Duke Energy (DUK) Announces Long-Term Clean Energy Plan

Duke Energy Corp. DUK recently unveiled its long-term investment plan, increasing its current five-year capital target and clean energy projections on the company's first day for environmental, social and governance (ESG). This comes at a high time when a handful of utility companies across the board are steadily increasing their carbon dioxide (CO2) emissions reduction goals.
The company now predicts that its current five-year capital plan will increase by about $ 2 billion to about $ 58 billion.
Details of the long-term plan
Duke Energy's recently announced plan is to accelerate the decommissioning of coal-fired power plants in addition to the 50 more than 6,500 megawatts (MW) of coal-fired power plants that have been decommissioned since 2010. The company intends to shut down all coal-fired power plants in the Carolinas and reduce methane emissions in the natural gas business to netzero by 2030.
With a view to promoting clean energy, the company is now aiming to increase its regulated renewable capacity to 40 gigawatts (GW) by 2050. By 2050, the system is to be expanded to include more than 11,000 MW of energy storage.
For such a clean energy expansion, Duke Energy aims to spend in the range of $ 65 billion to $ 75 billion between 2025 and 2029. Such a move to clean energy will allow the company to grow earnings at the high end of its current long-term adjusted EPS growth rate of 4% to 6% by 2024.
Factors that drive decarbonization
In the US, most utilities have reduced their CO2 emissions significantly since 2005. This was possible due to persistently low natural gas prices and falling costs for the generation of renewable energies as well as technological innovations to promote energy storage.
Improving power plant efficiency and shifting investments in clean energy in the electricity sector have also been driving decarbonization for some time. In addition, government energy policies such as the standard renewable energy portfolio, as well as government-offered subsidies such as manufacturing and investment tax credits, have helped utilities accelerate their carbon footprint reduction activities.
Advances in decarbonizing Duke Energy
We believe the above factors must have enabled Duke Energy to meet aggressive decarbonization goals in recent times. In fact, the latest announcement comes just a month after Duke Energy Carolina unveiled its 2020 Integrated Resource Plan (IRP), which for the first time set out potential ways to reduce CO2 emissions by up to 70% with political and technological advances.
Therefore, we can expect this IRP and the company's recent long-term plans to properly achieve its earlier set target of at least 50% carbon reductions by 2030 and long-term target of net zero by 2050 in the Carolinas .
Other utilities as per suit
Edison International's EIX subsidiary, Southern California Edison (SCE), supplied customers with 48% carbon-free electricity in 2019. The company aims to achieve 100% carbon-free electricity by 2045. In early June, management updated that the company has already touched nearly 50% of its carbon-free energy target for 2045.
In August, NextEra Energy's NEE subsidiary NextEra Energy Resources announced plans to add 700 megawatts (MW) of fully contracted battery storage projects in California by 2022. These investments will help NextEra Energy achieve its alternative energy generation goal and reduce CO2 emissions from the EU manufacturing process.
Xcel Energy XEL was the first major US electricity company with a vision to provide customers with 100% carbon-free electricity by 2050 and to reduce CO2 emissions by up to 80% by 2030 compared to 2005. The company saw the largest year-round decrease in CO2 emissions in 2009, reducing CO2 emissions by 44%.
Zacks Rank & Price Performance
Duke Energy currently has a Zacks Rank 3 (Hold). The full list of today's Zacks # 1 Rank (Strong Buy) stocks can be found here.
Over the past year, the company's shares are down 2% compared to the industry's 5.7% decline.
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