Future plans

PE. Until you moved into your current position as CTO, you served as Vice President of Strategic Planning for Duke Energy and the same role before that at Cinergy. How did the roles differ and what skills were you able to transfer from one to the other?

DM. The common skills and attitudes required for both jobs include an ability to take in lots of information and use it to ‘see around the corner’ an orientation towards what may be possible rather than why some new idea or approach won’t work, and sustained optimism that we can rise to the challenges ahead. The roles differ primarily in specific areas of focus: strategic planning is focused on development of corporate strategy and business plans; technology is focused on assessment, development and application of technology in support of strategic objectives and business plans.

PE. Climate change is a massive topic at the moment with both presidential candidates supporting some form of cap-and-trade initiative. Do you support the proposals suggested? What kind of policies do you think the president and Congress should put in place?

DM. One of the most important features of any climate change proposal must be support for technology development. Most people, including people on Capitol Hill in Washington, don’t fully grasp the scale involved in reducing CO2 emissions in the US by significant percentages. It will not be possible to make significant reductions and avoid unduly harming the US economy without significant technology development in the areas of carbon capture and sequestration, clean coal technology, advanced nuclear technology (and construction of a significant number of new nuclear plants), and a strong focus on bringing the costs down for renewable energy technology. Some of the proposals suggested to date envision taking the money from CO2 taxes or allowances and using it for income redistribution or for general funding of government programs. That would be a mistake if our real objective is to significantly reduce CO2 emissions without harming the economy.

We at Duke Energy support cap-and-trade, and we believe that emissions credits should be allocated to provide a bridge for making the transition from the more carbon-intensive generating technologies deployed today to the lower carbon and carbon-free technologies being developed for tomorrow. This is essential to insure that customers whose electricity today comes from more carbon-intensive technologies will not be economically harmed prior to deployment of new, lower carbon and carbon-free technologies.

PE. Duke Energy is becoming a leader in Smart Grid thinking and has been praised for its long-term plans. The company’s full scale roll-out will begin in the second half of 2008 and will continue for several years. Can you explain the procedures involved in putting your master plan together?

DM. We began with a general assessment of our distribution infrastructure, then developed a vision for what we have called ‘the utility of the future’. To move from vision to implementation, we developed a set of use cases and an initial deployment plan, and spent many months evaluating and selecting technologies and vendors for our initial deployments. We then began to build communications networks and deploy intelligent sensors, including smart meters, in order to determine which combinations of technologies would work best in the various geographies and topologies of the areas we serve.

After we completed our first deployments, we literally wrote a book laying out roadmaps for further technology development, assessing lessons learned and recommending technologies and architectures for further deployment. To date, we have deployed roughly 30,000 (about 50,000 as of 9/18) intelligent meters, a variety of intelligent sensors and two different communications technologies. We are also experimenting with several ‘behind the meter’ technologies, as well as distributed generation, distributed energy storage and micro-grids.

PE.Duke is aiming far beyond advanced metering infrastructure (AMI) or the Smart Grid, setting its sights on a fully transformed utility of the future. A Smart Grid is the foundation for that future and, as you have commented previously, is the “central nervous system”. Can you elaborate on this?

DM. We believe the ultimate value will be in the network – as opposed to any particular sensor or device on the network – and the ability to use the network to correlate data in real-time to optimize energy flow and utilization across multiple layers of the overall system, from inside a premise all the way through the electric delivery system. This will be key to driving energy efficiency all the way to the end of the wire. Our focus on the network as the source of value differs from the focus on the meter that some others have taken.

PE. The company has invested significantly in improving efficiency with programs such as ‘save-a-watt’ in place. Duke is also retiring its coal plants in an attempt to reduce emissions. How have these efforts been making a difference?

DM. These efforts have yet to fully emerge from the regulatory process, and have not been fully implemented. Just having introduced them, however, has changed the conversation about what’s possible. The idea that somebody has to ‘suffer’ from energy efficiency – whether it’s the customer turning down the thermostat in the middle of winter and wearing a sweater or the utility shareholder taking it in the wallet because the existing regulatory model is structured solely in terms of cents-per-kilowatt hour – is beginning to be seen for the fallacy it is. Our approach to energy efficiency is designed to ensure that people do not have to give up the comfort, convenience and return-on-investment they expect.

PE. Duke Energy operates a number of nuclear power stations in the Carolinas. How viable will this technology be long-term to help meet the country’s energy needs? Do you expect it to play a bigger part at Duke in the future?

DM. Nuclear power has decades of history behind it now, and has been successfully deployed on a global basis. In addition, performance and safety have improved markedly during that history. The bottom line: if America’s leaders are truly serious about reducing CO2 emissions, they have to be serious about nuclear power. The scale involved in significantly reducing CO2 in the US is enormous – far beyond most people’s conception. It will simply not be possible to do it with energy efficiency and renewables alone. Carbon-free nuclear power must play a significant role. Duke Energy has submitted an application to the US Nuclear Regulatory Commission for a construction and operating license for a new nuclear plant in South Carolina.

PE. Recently the company announced its intention to expand its wind operations with the acquisition of Catamount Energy Corporation. What prompted this move and what do you hope will be achieved?

DM. We believe wind energy will play an important part in America’s energy mix going forward, and we want to include it in our portfolio. Our recent acquisition of Catamount Energy gives us an ownership interest in the Sweetwater wind project in Texas, one of the world’s largest wind farms. Our goal is to develop about 300 MW per year of wind over the next several years.

PE. What changes have you seen in the utilities in recent years?

DM. Rather than talking about ‘recent years’, which would require writing a book, let me just talk about the past year or two. The utility industry has moved from a ‘just say no’ posture regarding CO2 to a recognition that it has a special responsibility to address the issue. The industry also has become more open to technology development and innovation. Finally, as our company’s energy efficiency and renewable energy initiatives demonstrate, the industry is working aggressively to meet society’s desire for cleanly generated electricity.

PE. What do you see as the biggest challenges and opportunities for Duke Energy and the sector in general over the next 12-18 months?

DM. Decarbonizing our generation fleet, taking energy efficiency all the way to the end of the wire, and delivering the comfort, convenience and affordability our customers want – in a rising-cost environment – are among the most significant challenges we face.