Duke Energy Corporation (DUK) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Duke Energy's Inaugural ESG Investor Day. I'm Bryan Buckler, and I head up our Investor Relations group. We are so happy you are here with us, and we're very much looking forward to discussing our environmental, social and governance practices. Here at Duke Energy, we are laser focused on bringing a cleaner energy future to our communities, while also creating great value for our shareholders. Over the next 2 hours, you're going to hear us speak to many ESG matters, but I promise you, we're going to leave plenty of time for your questions. Before I go over the agenda, I just need to take care of a couple of housekeeping items. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of the securities laws. Actual results could differ materially from such forward-looking statements, and those factors are outlined in the appendix herein and disclosed in Duke Energy's SEC filings. A reconciliation of non-GAAP financial measures can be found in today's materials and on dukeenergy.com. Please note the appendix for today's presentation include supplemental disclosures. All right. Let's dive into the agenda. We have a great day ahead of us, and you're going to hear from several members of our senior management committee. Leading our discussion today is Lynn Good, Chair, President and Chief Executive Officer. Lynn's going to share her long-term vision for Duke Energy, and she's also going to provide a broad overview of our ESG focus areas. After Lynn, you're going to hear from Julie Janson and Cari Boyce. They're going to discuss our clean energy strategy across all of our jurisdictions and how we will achieve our carbon reduction goals. Cari's also going to do a deep dive into our Carolinas IRPs. Next, CFO, Steve Young, will discuss our very significant infrastructure needs in our communities over the next 10-plus years, and he's going to translate those into the capital investment opportunities for Duke Energy and our shareholders. After Steve, Sasha Weintraub will provide an update on our natural gas business. Then Doug Esamann's going to speak to renewables, battery storage and emerging technologies. While Dhiaa Jamil's going to give an update on our carbon-free nuclear strategy. And just before we get to your questions, Lynn Good's going to host a discussion with Bill Kennard. Mr. Kennard is a member of our Corporate Governance Committee of the Board of Directors. Bill and Lynn are going to discuss human capital management, governance and strategy. All right, so let's get started. It is my pleasure to introduce Paul Draovitch. Paul oversees environmental health and safety for the company and does an amazing job for us. Paul is going to get the safety moment for today. Paul?

Thank you, Bryan, and good morning, everyone. We're going to start this meeting just like we start every meeting at Duke Energy, let's take a moment for safety. You might be working remotely, possibly in a location that's not designed to be worked in 8 to 10 hours a day. Now remote work may have some benefits, a shorter commute or no commute. And to be quite honest, when my Pomeranians walk into the room, it's really a pleasure. But remote work is not without risks, so here's some tips that can help. First, check your work area every day for tripping hazards: a loose extension cord, possibly a toy left behind by a child and even that pet who's wandered into the area unknown to you. Second, make certain you've got a comfortable chair, but sit straight, knees bent, feet firmly planted on the floor. And lastly, make certain you take frequent breaks get up and walk around and stretch, it will certainly improve your focus when you get back to work. All right. Let's talk about Duke and our performance. First, safety is a core value at Duke. It's been a core value since our inception more than a century ago. And we don't just define safety as the safety of our workforce, it also includes the safety of the communities we serve and the environment. So how are we doing? Well, let's compare ourselves against our EEI peers. For the fifth, that's 5 consecutive years, we will lead our EEI peers in overall safety performance. Let's get a little more granular. Total incident case rate. That's the standard by which ocean measures safety. Our TICR will improve for the 10th consecutive year. Both of those accomplishments are measures of sustained excellence, but guess what, we're not satisfied. We look for ways to improve each and every year. And I can't tell you how proud I am to be surrounded by a workforce that takes safety first. Now let's look at the environment. There is not a standard by which the utility industry measures environmental compliance, so to drive our performance, we created our own. And guess what, our performance has improved every single year since its inception. So I leave you -- there's a few things that I'd like you to remember with regards to Duke and safety in the environment. First, we're just not a leader in utility workforce safety. We're the leader in utility workforce safety. Second, when a metric didn't exist to drive our standards and improve our performance, we created it, and it's benefited us every day since. And lastly, our workforce takes safety first and foremost in everything they do. Every task, every job, every day. What a wonderful culture to be a part of. At this time, it is my pleasure to introduce our Chair, President and CEO, Lynn Good.

Paul, thank you so much. And let me add my welcome to all of you. We're delighted you're here with us today, and we're going to make this remote opportunity to talk together and work for you. I know how important ESG is, as you think about evaluating companies and making investment decisions. And we also believe at Duke Energy that environmental stewardship social responsibility and strong corporate governance is a foundation for sustainable value. We put together on the first slide, a bit of a tagline to introduce this discussion. And when you see the words transform and reshape, I'd like you to think about the very bold vision that we have set out around the notion and the important task of carbon reduction, net-zero by 2050, at least 50% by 2030. We'll hear a lot about that today as we talk about the plans to change our generation mix and introduce more clean energy. But we've also included in this tagline, the words our role in society. And I don't know if the words are perfect, but it's intended to capture the very important focus that we place on social responsibility on employees, on diversity and inclusion, on commitment to our community, whether it's the foundation or volunteerism and the commitment to stakeholders. You'll hear a lot about stakeholders today. And these 2 elements of environmental responsibility and social responsibility are underpinned by the importance of strong corporate governance, and I'm really delighted that Bill Kennard is joining me today. I think it will supplement the discussion to hear the Board's point of view on these very important topics. So I'm going to start us out with the E, which is environment, and on this slide, we have captured both the progress we have made to emphasize where we stand today but also our vision for the future. And if you look at this slide, we are standing here today at 39% carbon emission reductions, which is a very proud number for Duke Energy. It's well ahead of Clean Power Plan and Paris commitments. It's been something we've been working at for some time as we've retired coal and added renewables to our system, 8,000 megawatts of renewables. But we're not going to stop there because the future is also bright for us. We look at the next decade, and we will aggressively pursue further carbon reduction getting to at least 50%. And our state -- our home state of North Carolina has an aspiration to get to at least a 70% carbon reduction. So how will we do that? By more retirement of coal and also by adding more renewables and battery storage. And we'll have an opportunity to dive deeply into this in the Carolinas, but we also see opportunities in Indiana and Florida as well. As we move beyond 2030 and continue our transition with renewables and battery storage, we also see the need for new technologies to get to that ultimate goal of net-zero. This is hydrogen. It's advanced nuclear. It's longer duration storage. And Doug Esamann will have an opportunity to share with you how we are participating in that important development of technology to make our goal of net-zero achievable. We'll also have a chance today to hear from Sasha Weintraub, introducing a new methane goal because methane is also a part of this equation. And we intend to be a leader in reducing methane emissions. If you bring all of this together, it's not only a compelling vision of policy and how we will pursue climate change, carbon reduction on all of those important factors, but it's also a compelling investment story. And as we pursue this clean energy transition, we see the path to accelerate capital investment and deliver a 7% rate base growth by the end of this planning period. And we also see an opportunity with this capital investment as well as the great work we're doing around productivity and cost reduction to have the opportunity to earn at the high end of our 4% to 6% earnings guidance range. And Steve Young will take you through the specifics on how we're thinking about these great opportunities for our investors. Before we turn to the Carolinas and the IRP and hear from Julie and from Cari, I wanted to spend just a moment on the important topic of social responsibility and also corporate governance. It starts with the purpose of the company. I thought that would be a nice framework for the conversation, and our purpose is to power the lives of our customers and the vitality of our community. That statement is underpinned by a talented diverse workforce at Duke Energy. Employees who report to work every day with a mission to serve and who have an opportunity at Duke to pursue their career aspirations and develop into leaders. It is also underpinned by our commitment to diversity and inclusion. And I'm not sure there's been a stronger call to action than 2020. As we think about the tragic death, the George Floyd and others, it's been an opportunity for us at Duke to have conversations. We've held over 400 of them. We call them pathways to inclusion conversations. It's an opportunity for our employees to talk about how these events have impacted them. And I believe it will be a catalyst for change, for us to continue driving diversity in our supply chain and diversity in our leadership, our work is not done. And stakeholders. You'll hear a lot about them today, particularly as we focus on the transition and the energy policy and the stakeholder engagement necessary to make decisions that work for our policymakers and for our customers. We see this as critical to our success, and we're delighted to be involved in so many stakeholder engagements that we think will make a real difference for our communities, but also a real difference for our investment profile. Our foundation and commitment to community has been a long part of the heritage of Duke Energy. We invest about $30 million a year into our communities on initiatives and on projects that matter. And certainly, in 2020, it's been all about COVID, and it's been about racial and social injustice. And we have been a part of that conversation, donating into important projects, important initiatives, important social service agencies that are working in these areas in a way that will make a real difference. And I'm not sure there's a better example of how all this comes together than our response to COVID, where we focus on health and safety of employees and really health and safety of their well-being, with paid time off, and stipends and other things to help employees during this time. And also work with our customers, waiving fees, discontinuing disconnects and working generously and flexibly around deferred payment arrangements. All of these things, I hope, begin to paint a picture for you on how we take that purpose and turn it into something that really matters at Duke Energy. And as I said before, the foundation of all of this is strong corporate governance. Our Board is a diverse Board. Our Board is focused on refreshment and bringing new skills into the Board so that we continue to have the right skills to move us forward. And they're also focused on holding us accountable. We have had a number of metrics across a broad spectrum of operational and customer success for a long time. But in 2021, we will add a metric around climate and how we are doing in achieving these bold aspirations that we have set before you. We've included a few metrics for you on the right. We continue to measure our success and continue to engage with all of you on the metrics that really matter. So with that introduction of environment, kind of the vision for the future and how we think about social responsibility and governance. I want to thank you again for being here. Our commitment to these elements we believe will deliver sustainable value for our investors and for our communities. So we're going to take a quick pause, and then we'll hear from Julie and Cari as they talk about clean energy in the Carolinas, Indiana and Florida. [Presentation]

Wasn't that a terrific glimpse into the men and women that make our company great. Good morning. I'm Julie Janson, and I lead our sustainability and stakeholder engagement work across the enterprise as well as the regulatory and legislative work in the Carolinas. And I'm joined here today with Cari Boyce, who is our Senior Vice President of Enterprise Strategy and Planning. Our customers, our communities, all of our stakeholders really want for us to lean into the important issue of climate change. And we need to balance that with continuing to provide the affordable, reliable and safe energy that they've come to depend upon from us, and so we're excited about doing just that in the coming years. As we think about our transition, we are so hopeful that it provides an opportunity for our communities to come back better and stronger than ever before from the pandemic. We believe the transition will create high-paying jobs, generate tax revenues for schools as well as increasing the economic development capacity of our communities. If you'll indulge me for a second, let's look back. Lynn talked a lot about our bold goal around carbon reduction, and this is not new for our company. Moving toward a cleaner energy goal is something that is not new. In fact, we led the industry in 2010 with a carbon reduction goal a decade ago, and we're so proud of the progress that we've made over the last decade. Something you may not know, and this is super important, is we're also a national leader in low carbon intensity. Carbon intensity is really the great equalizer, and we're proud to lead the industry as well. In the Carolinas, we're 37% below the national average. Looking ahead, we're preparing to transition our coal fleet in the largest move from coal in our industry. That probably bears repeating, the largest move away from coal in the industry. And we're moving to renewables, to storage, to emerging technologies, and we're very excited about that transition. And in fact, it is all of this progress that gives us confidence moving forward. But we cannot do this alone. It is really our ability to engage with our stakeholders and our communities that will bring great success. And the slide that's up now is a word map. These are our stakeholders' words, not ours. When I look at the word partnerships, I think about all of the progress we've made, particularly in the last year around rate case settlements, around moving our grid investment plan forward, around solar reform efforts in the Carolinas, and partnership is front and center as we lean into with 40 other stakeholders. North Carolina Governor's Clean Energy Plan, where we're having meaningful conversations about the ability to move this state forward in terms of carbon reduction. Solid plans. Our integrated resource plans in the Carolinas that Cari is going to talk to you about in just a moment. We're so excited. They are innovative. They are new. And we solicited and received a lot of shareholder and stakeholder feedback from approximately 200 participants, and that feedback made those plans better. And finally, direct engagement. The ability to have those conversations. We may not always agree with our stakeholders, but the outcomes are better when we lean in and have those conversations. Also with engagement, our commitment to environmental justice is front and center. We are really working on our principles for environmental justice, working those internally and externally getting feedback so we can get those just right because protecting those communities, where we put our projects and interacting with our communities is of the utmost importance. And so you've heard a lot about stakeholders. I'd like you to hear from them.

All across the board in North Carolina, every one has become more and more in tune with where we're going with regard to climate change.

As efforts continue, our dialogue and collaboration are going to be the key going forward.

In fact, polling shows that the majority of North Carolina voters actually support or letting -- putting a limit on carbon to help get that job done.

Duke's an integral piece of that puzzle. They're an innovative leader in the utilities, among utilities across the country, that's taken a lot of effort and engagement on their part. We have some of the most affordable energy rates in the country.

We see a lot of opportunity in the wind space for both policymakers and utilities and NGOs to work together. We have a lot of different stakeholders to engage. And having the utility work with NGOs and work with the citizens of North Carolina to really show the kinds of benefit that will be derived from resources like offshore winds, I think are going to be critical.

In order for North Carolina to reach its carbon reduction goals, the electricity sector, and therefore, Duke is going to need to be carbonized. And in addition, this provides Duke a real strong opportunity to lead in the area, not only among other utilities in the Southeast, but among North Carolina-based companies as well.

And I think in the last few months, what we've really have seen is a lot of effort from Duke to participate in these larger working groups that are being administered by state policymaking bodies, and to participate in group activities that are going to help drive us towards a better consensus where everybody has input on the front end, and we really work towards trying to come to a common understanding.

Wow, what a great video. I'm Cari Boyce, and as Julie mentioned, I lead our Enterprise Strategy and Planning Group here at Duke Energy. I never thought I'd use the words innovative or exciting to describe an integrated resource plan. But this year is totally different. On September 1, we filed integrated resource plans, or IRPs, for our 2 electric utilities that operate in the Carolinas. These detail options to meet customer demand over the next 15 years. While called plans, they're really more planning documents that outline 6 potential pathways to the future. These are the first IRPs that we have filed in the Carolinas since we announced our climate goal last fall, and we took a whole new approach. Robust stakeholder engagement informed our modeling and our portfolios, and our analysis was underpinned by multiple detailed studies, many of which had their own stakeholder process. In all of our portfolios, we retire all our coal-only units by 2030. All include significant investments in renewables and storage. All require investment in the grid, both transmission and distribution. And in most portfolios, there's still a role for gas, balancing the variability of renewable resources on the system. You can generally think of our portfolios in 4 buckets: first, delivering leased cost consistent with current energy policy; second, retiring coal as quickly as possible; third, we've included portfolios that deliver at least 70% carbon reduction by 2030; and finally, a no new gas portfolio. In all of these portfolios, we continue to meet the needs of our growing communities, and we remain on track to achieve net-zero by 2050. As you can imagine, there are trade-offs inherent in every pathway. I'll share a few highlights. First, it's important to note that even in our leased cost portfolios we continue to make significant progress in transitioning to clean energy. Renewables and storage take center stage with additions double to quadruple what's on the system today. For the first time, we've included new insights around customer bill impacts, transmission and technology requirements to give policymakers and regulators the data they need to make informed policy decisions. Based on stakeholder feedback, we included a no new gas portfolio. In this portfolio, our coal units actually operate a little longer to allow time for new technologies such as small modular reactors, offshore wind or pump storage hydro to be integrated into our system. Here, you can see the varying levels of carbon reduction across each pathway, ranging from 53% to 74% by 2035. As a utility, we have a responsibility to meet customer demand every hour of every day. And while North Carolina is second only to California in solar, the sun doesn't always shine when our customers need it most. Solar output is variable and it's not available on those cold winter mornings at times of peak demand. Even with storage, which can shift energy a few hours, we still have a need for a dispatchable resource to make sure that the lights come on when our customers flip the switch. A lot of people have looked at this. There are multiple third-party studies. This is where there's a role for gas to serve as that dispatchable resource, and enable that cost-effective transition to decarbonization. As we look to the future, we are excited to build on the progress we've made to date, continuing the transformation that's underway, retiring coal and investing in carbon-free generation. Our focus on carbon reduction extends beyond the Carolinas, and I want to spend a few moments talking about the progress we've made in Florida and Indiana. In Florida, we've invested $1 billion to bring 700 megawatts of solar online by the end of 2022. And our recently filed shared solar program would bring another 750 megawatts to the state by the end of 2024. And our storm protection plan approved in August details the investments we'll make over the next decade to improve resiliency, protecting against storms and cyber attacks. Moving to Indiana. We continue to focus on accelerating the closure of our coal plants. We've retired 1,100 megawatts since 2010, and we've got more to do. Our recent IRP details how we will retire coal and invest in renewables over the next few years. And we're actively participating in a state-led task force to look at generation resources and emerging technology for the state. We plan to file an updated IRP in 2021. We'll continue to focus on retiring coal and diversifying our fleet. And similar to the Carolinas, stakeholder engagement will play a key role in the planning process. I've given you a lot of information, but here's what I want to leave you with. We have an ambitious goal to achieve net-zero by 2050, and it requires new ways of planning and operating the system. We're exploring all the options to best serve our customers' needs. And we're taking action to accelerate the clean energy transition in all of our states. Working collaboratively with stakeholders to reduce carbon, improve reliability and keep rates affordable. With that, I am pleased to turn it over to Steve Young, our CFO.

Thanks, Cari. Well, now you've heard about the portfolio options in the Carolinas. That, when implemented, will result in carbon output reduction of between 55% and 75%. What I'm here to talk about is the investment opportunity that these options provide, and it's an exciting opportunity. I want you to think about 2 numbers: $20 billion and $50 billion. Those amounts represent the range of incremental investments required over the next 15 years to implement these options. So let's think about these numbers a little bit. Look at this graph on this page. It shows 2 descending dotted lines. That represents the range of potential carbon reductions from these options. The 2 ascending lines represent the cumulative investment opportunity under the various options. The lower line leads to $20 billion of incremental investment opportunity. That is associated with the base case runs the scenarios that yield roughly 55% carbon reduction. The upper line accumulates to $50 billion, and that is associated with scenarios that drive to 70% to 75% carbon reductions. So let's talk a little bit about these numbers. The $20 billion number, I would think about it as being composed 2/3 renewables investment, 1/3 nonrenewables investment. The renewables investment is composed primarily of solar, which is more accommodated on our system in the Carolinas. There's some wind and there's some battery storage in that number as well. The nonrenewable investment piece consists primarily of gas peaking facilities, as Cari described, and transmission investment that's required to integrate all of these additional renewables. Now let's take a look at the $50 billion number. That number, I would break out and think about $30 billion of it being related to renewables and $20 billion being nonrenewables. Now of that $30 billion, roughly half of it we would estimate to be solar facilities. The other half would be consisting of wind and battery storage. The $20 billion of nonrenewables investment potential, that consists of 3 buckets that I would describe, again, gas peaking facilities; transmission investment, more of it's required to accommodate the more accelerated retirement of coal; and the third area could represent an investment to expand an existing pump storage facility. Bad creek pump storage facility on our system can be expanded, that produces carbon-free capacity and energy. So that's how I think about the $20 million and $50 billion. And that represents the cumulative incremental investment required to put these options together, and that's irrespective of ownership. So let me have you move to the next slide, if we could. Before I talk about what this means to our overall capital plan, I want to remind everybody about the grid. When you put our utilities together, we have the largest grid in the country, and it consists of transmission and distribution investments. The impacts of these portfolio options on the transmission system is part of the numbers I'm describing. The impacts on the distribution system have not been quantified yet. Our distribution system is our biggest body of assets. And we're modernizing that grid for storm hardening and other purposes, and we have been doing so, and we'll continue to do so. The impacts of these scenarios are not reflected in the distribution system at this point in time. So let's take a look at what this means to Duke Energy's capital plan and our growing rate base. If we can move to the next slide. Thank you. What we see here on the left-hand side is our 5 -- the evolution of our 5-year capital plans over the past several years, and on the right-hand side, we show our rate base. Now we've had to make some assumptions here about what amount of renewables investment would Duke Energy be able to make here. Those details have not been determined yet. They will over time. I think under any circumstance, we will have a significant role to play in making investments in renewables in the Carolinas. We've made assumptions here. I think they were very reasonable assumptions based on what we've seen around the country, what we've seen in our service territories. They may be a bit conservative, but I think they're reasonable, certainly. So let's take a look at the numbers. Again, on the left-hand side of the page, we show the evolution of our 5-year capital plans. It wasn't that long ago in 2019 that we had a 5-year capital plan that was in the neighborhood of $50 billion. Well, as we got our arms around the need for renewables on our system and the need for grid modernization, that was increased to $56 billion. That's the number we rolled out earlier in 2020. When we start to think about the impact of the various portfolio options that Cari described, that pushes the 5-year capital plan from '20 to '24 up to $58 billion. So again, we've moved from $50 billion just in 2019, looking forward 5 years to $58 billion looking forward 5 years from 2020. Now look at the period of time, the 5-year period, 2025 through 2029, there, we see a real acceleration of the capital as we transform and retire coal and build other facilities. There, we could see a 5-year capital plan in the neighborhood of $65 billion to $75 billion depending on the options selected. Now what does that mean for our rate base? On the right-hand part of this page, we show our rate base projections. We start with the year-end 2019, a rate base of $77 billion. We see that growing to roughly $105 billion by the end of 2024. That's a 6.5% growth rate, very solid. For the next 5-year period, ending in 2029, we see that growth rate accelerating to 7% as more capital kicks in with this transformation. Keep in mind, we have a very good track record of earning our allowed returns on a growing rate base. So this is a very exciting picture for us. Now a logical question you need to ask is how can you keep customer rates under control with this type of investment coming to you. Well, we never make a capital plan without thinking about customer rates. And there are a number of offsets to the increased capital cost that will come about that will help keep our customer rates competitive. As -- some of these will happen naturally. As you transition out of coal, you'll have lower fuel costs. As you transition out of coal, you'll have lower nonfuel O&M. There's less people. The outages are less complex. The third area is our continual pursuit of efficiencies across our footprint through our business transformation model. We have a good track record here as well. We will continue to find digital applications to automate processes. We will use data analytics to tell us how to do things and when to do it better. And we have learned from the pandemic, how to virtually move our workforce from areas of lesser importance to emergent work to help us displace the need for contractors. In addition to these potential offsets, we service areas that are seeing significant customer growth, particularly in the Carolinas and in Florida. The more customers you have, the more kilowatt hour sales you have. You can spread costs over a larger number, that helps keep customer rates competitive. So let me recap. $20 billion to $50 billion of incremental capital required to bring about these options. A growing rate base at 6.5%, 7%, with a track record of being able to earn our allowed return on that rate base and the ability to keep customer rates competitive. With that, I will turn it over to Sasha Weintraub, who runs our gas businesses.

Thanks, Steve. I'm excited to be here today to share with you the future of the natural gas business, a segment with consistent earnings growth and stellar customer performance. Natural gas is versatile. It can be used as a fuel for baseload generation, it's ideal for peaking units and it provides reliability for renewable energy and battery storage. Our customers rely on natural gas for residential heating, commercial cooking, manufacturing processes and economic development. Beyond that, this segment directly supports our broader emission reduction targets as we protect the environment. Today is a big day for our natural gas business. We're rolling out a new goal for our gas distribution companies, net-zero methane emissions by 2030. Now our 2 local distribution companies, or LDCs, Piedmont Natural Gas in the Southeast and Duke Energy in the Midwest. They've already made great strides in reducing their methane emissions, but we're going to do more. Let me tell you how. First, we're moving forward with advanced technology to increase our monitoring and measurement of methane emissions. We've started a pilot for the use of fixed-wing and satellite detection of methane leaks. We're analyzing the effectiveness of these techniques to detect leaks compared to our traditional means that we've used. Second, we are improving our operational efficiencies and damage prevention initiatives. Now we've already made good progress in achieving this goal with all the work we've done to eliminate our cast iron and bare steel main pipings from our LDCs, a significant source of methane leakage. We may need some offsets in order to achieve these goals. And if we do, we'll be using renewable natural gas. Now it's important when you think about methane to also consider the upstream component, and we're doing just that by partnering with the industry to have a bigger impact. We've joined ONE Future, a coalition of natural gas companies nationwide, working together to voluntarily reduce methane emissions. The collective goal of ONE Future is to reduce the methane intensity across the entire natural gas supply chain to be less than 1% by 2025. This is going to require coordination and collaboration. We'll be using our purchasing power to encourage our natural gas suppliers to use low methane emission practices while maintaining affordability for our customers. By purchasing responsibly produced and transported natural gas, we can reduce methane emissions across the entire natural gas supply chain for Duke Energy and the industry. This next decade is going to be transformative for the natural gas business and our LDCs. And as we transform, we are not going to lose sight of our customers and our communities. When you think about the feature of this business, renewable natural gas stands out as a cleaner and viable option to continue serving our customers and supporting economic development. We're executing a 5-year plan to be a leader in the renewable natural gas space. When I reflect on where we're going, I'm reminded of the tremendous success that we've already achieved and the incredible foundation to launch us into the next decade. It's clear the Piedmont Natural Gas acquisition has been a great success. Not only does the business deliver consistent earnings, we've also seen increased customer satisfaction, improved safety performance with lower customer rates. And the work continues as we expand our customer base and improve the customer experience with new products and services. For years, our gas companies have received national and regional accolades for their customer service. This just reminds us of the innovative solutions that we need to do as we strive to exceed our customer expectations in the future. So let me summarize for you what's ahead for the natural gas business over the next decade: net-zero methane emissions by 2030 and lower methane emissions across the entire natural gas supply chain; renewable natural gas as a cleaner, viable fuel source, and a growing strong business segment with excellent customer service and affordable rates. I can't wait. Now let me hand it over to Doug Esamann, who oversees our renewable business and customer solutions. Doug?

Thanks, Sasha, and thanks to you all for being here today. I hope you're staying safe. So you're getting a glimpse today into the transformation that's underway at Duke Energy. As we think about our mission to decarbonize, there are really 4 critical paths that we need to hit on in order to make sure that we can reduce the carbon emissions and meet the goals that we've laid out. Those 4 areas are renewable energy deployment, energy storage, electrification and emerging technology. At Duke Energy, we've had a long history of innovating and leading the way now and in the future, that won't change. So let me go into each of these in a little more detail and tell you a little more about how we're going to deploy these, starting with renewable energy. So from 2020 to 2050, we expect to deploy renewable energy at a pace that we've never deployed before. Large amounts and drastic increases in the amount of renewable energy we invest in will be necessary. So think about today, we have 8 megawatts of contracted, owned or operated renewable energy across the entire Duke footprint. By 2025, we'll double that. By 2030, we'll triple it. And in order to meet our net-zero carbon goals by 2050, it will take 6x the amount of renewable energy that we have on our system today. Most of that will be in the regulated businesses. By 2050, the majority of the energy in our regulated utilities will be from renewable energy, representing about 40% of the capacity. If you think about where we stand today, we're a top 10 leader in ownership in wind and solar, and we expect to continue that leadership position going forward. In our commercial renewables, we're also seeing growth. Currently, we own about 3,500 megawatts of renewable energy. And by the end of next year, that will grow to 5,000 megawatts. In our regulated utilities, Carolina has really been a lot of where the solar investments have been coming. But as we see policy changes, customer demand and economics continue to move in favor of renewables, we see more and more opportunities coming in the Midwest and Florida. To complement that, we need a lot of energy storage. And I'd like to talk a little bit about energy storage now. So we've been in storage business for a long time. If you think about our hydro stations, not what we currently think about in terms of battery storage, that they've been around for decades, and they were really storage opportunities for us. In the '70s, we've built pump hydro storage. You heard Steve Young talk about Bad Creek and Jocassee. That's over 2,000 megawatts of pump storage. While we literally in the low-cost time period, pump water up to higher level reservoirs. And then in times of the most need for energy, release that and peak times and in high-cost energy and instantaneously produce energy. That's a big storage facility for us. That's something we're very proud of and sets us apart. More recently, you can see on the slide, we've been investing in a number of battery storage technologies. The early stage investments were really utilized to demonstrate the value of battery storage on the Duke Energy system relatively low-cost system across all of our jurisdictions. But as we move forward and deploy more battery storage, it's become -- because of the economics supporting it and the business case supporting that deployment. And we file in the commissions with the business case, show why battery storage is the best option, and that's been the result of approved investments that you've seen in the near-term years here. So storage has great benefits. It has great benefits and resiliency, grid storage, it actually has benefits to capacity and energy benefits, the ability to micro grid an island, and so it's great storage and great capacity for our system. When you think about the costs coming down, which we know will happen in the battery storage area and you think about the functionality as it continues to improve, we see more and more battery storage deployment on our system, especially as we talked about the levels of renewable energy a little while ago. 11,000 megawatts by 2050 will be the total investment we expect to make in energy storage. And in our 5-year plan, we are also investing in energy storage. In addition to the uprates at our pumped hydro storage, we are also investing $600 million in additional battery storage, $100 million of which is in Florida at a 50-megawatt deployment projects that we have going on right now. So storage is very critical to us. It's very important to us, and it will be important as we continue to move along the path of decarbonization. So I'd like to shift focus now if I could to electrification. And I know many of us think about electrification of vehicles is, is it going to be here to stay? If you think about the evolution of vehicles from the Prius to the Tesla to new models coming out, there's always a question of how sustainable in it. And I'm here to tell you, I believe it's extremely sustainable. And there's a real driving force for that. The driving force is economy-wide carbon reductions. Transportation sector now is the highest carbon-emitting sector in the U.S. economy, and you need to be able to address those carbon emissions. And the best way to do that is through electrification. And if you think about supplying clean energy to support the electrification of vehicles, you get a 2x carbon reductions which are really going to be important for us as we think about substantial decarbonization. And customers are demanding more vehicles and more are coming to the marketplace. There's benefits for the utilities. There's benefits for the economy. There's benefits for the environment, for sure. We have 43,000 vehicles across our Duke Energy jurisdictions today, and that's just scratching the surface. There's much more to come. What's been holding it back is charging infrastructure and the ability of charging infrastructure in the marketplace. And we believe we're in a great position to at least jumpstart the marketplace by putting in charging infrastructure across all of our jurisdictions. And that's really the push behind why we filed in all of our jurisdictions to help move electrification of vehicles forward, to develop a foundational charging infrastructure across our service territories so the customers when they want to drive and want to get from place to place, they know they have a fueling option in a charging station. And we've recently got approval in Florida, and we're actually almost finished with deployment, 530 charging infrastructure stations in Florida. In South Carolina, we got approval a few weeks ago to move forward with a little smaller project but similar in nature. And we have pending pilots in North Carolina and Ohio. In all those cases, I'm really proud of the work we've done to promote stakeholder engagement and bring groups together to help support the filing of these pilots and requesting approval at the commissions. The other thing that you can think about from an electrification standpoint is the load pickup that we get. So in 10 years, we believe that our load will grow by 0.5% just because of the existence of electrification of vehicles. And by 2050, we think the load component could grow to 2% to 4% from electrification. There's also grid investment, which is helpful for us as we look to make sure the capacity exists to supply those vehicles. And the last point I want to make on electric vehicle is a real important one. Our pledge to take our own fleet and reduce the emissions from that fleet by electrifying 100% of our light-duty vehicles by 2030, and 50% of our medium, heavy-duty and off-road vehicles with hybrid electric, electric vehicles are carbon-free fuels. We're really proud of that pledge. So now I'd like to transition, if I could, to my last topic, and that's emerging technology. And it's emerging and called emerging for that very reason. It's not ready to be deployed at scale basis throughout the systems. But it's critically important for us as you've heard us talk about the 50% carbon emission reductions, leading to net-zero. Many technologies can get us today to the 50%, and they will carry us through net-zero, but they won't fill the gap that we need to get to net-zero by 2050. We need new clean energy technologies. Hydrogen is a good example of one of those technologies. We're testing hydrogen now. It's really not in full-scale deployment, but we believe that hydrogen as a clean fuel has expansive capabilities to change the dynamics of what's available for us in clean fuel technologies. We're working with our partners now at Clemson and Siemens as part of that, to take a combined heat and power plant we put in on the Clemson campus a few years ago, and put hydrogen in as a fuel source. We're applying at the DOE for a grant to actually demonstrate that, that technology can work in that scale of an investment. And we're working with our partner, Bloom Energy, whom we've invested in a few of their fuel cell portfolios to see if we can move forward with fueling those fuel cells with hydrogen fuel. So those are some great examples on the hydrogen side. There are other emerging technologies. And you heard them mentioned earlier today: advanced nuclear, long-duration battery storage, carbon capture and many more. Those are things that we're needing to work on as a group collectively, not only Duke Energy but industry companies and others. And so we've been an anchor partner in the Electric Power Research Institute, Low Carbon Resource Initiative. And that is a 5-year plan, bringing together a number of companies and resources to focus on taking clean energy alternatives from their demonstration scale to large-scale deployable in the utility space. And that, at its core, involves reaching out to universities, DOE research labs, NGOs, regulated groups and policymakers to help build that coalition or what we believe will get us to net-zero carbon, not only as a company but as a country. The last thing I want to focus on are something called ZELFRs. And if you've read our climate plan, you've seen ZELFRs mentioned. What is a ZELFR? Well a ZELFR is a zero emitting load following resource. And essentially, what that means is as you bring a lot of intermittent energy on, you bring a lot of distributed energy on, some that we won't be able to control as a utility to make sure it's there for the grid. We need a clean energy fuel source that can be dispatchable, that could be brought up and down as we need it to make sure we can keep the grid reliable. And that's what a ZELFR is. And any one of these emerging technologies I mentioned or a combination thereof, we believe, will help fill that ZELFR gap to allow us to manage the grid and continue to develop -- to deliver the good product that our customers come to expect today. So it's a profound time to be at Duke Energy. We are working hard on the transformation, the transition and adapting to all the changes ahead. And we are very excited about using these 4 pillars that I mentioned to getting us to a clean energy future. So at this point, I'd like to turn it over to my colleague, Dhiaa Jamil, our Chief Operating Officer, and Dhiaa's going to talk about our generation portfolio, in particular, nuclear energy.

Thank you, Doug, and good morning. Folks, I'd like to start by going back in time for a moment. I've been with this company for over 40 years, and I've seen the transformation of the fleet firsthand from growing the largest regulated nuclear fleet in the country, to methodically reducing our reliance on coal plants, to moving full speed ahead in increasing our portfolio of renewable and storage. That is our plan going forward as well. Now I realize that others in the industry have gone through similar transformation. I'd like to show how we compare to those in that space. This chart shows a number that should jump out of the page, and that is 24%. Only 24%, our generation, come from coal. Does that surprise you? Do you also know that over 53% of the energy that we provide in the Carolinas come from carbon-free generation. If that is not a surprise to you, I want to thank you. That means you've been watching the great transformation that's taking place at Duke. And also recognize the strong leadership position that we have taken in this space, largely driven by our aggressive approach to renewable energy and our best-in-class nuclear fleet. That fleet is made up of 11 reactors. They are not only responsible for the vast majority of the carbon-free generation that we produce, but they are also a key reason for why our rates are below the national average. And to say that fleet is reliable is really an understatement. The capacity factor of the fleet, a measure of reliability, has been over 90% for the past 21 years. In fact, that number last year was an impressive 95%. So when we plan ahead, our initial focus is on extending the licenses of these nuclear reactors. These licensing currently expire from 2030 to the mid-2040s. We will follow a well-established NRC process to go through and ensure that, that resource is available to us well into the second half of the century. Now as we look ahead, further ahead in the future, our modeling suggests that we will need new carbon-free generation that not only can be dispatched on demand, but also can be available and reliable through the various weather events that we could have. That will complement our aggressive approach to renewable. There are a few opportunities out there, some are further in development than others. I would like to highlight a couple of them. One is the SMRs, small modular reactors. As the name suggests, they're modular. They come in a variety of smaller sizes up to 300 megawatts. They are of the light-water reactor technology. That means they're similar to the ones -- the reactors we currently run, and they are further in development. So they can be ready to be deployed late '20s, early '30s. The second exciting opportunity is the advanced nonlight-water reactors. These are carbon-free generation that also have -- hold the distinction of being designed to load-follow from 0% to 100% on demand. That is the type of breakthrough capabilities that we're looking for in the mid-2030s and beyond to supplement our growing renewable portfolio. So that's the future. Meanwhile, we're preparing for that future. And the way we do that is by focusing on the reliability of the fleet and also continuing to focus on reducing the cost of generation. We're doing it through a variety of ways. Relying on digital technology is one, reskilling our workforce and, of course, adapting best practices from the industry. So folks, that is really a very exciting time for us to be in this industry. It's an exciting time to be at Duke. We've had a track record of changing and transforming the fleet, and we plan to continue to sunset legacy project -- resources as we build a new -- and scale up new carbon-free technology in the future. Nuclear will continue to be a vital part of that transformation. We will continue to deploy capital in that space to grow that resource. So thank you, and thank you for being with us today. In a moment, you will hear from Lynn Good. [Presentation]

Well, Bill, thank you. I'm joined today by Bill Kennard, a member of our Board. Bill has had his distinguished career in public policy and in business and serves in corporate roles in a number of companies, and he's really made a big impact on our company. He chairs the Finance and Risk Management Committee, so he gets to see all the investments and all the risks, and he also serves on the Corporate Governance Committee. And I thought as a complement to all that you've heard today about management's objectives and vision for the future that it would be helpful to have the Board's perspective as well. And I thought I would start with the whole topic of ESG, Bill, and how the Board thinks about its oversight of ESG topics and maybe more specifically, oversight of climate and our carbon reduction goals.

Well, thank you, Lynn. First, it's great to be included in this presentation and have an opportunity to speak directly to our investors. On environmental and ESG, I think I can speak for the entire Board in saying that we really feel that it's a privilege to be able to work in a company that we think can play a leading role in addressing what is the most important challenge facing the whole planet today. And we take that role very seriously. And what I took from the presentation today is that we're seeing that our financial goals are aligned with our goals to lead on climate, which is really an exciting time to be in the company. In terms of how we operationalize that on the Board, a couple of years ago, the Board decided to task the Corporate Governance Committee with oversight over sustainability. So as a member of the Corporate Governance Committee, I and my colleagues on that committee are very engaged on sustainability issue, reviewing many of the plans that investors heard about today. But I do want to emphasize that this is not an issue that is confined to one committee on our Board. As you know, because of the centrality of climate to our business model and our future as a company, it's really discussed at all levels, all of our committees and always at the full Board level.

Appreciate that, Bill, because it has so many dimensions to it, policy, compensation, risk, investment, all of those things. Why don't we talk about risk just for a moment because in your role as the Chair of Finance Committee, you get to see a wide variety. And I know risks are often on the minds of investors, whether it's climate risk or cybersecurity risk. And maybe you could talk a little bit about the Finance Committee and then, again, how the full Board addresses risk more broadly in the various committees.

Sure. Well, the Finance and Risk Management Committee is responsible for I would say overseeing enterprise risk more broadly and compliance risk. But when you're delivering energy at scale like a company like Duke, there are lots of risks that we have to deal with. And so every committee of the Board has responsibility for risk management. So maybe it would be helpful if I sort of gave an overview of how we have assigned the responsibility for risk management in our various committees. So the Audit Committee is responsible for a number of areas of risk, but principally cyber risk, grid security, obviously, financial regulatory compliance. Our Operations and Nuclear Oversight Committee, really important committee when it comes to risk management because that committee oversees operational risk, environmental, health, safety, oversees risk involving operating our nuclear fleet. This is a committee that before every Board meeting, they literally do a site visit to one of our nuclear plants and meet with the team, they get a safety review. It's a really intensive oversight of the nuclear fleet. We have a Regulatory Policy Committee that oversees regulatory risk. And I do, though, want to emphasize that a lot of these risks, although they are -- the committees will delve deeper into risk management, they often will reach the full Board level. And particularly, the issues around climate risk is something that the full Board will often discuss.

I find there's a curiosity on the part of the full Board on how enterprise risk comes together. So we've put enterprise risk into that retreat for that reason, our longer Board committee, because of the depth of that. Moving to corporate governance, Bill, maybe just for a moment because I think Board skills go with this notion of risk because we need to make sure that we're refreshing skills and we have the right people to oversee them. And I think given the importance of diversity and inclusion as part of our social responsibility, I think that's also an element. So maybe you could talk about how the Board approaches, finding the right skills, the right Board members and how the overlay of diversity and inclusion is also important.

Sure. Well, I joined the Board in 2014. And I was really at the front end of what has been a major Board refreshment at Duke. In the last 4 years, we've recruited 7 new directors. And we've used that as an opportunity to pretty dramatically increase the diversity on our Board. We have 40% Board members that are racially, gender, ethnically diverse, 31% women. And we've also used this Board refreshment opportunity as a means of also really deepening the scope of our expertise on the Board. So we've recruited people with deep experience in nuclear safety and nuclear operations. We've recruited people with really deep financial experience, utility experience. We recruited Ted Craver, who ran Edison out in California, and a number of new people who just have broad experience in leading large, complex industrial businesses. So I think we're well positioned to cover a lot of the areas and problems that rise to the Board level.

How about diversity and inclusion, more broadly, Bill? In overseeing human capital management, comp committee certainly has a role. I think the Board has been very interested in that. And I think particularly about this year, with whether it's COVID response where employees have been front and center and customers or the social and racial injustice issues that have been front and center. Maybe talk a little bit more about diversity and inclusion in human capital and how that has been overseen at the Board.

Well, in my experience, I've served on now 10 public company Boards. And this issue is always discussed at every company. It has been discussed historically and even more so. Now in my experience, the only way you make meaningful progress on diversity inclusion is to have a commitment and engagement at the top. And I know, Lynn, you are passionate about this issue. You have been for a long time. Our Board is passionate about this issue. We have -- and I think we've shown results. Our -- if you look at targets and goals, we have targeted a workforce that is 25% women, 20% minority. And we're close on those goals. Workforce-wide, we have just under 24% women and under 19% -- just under 19% minority. A lot more to do. But we've made a lot of progress. I think it's also a really important historical moment in our country. You mentioned earlier the George Floyd murders and the problems that we've seen in the streets of this country. And it is a moment of real reckoning in the country, where I think people are -- everyone is touched in different ways. I see in various companies that I'm involved with that people are redoubling their efforts to recruit a diverse workforce and build the pipeline. We're doing that at Duke. We have partnerships with, historically, black colleges and universities, and we have a number of affinity groups, minority groups that help us build the pipeline and also are important in retention and just creating an environment of inclusion. But again, in my experience, and as an African-American professional, I've been dealing with this issue my whole life. And what is clear to me is that you can have as many numerical targets as you want, but if you don't address the culture of an organization, you're not going to have sustainable, meaningful change. So the thing that we have done at Duke, which I think is really significant, is the convening of conversations around this issue to give employees a safe place to talk about how they're feeling about what's happening in the country and what their customers are feeling. You have used this term at the Board, which stuck with me, you talk about courageous conversations that we have to confront them as people. And that's the only way we're going to make really sustained change on this issue. And I'm glad to see that as a Board and as a company, we're rising to this challenge. We have more work to do, no question about it, but I think we're on the right path.

You know, Bill, the conversations we had, I mentioned about 400 of them, and what was interesting, the ones that I participated in, there was a real emotional connection in those conversations. You heard personal stories about a young woman in my group. She and her husband excitedly moved to a new subdivision. Her husband is a runner. He runs in the neighborhood and in the first year, he's stopped half a dozen times by the police. And I feel like I'll always remember that story because my husband's a runner. He has never been stopped by the police in my neighborhood. And that emotional connection I'm hoping spurs us from good intention to more action. And part of the...

That's really important. It's really important. It's about that connection and that understanding to see life through the eyes of other people that you work with. And that is the basis for understanding what they're facing day-to-day in the workforce. So it's a really important component of making progress.

I agree with that. Well, compensation may be a good topic to transition to because the Board has an important role to hold us accountable, accountable for the behaviors that are going to be necessary, whether they're cultural or performance for investors or recruiting top talent. So maybe talk a little bit, Bill, about the Board's role in compensation and how you see that important role of accountability.

Compensation is critical because in my experience, it's where the rubber meets the road, right? It's the way you align mission strategy and execution. And because of Duke's size and scale, we have a lot of objectives and goals in our compensation plan. We have sort of a lot of traditional financial metrics and goals like TSR, but we also incent operational performance around health and safety, reliability, efficient production of energy. But what I think is really important when I look at a comp plan is to make sure that it is evolving with the strategy of the business. And at Duke, what we've done is, as the business changes, as the strategy changes, as we have to meet new challenges, our comp plan is evolving. So we've incorporated objectives around diversity and inclusion. We have incorporated objectives around incentivizing work with stakeholders so that we can incent good outcomes for our shareholders and customers. And I think as you mentioned earlier, what's really exciting now is that we're now incorporating incentives to achieve the ambitious climate goals that we've been talking about recently. This is going to be really important, I think. And again, it's where the rubber meets the road in terms of moving your strategy forward.

I agree with that. Because it also aligns an organization.

That's right.

[indiscernible] what's important and what progress you're going to make. Well, Bill, maybe one last topic before we transition: political expenditures and disclosures. So I think it's been kind of front and center in our industry this year with a number of events that have gotten attention. And strong governance around political expenditures has been an important topic at our senior management level, but at the Board level as well. And on the Governance Committee, you have an opportunity to see all of that. Maybe you could comment on political expenditures and disclosures.

Sure. We have a very highly regulated business. And if we're going to be successful, we have to be engaged in the political process because regulatory outcomes, political outcomes are really, really important to our ability to achieve our goals. So I would say more so than most companies I've been involved with historically, the Board is really engaged in the whole political engagement of the business. So we have, I would say the sort of the best practices around approval of political expenditures. They come before you as CEO, before the Corporate Governance Committee and also the full Board. But because of the centrality of our political engagement to executing our strategy, I'd say that our Board is more engaged on these issues than other Boards I've seen. And we have steadily increased our disclosures to investors. We've gotten a lot of investor input over the years. I see a lot of this on the Corporate Gov Committee, and we have been disclosing more of our political involvement, and hopefully, investors find that more satisfying as well.

And I think, Bill, the emphasis that I certainly emphasized to the group, and I know the Board does as well, is all of this in the context of integrity and the values of the company. And I think that strong governance is what makes that important political involvement work.

Yes, absolutely.

All right. Well, thank you.

It's a pleasure.

For being here today, taking your time to share perspective on these topics. And what we're going to do at this point is transition to investor questions, people on the call. And I believe you received a dial-in number with the information on how to get in touch with us for the question-and-answer period. So we're going to take just a moment to transition, and then we will take your questions. So thank you all. [Presentation]

Very good. Well, it's time to move to Q&A. And maybe to give you a little perspective on what's going on, we'll take questions from the operator. And I'm joined in a great socially distance way by the entire team to my left, so we will engage them in questions as it makes sense. So if we could go to the first question, operator?

[Operator Instructions]

[Technical Difficulty] Shall we try questions...

The first question comes from Michael Weinstein of Crédit Suisse.

We're going to pause for some moment.

Good morning, can you hear me? [Technical Difficulty] Okay. Great. Lynn, listen, terrific presentation, great to see Duke take such a leadership role on ESG and really get a lot of this information out there, which hopefully we'll see that from the entire industry. I wanted to ask you about financing. As we -- as you outlined, you show an acceleration of rate base growth to approximately 7% in the latter half of the decade. And a pretty robust growth profile, even in the early part of the decade. At what point do you need to issue equity, considering your FFO to debt is really around 15%? It's -- you recently had to write-off the Atlantic Coast Pipeline. And I'm just wondering, with the balance sheet you have, what kind of equity financing? And when can we expect that equity to come out for this? [Technical Difficulty]

Well, welcome back, and I apologize for the technical difficulties. But as we were away, we've come up with another method, which Bryan Buckler is going to host the questions, and those in the queue will be e-mailing to Bryan. So Bryan, can I turn it to you and we'll resume questions that way?

Yes. Lynn, the first question is around offshore wind. And President Trump's office had a recent order around leases off the coast of many states. But if you could speak to the potential impact of that to our plans in North Carolina.

Sure. And I'd like to talk, first of all, about the growing momentum in North Carolina around wind in general and around offshore wind. It's a part of the conversation. And I actually think the beauty of the integrated resource plan as well as the clean energy discussions going on in the Carolinas is we're having an opportunity to fully explore this important resource, and I believe, are building momentum. The governor and the administration is looking at what could the economic development impact of offshore wind to be to the state. So of course, we're watching the executive order. We're trying to learn more about it. Our preliminary thinking is that it does not impact existing leases, but I think we'll learn more. And in the meantime, we're working to build momentum because we see wind as an important complementary resource to the solar resource we have here in the Carolinas as well as carbon-free nuclear.

Very good. So we're still waiting to get more questions in. But a question we've received often from our engagement with various investors is how we make sure we're doing as much as we can on the renewables front, in particular, looking at the proper mix of natural gas with renewables and storage. And Lynn, if you wouldn't mind, just sharing a little more perspective on that [ briefly ].

Sure. And you know, Bryan, I think the headline from today is that we are aggressively pursuing carbon reduction. And as part of that aggressive pursuit, we will add substantial renewables. 8,000 megawatts today, 16,000 by 2025. I think Doug said tripling by 2030, 6x as many by 2050. But there's also a need for us to balance our environmental aspirations with reliability and affordability. And that's where we see a role for natural gas, at least at this point in time when the technology development and resources are not quite where they may be in the 2030s. And so we see it as a peaking resource. We see it, it is important retiring coal. And I thought Cari's slide, to give you a sense of what a winter peaking utility looks like, gives you an idea that we need to move those renewable resources more than a couple of hours to meet the peak in the winter time. So we'll be thoughtful. Gas resources will be fully vetted. We understand the importance of getting this just right. We've run a variety of scenarios in the integrated resource plan, lessening the life of gas and the model still pick it because of this new balance reliability. So I think this is an area that will be continually tested year after year as we go through not only integrated resource planning processes, but CPCNs and stakeholder engagement, although with the headline of reducing carbon and doing so with the right resources, the balance, affordability and reliability.

Excellent. And we have the questions rolling in now. So we got a nice queue. First question is from Stephen Byrd from Morgan Stanley. Thank you, Stephen. His question is, and I'm going to read this straight as they came to me. Lynn, how do you and the Board think about the potential evolution of executive compensation to further include ESG-oriented goals? Any potential changes or topics that may rise in importance?

Yes. Stephen, thank you for that question. And as Bill Kennard highlighted, we are continually looking at our compensation plan to see if we have the right emphasis on the items of strategy. And so customer satisfaction is in there, safety is in there, environmental safety is in there, diversity and inclusion, and we'll be adding a climate goal in 2021 just to ensure that we are making the progress that we need to make, not only on investments, but in advocacy and public policy to achieve these goals. So I would confirm to you that executive comp is always under review to make sure it is aligned not only with ESG objectives, but broadly on earnings and stock price and growth in a way that incents the right behavior for the executive team to achieve our objectives.

Great. And Stephen had one follow-up. If Congress were to extend the renewable tax credits and extend the tax credit for storage, how might that impact your renewables adoption plans?

I think the tax incentives have been an important part of incenting investment, but I would also say, Stephen, that there is a tailwind of incentive around renewables even without the tax credits because of the important work to reduce carbon and the policy support and the stakeholder support. The tax credits can make it less expensive. And I think for things like battery technology and new technologies, they can be quite impactful. So we will, of course, take advantage of everything that we can on behalf of our customers and continue to move toward the goals we've outlined today.

Great. Next question is from Julien Smith from Bank of America. Can you speak to the ranges of $140 billion to $150 billion? What is reflected in the low end and high ends with respect to the Carolinas IRPs? And further, what does the $2 billion represent as far as preliminary assessment with respect to IRPs?

Sure. And those are capital -- I think capital investment ranges that Steve Young shared with us. And Steve, if I could turn it to you to give us a perspective on that question?

Sure. The $2 billion in the near 5-year period is represented by some of the early conversions, some of the investments in renewables, primarily solar, and some transmission underpinnings with that as well. Moving beyond the 5-year period ending in 2024, that's where you see the acceleration of investment. And depending upon which scenarios are ultimately selected, that would impact the capital plans and the rate base growth. When we talk about $140 billion to $150 billion, that represents the range of rate base estimate for the total company. The high number would represent a more rapid Carolinas deployment of renewables. The lower number there would represent the less rapid, more the base case. So that represents the range as we see our investment profile going forward. Again, it's a mix of renewables, transmission and some gas assets as well. The renewables piece is more heavily solar in the Carolinas. So I hope that gives you a little guidance on what those components are.

The only thing I would add to that is it also includes transition underway in Indiana as well as the transition and the addition of solar in Florida. So we will continue to identify opportunities to accelerate, transition to clean energy as the state's policy continues to develop, but it also includes an expectation of more investment in those states as well. Next question, Bryan?

Yes, Lynn. And then a good follow-up from Julien here. Can you speak to the process around translating IRP into CapEx over time?

Sure. And Julien, I would -- I'd like to talk about 2 things. On the integrated resource plans themselves, it has been an ongoing discussion with stakeholders. And a lot of dialogue has been going on. They will both be reviewed. The North and South Carolina Commissions will both review the IRPs in 2021 and provide us some feedback. We expect hearings potentially in both North and South Carolina to really understand these plans more broadly. And I think it served as a great foundational discussion also for the clean energy plan stakeholder process that's going in North Carolina. That process is addressing not only carbon reduction in retirement of coal, but it's also addressing regulatory modernization that would enable and incent carbon reduction. We expect both of those processes to develop recommendations toward the end of the year, and that will also feed into the momentum in 2021. So I see 2021 is just a really important year to begin taking action around these plans. And I would also emphasize that the base case, the one that is completely consistent with existing regulation, achieves over 50% carbon reduction and retires all coal in the units by 2030. And our objective is to get moving on that as quickly as we can.

Great. Next question comes from Guggenheim Partners, Shar Pourreza and Kody Clark, and he gave me a lot of questions on here. But I think we've answered most of them. One question from that team that we have not addressed is how are we going to get gas supply into North Carolina, in particular, the eastern part of the state?

Sure. So gas supply is something that is important in the Carolinas because particularly in the winter months, gas supply is constrained. So we are looking at expansion of infrastructure into the eastern part of the state and also looking at some options upstream to identify ways we can get more transport capacity. And Sasha, if I could turn it to you to add any additional color. I know you've been actively working these plans around gas supply.

Yes. No, Lynn, I think I would only add that, as you mentioned, we're working on our own infrastructure plans to bring in more natural gas for both the Piedmont Natural Gas customers on the eastern part of the state as well as for generation, and those talks are ongoing. And we look forward to really working and coming up with finalized plans over the next several quarters.

Great. Let me go to the next question. This is from UBS, Paul Cole. Lynn, can you speak to the environmental goals of the State of North Carolina and when the governor's task force might issue its report and then how it will fold that into next year's legislative session?

Sure. Governor Cooper, just by way of background, issued an executive order, setting a target for North Carolina to achieve at least 70% carbon reduction. And under the leadership of his Head of Department of Environmental Quality, Secretary Regan, they -- the state has convened very diverse stakeholder discussions throughout 2020 not only on carbon reduction, but on regulatory modernization. And as I said a moment ago, those processes are moving toward recommendations toward the end of the year. And we have found that the integrated resource plan that we filed in early September has been quite complementary to those discussions, because it puts some modeling and math to the 70% reduction. And we're finding a lot of interest in those models and particularly that goal of 70% carbon reduction by 2030. We'll know more at the end of the year and keep you informed along the way.

Great. Next question is Steve Fleishman from Wolfe Research. The first 2 questions are similar. Are we using 2021 as our base for our high end of the 6% -- 4% to 6% EPS growth rate to 2024? And how should they think about EPS growth relative to a 7% rate base CAGR in the second half of the decade?

Sure. And 2021 is the base year. We've talked about that in connection with our second quarter call. And Steve, if I could turn it to you to give your perspective on that back half growth and how you see rate base growth translating into earnings growth.

Right. And again, 2021 will be our anchor year as we move forward. And we do see the ability to earn at the high end of the range. What we are starting to see as we implement these portfolio options in the Carolinas is the capital will start to build at the back end of the range. And that will give us the opportunity to build these assets and participate in this process and incorporate those into our rate base. And again, we see other activities in our distribution system as it grows, our organic customer growth, we think all of this underpinned by our capability to control our costs and to find optimization around our various capital projects that allow us to give us comfort that we can earn at the high end of the 4% to 6% range. Again, we'll be updating all of this as we move into the third quarter and the fourth quarter results and refining this. But adding in this generation transformation in the Carolinas into our capital plan really strengthens our rate base growth and gives us confidence in our earnings growth potential.

And Steve, the thing I would emphasize and what we're excited about today is we see alignment and momentum in the states around this important goal of achieving carbon reduction. And using the tool of the IRP and using the expectations of getting to goals by 2030, we can give you more visibility into what capital can look like. So that you know it's just not between now and 2024 or now and 2025. But it represents a very strong investment thesis over the decade, coupled with our focus on controlling costs and driving productivity not only to drive earnings, but to maintain affordability so we can make these investments for our customers. I think we've got a great investment profile here that puts together a strong plan for the company and for the Carolinas and Indiana individually as well and Florida.

And one more follow-up from Steve Fleishman. He asked about how Biden -- a potential Biden victory in the presidential election could impact our clean energy plans.

Steve, we've been following the presidential election and really the conversations around climate and carbon at the state and the federal level. And I do believe there's an increase in conversation at the federal level around carbon reduction, and you've seen that in a lot of the debates and in the conversation. I think there will be work once you get into Congress and try to begin passing laws, there will be a lot of work to do to get those crystallized. But what I like about our position is we have been at the discussion and the emphasis of the importance of getting after carbon reduction in all of our states for some time. We've got task forces, we've got stakeholders engaged, we've got policymakers focused on it in a way that I think our states will be prepared to react with us to what might happen at the federal level. And I feel like Duke Energy is at the table with the right conversations, the right plans to be a part of shaping those policies in a way that makes sense for our customers. I also like the fact that these plans are talking about the need for research and development and investment in technologies that will be necessary to get to net 0. And and so we're also active. As Doug mentioned, through EPRI, through the national labs and through advocacy to make sure that enough resources are being put to those investments so that we can keep going to net 0.

Great. I'm going to continue on with the email questions. And here's a question from Jonathan Arnold from Vertical Research Partners regarding ZELFRS. So our favorite acronym, right? What are the potential technologies that you have talked about do you feel most optimistic about?

So it's interesting, Jonathan. We are studying all of these. We have folks focused on advanced reactors and small modular nuclear. We have folks focused on hydrogen. We have people focused on long duration batteries. We have continued to look at carbon capture, frankly, and have for some time. But let me ask Doug and Dhiaa, just to comment because they have teams that are focused on these new technologies and I think you may hear a little bit of enthusiasm in both. So Doug, could I start with you and then turn to Dhiaa?

Sure. Thank you. So I think as we look at some of the plans and the plans in the Carolina IRP, we see small modular reactors in those plans. And so that's certainly one that we believe has the potential, and I think Dhiaa can talk more about the excitement around that. I think hydrogen, too, even though it's early stage from our perspective, I believe hydrogen has the potential as a clean fuel to be able to very quickly work its way into the mix for us. For us as hydrogen could be blended in turbines today that burn gas. So we could begin to use hydrogen now and begin to make some of these machines essentially 100% hydrogen in the future. So those are 2, I think, that really excite me about possibly being there for us in the future in terms of a ZELFRS that we need on our system. And I'll let Dhiaa add anything he would like to that.

Well, I agree on both of them, Doug. I would add the advanced nonlight-water reactors. I really hold a lot of promise for that one. We are actually in partnership with TerraPower, GE Hitachi on their Natrium reactor. That is really a breakthrough technology. It's the same type of reactor that we have -- this country has had history with. They're not like water reactors, but we do have history with those reactors. You couple that with the temperature that is high enough that you could use a medium of molten salt as a third loop, per se to store the energy. So the reactor continues to run 100% regardless of what the load is doing. The energy is transformed to a storage mechanism. And as the variable nature of renewable varies, you direct the energy to the load or you keep it stored. That is really a breakthrough technology. These are the type of ZELFRS that we've been waiting for. Hydrogen is another one. Doug mentioned it, hydrogen is -- could be coupled with our baseload operation, like nuclear plants, where through a process of electrolysis, you change water or the vapor, the steam that we produce into stored energy in the form of hydrogen that can be blended with natural gas to produce low carbon generation.

Great. Thank you. That was my favorite question-and-answer today, by the way. Here's a question from Jeremy Tonet from JPMorgan. Lynn and Steve or whoever is the right one to answer, can you quantify how the revenue requirements presented on your slides for the Carolinas IRPs translate to annual customer bill increases on a percentage basis?

Thank you, because customer affordability is front and center. And I'm actually going to ask Cari Boyce to take this one because it's Cari's team that does all those present value revenue requirements, and it was a new thing this year for us to put in the IRP customer impact. So Cari, if you could take this question.

I'd be glad to, Lynn, and thanks for the question. The present value revenue requirements, and that's a mouthful for us, actually go out to 2050 to -- so that we have an apples-to-apples comparison of the cost of the various technologies. The rate impacts that we show go through the planning horizon to 2035, and we see a range of impacts to customer bills. And again, these are just focused on the resources that we're adding in the IRP and would not be -- and would be offset, as Steve mentioned, by some of the transformation efforts underway. But in our base case, from around 1% annual increase to customer bills to up to about 2.5% to 3% over the -- depending on the portfolio that you're looking at.

I would say the pace of transition of resources is a key ingredient to the customer bill impact. And as I understand, those who have been involved in the stakeholder process, that pace of transition and the speed with which new technologies are introduced has been a fruitful area of discussion because we're always keeping our eye on affordability.

So I actually have a question here from a -- directly from an investor, I'd like to get to. So it's nice to get -- we don't always get those on our quarterly calls. This is from Hermes Investments. Has Duke Energy assessed if its capital allocation strategy enables the company to meet its net 0 carbon emissions goal or more broadly, the goals of the Paris Agreement?

I believe we have. We are ahead of the goals of the Paris Accord right now with the amount of carbon reduction that we've achieved. And as we look at the capital allocation that we've shared with you over the next 5 years, that capital allocation is completely consistent with achieving at least 50% and more carbon reduction by 2030, which I think will keep us on a good path. And Cari, you might jump in here on how these integrated resource plans fit with the Paris Accord.

Sure, Lynn. As I mentioned in when I was speaking, even our low-cost portfolios keep us on track to meet our carbon goals, and what's important about that is that keeps us on track to meet or exceed what's been set forth with the Paris Agreement. And certainly getting to net 0 by 2050 would help keep those global warming well below 2 degrees and as close to 1.5-degree Celsius as possible.

And a follow-up question from the same investor is, as Duke moves towards its carbon reduction goals and retires fossil fuel assets, has a just transition strategy been considered?

Can you clarify that, Bryan?

I think it's about workforce transition.

Sure. Okay. All right. The transition of community and workforce and so on. It's a front and center topic for us. And I think about the transition that has already been underway. We closed a nuclear plant in Florida. We closed a coal plant in Asheville, North Carolina, in connection with transition. We generally can see these activities coming several years ahead. We work on agility of our workforce, really focused on the skills that they have so that we can offer other opportunities either within the, in the case of our nuclear fleet, within the nuclear community or in the case of our fossil fleet in connection with our renewables or even nuclear, engineers and others looking at the skills that they have and whether we can point them to something new in the company. And we have launched in the last year a skills-based deployment and redeployment strategy for employees so that we are ready for all of the changes that we see. And it's not just in connection with generation. It's changes throughout the company as we pursue productivity. It's taking IT professionals and making them cyber professionals. It's taking finance professionals and making them project management professionals. We think this is an important way for us to continue to drive productivity and create career opportunities for our employees. As I think about the community, we have been very active with our foundation and our support of community colleges and other things in areas impacted by transition of our work and transition of our fleet. And I know Julie and her team have been very active in supporting communities. So Julie, if I could turn it to you for any additional perspective on how we'll support communities as we go through this transition.

Sure. Thank you. And I mentioned in my prepared remarks a bit about our focus on environmental justice as part of a just transition as well. And we've always had within our code of business ethics and just our general operating principles a focus on building trust and strong communities with investment, but I think we're going to go a layer deeper to really say and look at how those projects affect those communities and how we can evolve our principles, again, to be just right with respect to how we interact with our communities.

Thank you.

I think we have time for 2 more questions. I've got a couple of really good ones here. One is a follow-up from Jonathan Arnold. It's for Steve. On distribution CapEx, Jonathan says, Steve, can you give us a sense of materiality and direction of the distribution spend? What is the process and timing for determining that element? And he says, if I heard you correctly, the IRPs include T but not D.

That's correct. The IRPs do include transmission but not a distribution. Distribution, as I said, is our biggest asset base. Our T&D combined is 40% to 50% of our capital spend, and distribution is the largest piece of that by far. We've been doing distribution, grid work, storm hardening, smart meters, those types of capabilities. Those are going to continue. We've got riders in the Midwest, one coming in Florida and other proposals in the Carolinas as well. The distribution aspect of our asset base is going to continue to grow. I think the acceleration of renewables in the Carolinas will put more capital into distribution. We haven't quantified that yet. We're working on it. But I think you're going to have some distribution needs as well to accommodate all of these renewables and particularly battery storage. Haven't quantified it yet. I think it's another upward potential investment area in our rate base.

Very good. Let's go to our last question. And before I do that, I want to apologize to you if I didn't get to your question. I will be glad to talk to you this afternoon. I had a question from Michael Weinstein and Michael Lapides. Now I can't find them. But here's a really good question from Anthony Crowdell from Mizuho. Lynn, given the push towards ESG investing, how do you believe investors should view or rate the success of a company's ESG plan in progress over time?

That's a really good question. And what my mind goes to is all of these metrics, metrics, metrics. And we work hard to focus our attention on the metrics that matter to you all because I know that they become a part of your analysis of whether we're making progress. But I feel like on what we've talked about today, which is investments to achieve carbon reduction with very specific goals of what we want to achieve over the next 5 or 10 years, I feel like on the investment around environment and on transition of our fleet, we should be able to give you very clear milestones and markers on how we have achieved those objectives. I think in the area of social responsibility, you can monitor diversity and inclusion. You can get a sense of how we're engaged with our communities and stakeholders. We take time in our sustainability report to talk about a number of those elements to give you a sense of whether we're moving fast enough. And then on corporate governance, there are a variety of metrics, ISS and others. And engagement with our Board occurs in the fall of each year with our investors to give you a chance to have conversations with them about their important role. So I think it's things like we're doing today, where we're talking about our objectives, and then hopefully, sharing with you our progress along the way that will help you give a sense -- get a sense of our true commitment to these important areas of environment, social responsibility and governance. Okay, Bryan. I guess, we'll wrap up. Thank you for stepping in. He's been the emcee for questions today. And again, I apologize that our technology didn't work quite as we had planned. But we've enjoyed the opportunity to focus on this part of our company because it has been a hallmark of Duke Energy to make progress, to demonstrate leadership and environmental responsibility, demonstrate leadership with our employees and our communities on social issues. And we pride ourselves on having strong corporate governance. And I hope that progress has been clear, but as importantly, our vision for the future, net 0. Net 0 on methane, also on pursuing doubling of renewables by 2025 and achieving at least 50% to 70% carbon reduction across the company and in the Carolinas. And I feel like not only do we have a compelling agenda for ESG, but we have a compelling agenda for investors because we will take these visions and -- this vision and aspiration into investments that will drive growth and drive a solid dividend that I know you all count on. So I appreciate your attention today. I appreciate your questions, your investment in Duke Energy. And thanks again for joining us.