An interview with Duke Energy CEO Jim Rogers
Meet Jim Rogers, a great American paradox. He’s the top gun at Duke Energy, a huge (and hugely polluting) power company; he’s also one of the nation’s most dogged advocates for federal regulation of greenhouse-gas emissions.
Duke Energy operates smack in the heart of coal country in the Midwest and Southeast and derives 70 percent of its power from the dirtiest of all fossil fuels. Rogers knows full well that his company has a lot at stake when it comes to cleaning up carbon emissions — which is why, he says, he wants to be on the vanguard of those preparing for limits.
A bridge-builder between the worlds of industry and environmentalists, Rogers played a key role in launching the U.S. Climate Action Partnership, an unprecedented alliance between corporate executives and green groups that launched in January and has proposed a federal cap-and-trade program that would cut greenhouse-gas emissions 10 to 30 percent over the next 15 years, then 60 to 80 percent by mid-century. These are goals nearly on par with the most ambitious climate bills in Congress, and in recent months, Rogers has been among the most active coalition members lobbying for them on Capitol Hill.
As chair of the Edison Electric Institute, an industry trade group representing companies that provide nearly 60 percent of America’s electricity, Rogers has helped move the organization from staunchly rejecting federal global-warming policy to embracing a forward-thinking (if limited) set of climate-change principles. Rogers is also a board member of the Alliance to Save Energy, a D.C.-based nonprofit that lobbies for ambitious energy-efficiency regulations.
But Rogers is not in all areas an environmental angel, as everyone was reminded this week when Duke Energy got spanked by the Supreme Court. In a high-profile decision, the justices unanimously overturned a lower-court decision that let Duke off the hook for circumventing a Clean Air Act provision that requires the installation of high-tech pollution controls on aging power plants. Rogers also takes heat from critics for his avid support of nuclear power, and his contention that heavily coal-dependent utilities should be given more pollution permits than any others in a federal cap-and-trade scheme.
Rogers spoke to me recently from his office in North Carolina about the professional, political, and personal factors that fuel his concern about climate change.
You’re running a company that’s one of the nation’s largest producers of CO2 emissions. You’re also doing more than perhaps anyone else in your industry to try to get these emissions regulated. Can you reconcile this contradiction?
I’m an optimist. I think there are solutions to problems — maybe not perfect solutions today, but over time, solutions will improve. I think the probability that we’ll get good solutions to climate change — solutions that benefit both the planet and industry — is higher if we face the problem now than if we bury our heads in denial. If you’re constantly trying to define the problem, or deny it, or dispute it, it gets increasingly difficult and costly to develop a good solution.
Last year you were elected as chair of the Edison Electric Institute, the power industry’s biggest trade group. Did this reflect a growing acceptance within your industry of climate change and the inevitability of regulations?
There’s undoubtedly a growing openness in our industry to this issue. I’ve seen several surveys that say 70 or 80 percent of the executives in our industry think there will be carbon regulation. In a sense, we’re all building our business plans around the carbon scenario. The only issue is what the regulations will look like and when they’ll be implemented.
You’ve recently tried to define one approach via the U.S. Climate Action Partnership. Tell us how that alliance formed, and the process of give-and-take that got you to the final agreement.
Most of the executives knew each other and had had ongoing conversations with environmental groups on a range of issues, so there was a set of existing relationships that brought us all into the room. I think the pivotal moment was in December when we began to agree on how we would structure the cap-and-trade program. The really big issue was: Can coal be part of the energy equation in the future? We agreed that it will be, given the fact that 50 percent of our electricity in this country comes from coal.
The other issue was the recognition that nuclear had to play an important part in the equation. This is a tightrope that the environmental community is walking. On the one hand, they want to solve climate. On the other hand, nuclear is the best zero-carbon energy source that can reliably supply our economy, and historically they have not been supportive of it.
So your environmental partners came to agree that nuclear needs to be part of the solution?
I wouldn’t characterize them as 100 percent supportive of nuclear, but I’ve seen some movement in that direction. I think they are reluctant to embrace nuclear at this point, but in the face of climate change they view it as the lesser of two evils.
Most of the companies involved in U.S. CAP had already been making noise about the importance of federal action on climate change. Did you try to get other industry members — auto companies, for instance — to come onboard?
It was an interesting kind of tension. On the one hand, you want enough people to have a critical mass; on the other hand, if it gets too big, you end up spending too much time sitting around the room and fine-tuning the words. Even with that fairly like-minded group [in U.S. CAP], our staff spent an incredible amount of time trying to get the right words so everybody was comfortable with them.
And now you’re in a process of recruiting other corporate leaders to join the CAP alliance, as I understand it. Are there major players coming to the table?
It looks that way. It’s very exciting, but it’s too soon to mention names.
What are the chances of getting an aggressive climate bill, on par with the CAP agenda, passed in the 110th Congress?
That’s a very difficult call. What we’re learning as we soak in the details of this issue is how incredibly complex it is. You’re starting to see Congress members who are dealing with it for the first time saying, “Oh my goodness — every time I get one answer, it raises five questions.” The complexity, by definition, will slow down the progress.
Secondly, as you listen to very partisan Democrats and certain environmentalists, there is a sense that they would rather keep this as an issue for the 2008 election and then have a solution afterward because, one, it becomes a good issue for the campaign, and, two, they think they would get a tougher bill. I think every day that goes by, the probability is increasing that it gets done after the election, not before.
But you’d rather see it happen before?
I personally think that sooner is better. It gives us more time to start to take early action and get credit for it, to know what we’ll get credit for. A lot of companies like ours are making big decisions right now: “Do we build coal plants? Do we build nuclear or natural gas or renewables? How much do we depend on energy efficiency?” These are investments that last for half a century or more.
Do you think that utilities should get carbon credits based on actions they’ve already taken, before the regulations are implemented?
They should not. The legislation should encourage companies to go out and do things, make investments that would help their carbon footprint in the future. Retroactive credits would not achieve this. Actions taken in the past weren’t taken recognizing there’d be future carbon legislation.
Some economists think that a carbon tax would be more effective than a cap-and-trade program. Do you agree?
I think economists generally believe that. Here’s the problem: It’s not politically doable. You can’t find Democrats and Republicans that want to sign on to any tax.
You’re a strong proponent of nuclear power. The question of what to do with spent nuclear fuel hasn’t been resolved. What would you propose?
Our industry has long supported Yucca Mountain [a federal nuclear-waste repository in Nevada], but there seem to be huge impediments to Yucca Mountain at the moment. The way that the political deck is stacked today, I think we need to come up with an alternative approach to consider. I haven’t really seen anything that makes sense yet from a political standpoint. But I do think that we can come up with ways to do it, most likely pursuing a more regional approach to storage. The French have come up with ways to deal with the storage issue, and we should look to them.
Coal has been taking a beating lately. Jim Hansen, the nation’s most respected climate scientist, has called for a moratorium on building coal-burning plants. Texas utility TXU has had to scale back its plans for old-style coal plants. The North Carolina Public Utilities Commission challenged your company’s plans to build two new coal-fired plants. What role do you think coal should play in a carbon-constrained future?
There’s no getting around the fact that coal is America’s most abundant and affordable power source. There are 25 states in this nation that today get more than 50 percent of their electricity from burning coal. We’re not going to eliminate that capacity any time soon — in fact, there are 150 new coal plants on the books.
As for future coal development, I am optimistic and hopeful that we will solve the challenge of carbon capture and storage. There are some 30 different technologies that are being developed and are in different stages of research and development that have the potential of attacking the issue.
But the real challenge will be coming up with a technology that can eliminate carbon emissions from existing plants — a carbon “scrubber” of sorts. Today we can put a scrubber on the back end of our plants and take out [sulfur dioxide], mercury, nitrogen oxides. We ought to be able to do that with CO2. A lot more emphasis and resources need to be devoted to that innovation.
Does Duke have any IGCC plants [integrated gasification combined-cycle plants, cleaner fossil-fuel plants that could be adapted to capture carbon for storage] in the works?
We are in the process of getting authorization to build an IGCC facility in Indiana, a coal-producing state that has the right geology — the limestone-type geology — which allows you to pump the CO2 into underground chambers.
Why not make Duke’s two proposed new coal plants in North Carolina IGCC?
North Carolina has a different geology that isn’t suited for underground storage. Until we find more advanced ways of storing the carbon emissions, you can’t site IGCC in regions that don’t have the geological capacity. So in North Carolina we proposed building a “supercritical” plant, which is 40-percent efficient — the most advanced existing technology available. It eliminates 99 percent of the sulfur dioxide emissions, 90 to 95 percent of nitrogen oxides, virtually all particulates, and there are no thermal impacts to the water bodies. By building this plant, and retiring two older coal units, we will actually reduce our carbon footprint. Plus, our older plants that aren’t retired will run less, because they’re less efficient and more costly to operate.
In a unanimous ruling, the Supreme Court [this week] overturned a lower court decision that essentially exempted Duke Energy from having to install more advanced emissions-control equipment on old coal plants under the “new-source review” provision of the Clean Air Act. What’s your reaction to the decision, and how will it affect your company?
It’s a big disappointment for us, certainly, but the case is now returning to the lower courts where we’re going to continue to defend our position. I believe we have solid defenses against the government’s claims and will prove in the lower courts that the projects we were undertaking were not subject to the NSR provision. That provision applies to what they call “major modifications” of plant facilities, not the kind of more routine upgrades that we were undertaking.
But if Duke is claiming to be a good corporate citizen, shouldn’t you support regulations that require the use of top-notch technology to control emissions?
Well, the problem is that NSR often keeps us from using advanced technologies to make our plants more efficient, because every time we want to modify a plant and improve it, we have to go back and upgrade it in every way. And that might not make economic sense, so it often acts as a deterrent to make technological improvements.
What is Duke doing in terms of its own operations to help solve the climate crisis?
I’ve always viewed energy efficiency as the fifth fuel. We think that the most environmentally benign plant you can build is the one you don’t build. Job one is getting our customers to implement a broad array of efficiency measures, and give them more control over their bills, which will dampen the growth in demand. Job two is trying to use our distribution system more efficiently. We lose a lot of energy just in the transmission cables, so we’re working to reduce what we call “line loss.” Third, we’re trying to increase how much we use our nuclear units. Fourth, we’ve contracted up to 100 megawatts of wind [power] in Indiana, and are exploring investment in other renewable energy areas such as biomass.
The Edison Electric Institute has long opposed carbon caps, and under your leadership it has relented. How did you push through that change?
I was lucky to be there when the change occurred in people’s thinking. The pivotal moment was back on Jan. 10. We had a board meeting in Arizona, and as chairman I asked every person in the room — there were 50 different CEOs — to give their view of how as an industry we ought to move forward on climate change. It was like a snowball effect. Everybody stepped up and talked and it became increasingly clear that we needed to change our position from just supporting voluntary efforts to supporting regulation.
In the long run, do you think society will have to consume and produce less energy?
One of my favorite statistics is that in the U.S., electricity demand as a percentage of GDP has actually decreased 30 percent. To say it another way, if we were at the same concentration of electricity per unit of GDP today, we would have to build as many power plants as there are in Texas and California. So we’ve become as an economy less energy intensive, and I think that trend will continue.
Did you have a “conversion moment” on the climate issue?
There wasn’t a burning bush on the way to Damascus that did it for me. But about eight years ago I asked this smart guy in our company, a former Peace Corps member, to be my special assistant, because I liked the way he thought. I asked him to tell me about carbon. He did all this research, we spent long stretches of time talking about it. At the same time, I was attending the World Economic Forum at Davos every year. I’d sit and listen to how the Europeans are thinking about it. I started to say, “Wow, they have such a different view than we have.” So that forced me to dig in more. The more I learn, the more passionate I get about it.
How are you personally reducing your carbon footprint?
I’m actually in the process of building a house, and I’m working with my architect to bring in people who are experts on building energy-efficient homes. So I’m trying to build a home that reflects energy efficiency’s best practices. This is a passion of mine. I’ve recently been named to the Alliance to Save Energy board, and my goal is to be chairman of that in several years.
What kind of car do you drive?
I drive a Lexus. A real small one, though.
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