I Don't Have All the Answers for Solving Climate Change. I've listened to legislators, regulators, environmentalists, scientists, renewable energy advocates and my grandchildren. What I've learned is no one has the complete answer. Everyone has a piece of it. And it's time everyone starts working toward the same goal: clearing the air and finding solutions to address climate change.
Members of several environmental organizations attended Duke Energy's recent annual meeting. Each took a turn at the microphone telling me and my board of directors what we shouldn't do to ensure our customers continue to receive safe, reliable, cost-effective electricity.
Environmentalists have demanded we cancel plans to build an advanced 800-MW coal plant in North Carolina — a project that includes retiring 1000 MW of older, less-efficient coal units. The effort will lead to cleaner air and features massive reductions in sulfur dioxide, nitrogen oxide and mercury emissions. Most importantly, it is carbon neutral and is a key bridge for our company as we economically meet our growing customer demand while addressing climate change.
I welcomed their thoughts, but pointed out that rather than fight each other, we should be fighting together. We have a common cause: cleaner air. And we have a common solution: energy efficiency.
Duke Energy has introduced innovative energy-efficiency proposals in the Carolinas and Indiana, and plans to introduce similar proposals in our other two states, Ohio and Kentucky.
How much more successful would we be — how much more would our regulators be willing to listen — if environmental groups stood shoulder-to-shoulder with other groups to support these proposals? Our plan is to bring customers a portfolio of energy-efficiency solutions made possible through advanced digital technologies.
Smart grids, including substations, transformers and line sensors, will operate and communicate with each other much like a computer network. Our systems will interact across platforms, from generation and power distribution to the customer's home or business. This real-time communication will allow our network to balance our load systemwide. We will be able to detect and resolve problems quickly, prevent and shorten outages, and improve reliability and power quality. More importantly, it will allow us to bring on-line new energy-efficiency programs and offer our customers a new suite of products and services.
To make this work, our state regulators must allow us to be compensated for meeting growing customer demand, whether it's through saving a watt or generating a watt. Our plan only rewards us for actual reductions in demand, not the more traditional “cost-plus” regulatory model. It is designed to yield results by driving program costs down and customer participation and innovation up. We're investing in wind and solar, and looking into other options as well. However, the many renewable-energy technologies are not yet cost effective.
I strongly support federal legislation to create a mandatory and declining national cap on carbon dioxide and other greenhouse gases, with a target to reduce these emissions by 60% to 80% by 2050.
However, the legislation proposed by Sens. Lieberman and Warner is not the answer in its current form. It correctly takes an economywide approach by capping carbon-dioxide and other greenhouse-gas emissions. Unfortunately, the approach used to meet that cap requires companies to pay for current carbon-dioxide emissions through allowance auctions.
We should be clear that an auction of allowances is a carbon tax. Lieberman-Warner gives electric utilities in coal-dependent states no choice but to buy a substantial number of allowances from day one simply to keep their customers' lights on. This would result in unfairly placing the cost of addressing climate change on the backs of consumers in the 25 states that depend on coal for more than 50% of their electricity.
The bill also proposes to raise funds for a variety of purposes unrelated to developing technology solutions. Without new technologies, we have no hope of achieving our carbon reduction targets. Technology funding should be pursued independent of the carbon-dioxide regulation under cap and trade.
A more fair and transparent way to fund research and development might be a surcharge on every kilowatt-hour of electricity sold in America. A three-tenths of a cent surcharge per kilowatt-hour would raise about US$11 billion annually, and cause minimal rate impact. This compares to about $1.38 billion budgeted for energy research and development by the U.S. Department of Energy in 2008.
Finally, the electric industry must pick up the pace. We've got to exit our comfort zone, embrace change, work with our regulators and legislators, listen to new ideas.
It's time for everyone to stop trying to find someone to blame for our situation and start doing something to correct it. Let's clear the air — together.
Jim Rogers is the chairman, president and CEO of Duke Energy.