- To help readers better understand the nuances of foreign policy, CFR staff writers and Consulting Editor Bernard Gwertzman conduct in-depth interviews with a wide range of international experts, as well as newsmakers.
The Obama administration is pushing for domestic consensus on climate change ahead of December’s UN Climate Change Summit in Copenhagen but proposed legislation continues to generate intense debate among energy industry leaders and politicians. Jim Rogers, CEO of Duke Energy--the third largest utility in the United States and one of the country’s biggest carbon emitters, says he expects cap-and-trade legislation to become more flexible on energy allowances, which permit a certain level of CO2 emissions. Rogers, who supports emissions controls and alternative energy investment, says boosting nuclear power supplies is the best option for expanding the country’s alternative energy portfolio, given the current limits in coal decarbonizing technology. He also says partnering with China is critical to learning which green technologies are suitable for commercial use.
As the country’s third largest carbon emitter, why is Duke supportive of putting a price on carbon?
Because our carbon footprint is so large and because we believe that we need to get started addressing the problem to build a bridge to a low-carbon world sooner rather than later. The best policy mechanism, we believe, is to put a price on carbon and a cap on emissions and maintain the integrity of the cap. We know the transition is going to be expensive. We know it’s not going to be easy, because every technology that generates electricity needs advances to be an equal contributor in a low-carbon world. We know that it won’t be quick. But we believe that the transition needs to be fair and the cost impacts to consumers need to be smoothed out over a period of time so it’s not disruptive to U.S. businesses or families. The most important thing we believe is that we need to start now.
What role should coal play in the U.S. energy economy?
Fifty percent of electricity in the United States comes from coal. And coal has been a great resource for our country, in terms of basically allowing the industrialization of our country in the twentieth century. The question is: Will coal continue to play the same role it played in the past, where it’s been affordable, allowed us to provide reliable electricity, and quite frankly [is] cleaner than burning it in fireplaces as we did almost a hundred years ago? In a sense, how we’ve used coal has actually cleaned up the environment, if you could have seen the world in 1909 versus today. As we move to a decarbonized world, coal’s role will only be significant if we’re able to develop the technology that allows us to take the carbon out of coal. If we fail in developing a technology that’s cost-effective at taking carbon out of coal, we could find ourselves in 2050 where coal has a limited role, if any. There will be stricter rules on sulfur dioxide, nitrogen oxide, mercury, and fine particulate. The ash pond issue will [see] more regulation; the water discharge is an issue; [and] the whole concept of mountain-top mining is an issue. Decarbonization of coal is just on top of that. If you asked me today based on current technologies--and assuming we have no advances in technology with respect to decarbonization of coal--I would say nuclear would trump coal because it produces zero greenhouse gases, it provides power 24/7, and, probably most importantly, it probably produces more jobs than even solar or wind on a per-megawatt basis.
"When I talk to different people about smart grid, it’s like talking to ten blind men standing around an elephant and each describes the elephant."
Why is that?
In an operation of a nuclear plant, there [are] .64 jobs per megawatt. The wind business--and we have a very large wind business--is .3 jobs per megawatt. In the solar business--and we’re installing solar panels--it’s about .1. But the difference in the jobs is quite different, because if you’re wiping off a solar panel, it’s sort of a minimum wage type of job, [with] much higher compensation for nuclear engineers and nuclear operators. If our goal is to rebuild the middle class, nuclear plays a key role there, particularly if coal is out of the equation. Neither solar nor wind, both of which are intermittent, provide power at a low cost 24/7. Job one for me is affordable, reliable, clean, 24/7, 365 days a year. So, given the technologies that we have today, nuclear is the only 24/7 product we have--unless you do natural gas, which has 50% of the carbon footprint of coal. And its price is quite volatile.
Why do you think nuclear energy is the key to U.S. competitiveness in the green-tech race?
People forget that [the United States was] the innovator of nuclear energy. We developed the technologies. And what people have also forgotten is that 20 percent of our electricity comes from nuclear, and that we produce twice the amount of electricity from nuclear than any country in the world. We sit here today, not turning dirt on a single nuclear plant. They [just] built ten nuclear plants in England. In China, thirteen new nuclear plants are under construction, with ten more on the drawing board. India is looking at nuclear plants and building up. They’re looking at building them in the Middle East. In Germany, they’ve changed their decision in favor of keeping the nuclear plants open. We have a competitive advantage on building nuclear, on building recycling to address the spent fuel, and that would be a great loss of opportunity if we don’t find a way to seize it and rebuild the supply. It’s not just jobs; it’s also [about] letting that innovation slide into the hands of the French and the Chinese and others.
You have struck deals recently with Chinese companies to develop solar-powered projects and "share technologies." Why pair up with China, an energy competitor, and what does collaboration mean in practical terms?
There’s a macro dimension and a micro dimension. The macro dimension is our two countries--the largest developing country [and] the largest developed country--produce 50 percent of the CO2 in the world. If we can, let’s come together as the G-2 and find a way to cooperate and develop a technology roadmap to ride the Chinese economic development wave and their ability to scale things really fast--whether it’s smart-grid technology, whether it’s carbon capture sequestration--because scalability is really important going forward. Coming up with an answer for coal is critical not just for us and our use, but also for the Chinese. The macro point is simply this: If you can build this ladder of cooperation between private Chinese and U.S. companies, where we’re sharing technologies [and] co-investing, it would build mutual trust and understanding, which will embolden our governments to come together in a way that allows us to find a way forward on climate [issues].
Don’t we risk sharing more of our technological edge than we’re getting in return from the Chinese?
I’ve spent time at Qinghua University in Beijing. I look at the work that they’re doing--in terms of underground coal gasification, research on taking carbon out of the flue gas stream, and growing algae and harvesting it for biofuels--and, quite frankly, I don’t know whether we’re ahead or behind. But I do know this: The technology is trivial compared to the need to scale it and deploy it on a commercial basis. They clearly have the ability to do that faster than we do, and I’d like to know that answer not twenty years from now, but if the Chinese can tell me the answer--is it scalable, is it commercial--in seven years, I have more options to go forward.
"How we’ve used coal has actually cleaned up the environment, if you could have seen the world in 1909 versus today."
A recent report by carbon price forecaster Point Carbon estimated Duke Energy to be the third biggest loser in the U.S. carbon market under the Senate version of cap-and-trade legislation. You’ve supported the bill but said it needs improvement. What kind?
There’s no perfect legislation, of course. What I’m most worried about is from my customers’ perspective, and that’s where the improvement needs to come. With cap and trade, it’s very important to use allowances to do two things. One is to smooth out the cost impact that’s inevitable. There are twenty-five states in the United States where more than 50 percent of the electricity comes from coal; these are the same states that carried out our national policy in the seventies to build coal plants--and so we need to be mindful and shouldn’t punish them for having carried that policy out. We also use allowances to keep [companies] from paying twice though auctions [meaning pollution permits would be sold through public auctions, rather than distributed for free]. If auctions turned out to be more of a tax than the allowances granted, then they would not only pay now, but they would also pay when we retired the old units and built new units, and they had to pay that much higher cost for new units. The transition has to be fair and affordable. That also is a key to the politics of the improvements, because if I feel that way, you know senators in these states--where rates could go up 10, 15, 20, 30 percent--are going to feel the same way unless the transition is fair.
Some analysts say consumers should bear a bigger share of those rising energy costs to incentivize them to decrease their demand for energy, which will incentivize companies to invest in greener technology. Do you agree?
No, [because] what is more fundamental to every home and every business than electricity? Think of those on low income and fixed income. Would you increase their rates 40 percent? Or if you think of our steel industry, would you raise their rates 40 percent so they would use less? It would just make them unable to compete worldwide. We would basically take what has been the loss of manufacturing in this country starting in the eighties and drive more and more people offshore, and also raise the 10 percent national rate on unemployment to 15 and 20 [percent]. We need that manufacturing base. We need people making things, and it’s those states where the prices would go up. So on the margin, yes, it would change behavior, but the loss of jobs would far outweigh the benefit to our country, and that’s why the transition must be smooth.
What are some of the sticking points in negotiating the gains and losses in implementing smart-grid technology?
When I talk to different people about smart grid, it’s like talking to ten blind men standing around an elephant and each describes the elephant. They don’t see the whole thing, and very few people really understand what the smart grid means in the context of the operation of the historic grid, and very few people can even imagine the energy efficiency that it would enable. Here’s what state regulators are facing: rising prices from more investments by us and old equipment. We have a billion dollars in our five-year plan to invest in smart grid. State regulators are facing the potential of higher prices because of carbon regulation. Our company has spent $5 billion reducing the emissions of sulfur dioxide and nitrogen oxide from our power plants, and that has driven rates up. For fifty years, the real price of electricity has been flat. We’re now in a period where the real price of electricity is going to rise, and that’s a fundamentally different political dynamic. You have to make the business case [to regulators] just on the grid itself, which we’ve been able to do, without taking into account the greatest benefit--the innovation that will come with energy efficiency and productivity gains in the electricity used by homes and businesses.