that fit our business model and meet our return expectations.
Commercial renewables business
Our commercial renewables business has initially been focused on land-based wind energy, currently the most economical renewable power source. By the end of 2010, we expect to have nearly 1,000 MW of commercial wind power in operation. We have been very successful in bringing new wind projects on line ahead of schedule and under budget. These projects are backed by long-term contracts with creditworthy partners — a low-risk approach that we are also applying to solar, biomass and new transmission projects.
In January 2010, we announced our first commercial photovoltaic solar venture, the Blue Wing Solar Project in San Antonio, Texas. This 14-MW, 139-acre solar photovoltaic farm includes a 30-year power purchase agreement with San Antonio-based CPS Energy, one of the largest municipal utilities in the United States. Our solar strategy also involves joint development of commercial projects in the United States with China-based ENN Group.
Last year, the U.S. Department of Energy awarded us a matching grant worth $22 million to design, build and install one of the nation’s first demonstrations of energy storage at our 153-MW Notrees wind farm in Texas. If it proves to be cost-effective, we could adopt similar storage solutions at some of our other power plants.
Also in 2009, ADAGE, the biopower company we own with AREVA, began the permitting process to build two 55-MW carbon-neutral biomass plants in Florida that will generate electricity by burning wood waste. In early 2010, ADAGE and John Deere announced an alliance for collecting, bundling and transporting wood debris from regional logging operations in western Washington to fuel a proposed 55-MW biomass power plant in that region.
Finally, we became the lead investor in GreenTrees, a program that aims to offset carbon emissions through the reforestation of 1 million acres in the southeastern United States. Our initial investment funded the planting of more than 1 million trees on approximately 1,700 acres in Arkansas.