View from the C-Suite: Duke Energy CEO Jim Rogers

View from the C-Suite

View from the C-Suite: Duke Energy CEO Jim Rogers

Duke Energy is a $12.7 billion Fortune 500 Company headquartered in Charlotte, North Carolina. Through its twenty coal plants and a mix of nuclear and renewable energy facilities, Duke generates 35,000 megawatts of electricity and serves more than 11 million people in five states -- North Carolina, South Carolina, Ohio, Kentucky and Indiana. Duke Energy is one of the largest electric utilities in the U.S. and one of the nation's top industrial polluters.

In 2007, the Company outlined a plan to de-carbonize by 2050. It has played a leading role in galvanizing new energy policy and efficiency innovations. Heather King talks with CEO Jim Rogers about Duke's collaboration with Fred Krupp of Environmental Defense Fund (EDF), his advice for Energy Secretary Steve Chu, and a future where the appliance is "the customer."

As the country's third biggest polluter, what is your business case for reducing carbon?

Jim RogersIn the late '90s, we became aware of 'global warming'. We recognized our huge risk, precisely because we're such a large emitter of CO2. We recognized a need to understand the issue, get ahead of it, and help shape a solution. In 2004, we started to build a coalition of stakeholders to collaborate and proactively work on the challenge.

We foresee a carbon-constrained future, and we want to make sure that we're one of the lowest cost energy suppliers in that new world. The sooner we get started, the better. The more we can smooth out cost increases, the better.

You have forged a number of partnerships with significant NGOs, most notably EDF in your work on USCAP. What advice would you have for other corporate leaders in working with NGOs?

A company cannot be sustainable over the long term unless it takes a stakeholder approach to operating a business. Stakeholders include customers, employees, investors, the communities you serve, policymakers, and NGOs. It's important to discuss issues with people who may not share your views or your goals or your timelines. Real change in America is not going to come by government edict, but by NGOs, corporations and community organizations working together.

In 1990, Fred Krupp of EDF and I worked on the Clean Air Act Amendments and we supported a cap-and-trade approach for SO2. These measures were good for consumers and achieved ambitious environmental goals at a lower than expected cost.

I encourage other companies to recognize the importance of building relationships, understanding differing perspectives and cultivating consensus.

In the wake of a defeated national cap-and-trade initiative, what do you think it will take to pass meaningful energy and climate legislation? What would you do if you were Energy Secretary Chu?

There are a couple of things at play. The administration decided to put the stimulus, healthcare, and financial reform before the energy issue. We also have a fragmented national voice. A perceived transfer of power from the states to the federal government has also impeded moderate Democrats' and Republicans' focus because their power base has shifted. And, Republicans have demonized cap-and-trade -- a system that they heralded as the free market answer to our environmental challenges when Bush passed the Clean Air Act in the 1990s.

Secretary Chu's challenge is to regroup, reframe the issue, and rebuild a base of support. This requires an old-fashioned, person-to-person approach.

With or without climate legislation, a revised energy policy is a worthy objective. By 2050, our world's population will grow from 6 to 9 billion people. The battle over scarce resources will accelerate. One thing people understand is the link between prosperity and electricity. Such a future requires a change in the regulatory paradigm. And, it requires us to redefine our business.

How has your approach to energy policy shaped the broader utility industry?

When I was chairman of Edison Electric Institute, a leading industry association, I worked hard to have my fellow CEO's recognize the imperative to seek carbon regulation instead of voluntary measures. We needed the surety of a coherent and consistent policy to manage our capital-intensive business.

We also worked hard to improve energy efficiency -- the first critical step in energy reform. Last century, the utility industry's mission was to provide universal access to electricity. We enabled air conditioning, which transformed the South and Southwest. We enabled MRIs and X-rays and laser surgery. We enabled cell phones, computers and the Internet. In the 1980's, there were three electrical devices per household. Today, there's an average of twenty-five. Our country has become increasingly dependent on electricity for our way of life.

In the 21st century, our mission is to facilitate energy-efficient communities. If we can achieve that, we will have a higher probability of increasing the standard of living for our children and grandchildren.
 Many of our industry peers are concerned about rate increases and international competition, especially in the face of a tough recession. Unfortunately, sustainability and environmental issues get moved to the back burner. In our view, delay is not a friend when addressing problems.

With regard to energy efficiency, how are you working with your customers?

That's a challenge. The majority of people do not think about the implications of throwing a switch. They are just not aware of the impact. Therefore, we need to use technology to make energy efficiency as back of mind as throwing that switch. We need to develop technology that enables efficiency without demanding a change in consumer behavior.

What is Duke's strategy for renewable energy?

We are taking a portfolio approach to renewables and have investments across the board. We have about a billion and a half invested in 1,000 megawatts of wind. We've invested in a number of solar projects, both in our regulated business and our commercial business. We have a joint venture with Areva to build biomass plants.

In my view, solar, wind, and biomass will play an important but not dominant role in the future. All three need significant efficiency improvements and cost. These fields are evolving. The costs will come down over time. My bet is that by 2050, solar will trump wind because you can more easily distribute it.

What then is your vision for the next generation utility company?

In the future, our mission is to optimize the use of kilowatt-hours, rather than to simply supply power. We will optimize usage on the grid, within homes, between homes, between neighborhoods, and between residential and industrial customers.

What are you doing today to move towards a future of efficiency and optimization?

We're working hard to create a new regulatory paradigm -- so we get compensated for every megawatt we reduce in the same way today we get compensated for every megawatt we build.

Secondly, we believe technology will drive efficiency and optimization. We have a number of pilots in place to test new technologies. We installed sensing devices in 100 homes in the Charlotte area. These devices communicate with each other within the home. When you turn on the dishwasher, the device signals the refrigerator to cycle down before the dish wash cycle starts. Usage within the home remains constant throughout the use of multiple appliances. With such sensing technology, we can reduce peak usage 20 percent without impacting the quality of customer service.

Lastly, we are working to retire and replace most of our power plants. Our goal is to modernize our fleet and de-carbonize it by 2050. In the next decade, one-third of our coal fleet will be retired as a result of tougher regulations. But we need to have a diversified supply of electricity. A portfolio approach is critical in this uncertain world. The question is 'What will replace the coal plants?' I do know that those replacements will have greatly reduced carbon intensity.

Heather King is a producer, writer, strategist and executive-in-residence. Her primary focus is on clean technology, corporate sustainability, and new media. She writes the "View from the C-Suite" column for GreenBiz.com.