Duke Energy: Powering a Plan Toward Net Zero

by: Pratap Mukharji, Daniel Vermeer

Publication Date: July 6, 2023
Length: 22 pages
Product ID#: 3-925-370

Core Disciplines: Strategy & Management, Sustainability

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Description

Regulated utilities are required to file an integrated resource plan (IRP) with their state regulators for power plants they want to operate, shut down, or build. Traditionally, the focus of electricity providers’ IRPs has been to ensure adequacy of supply at the lowest cost of delivered power.  In the United States, coal and gas plants have historically dominated the generation mix. Nuclear, which is a non-carbon alternative, has been only moderately successful due to frequent cost overruns and safety issues (i.e., Three Mile Island and Fukushima). Almost all utility plant decisions are long term in nature (at least 30 years), so picking the right set of options is very important. Renewables—solar, wind, storage, etc.—have not been deployed widely in the generation mix until now because (1) they typically don’t run 24/7 and thus cannot guarantee power to be available when needed, and (2) their installation costs have been higher than alternatives, although have decreased over time.

This case examines how one regulated utility, Duke Energy, deals with these challenges in North Carolina. Company leadership has committed to exiting coal plants by 2030 and achieving net zero-carbon by 2050. The specifics of which coal plants should be shut down and when, what types of plants replace these coal plants, how much these new plants cost to build, and who pays for the transition are all questions students must address in this case.

Teaching Objectives

After reading and discussing the material, students should:

  • Develop a plant (manufacturing) mix by matching supply to demand.
  • Evaluate the various stakeholder issues presented in the case and recommend the best path forward.
  • Understand how to make long-term decisions within a changing environment that includes evolving policy requirements and the evolution of new technologies.