Released December 16, 2013 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Jim Rogers, chairman of Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina), will be retiring from Duke at the end of 2013. Readers of Power Engineering magazine recently voted him the most influential executive in the electric power business. In accepting the award at a keynote speech at the recent Power-Gen International (PGI) conference, Rogers shared some thoughts about the future of the power industry, drawing on his 25 years as chief executive at utilities PSI Energy (Plainfield, Indiana), Cinergy (Cincinnati, Ohio) and Duke.
"I am not worried about our industry attracting great talent," Rogers told attendees November 12 at the PGI conference, which was produced by PennWell Corporation (Tulsa, Oklahoma). "I am not worried about our ability to come together with people of different views to build a way forward. My Number One fear is that we as an industry won't run to the problems of the future, that we'll be reactive. At the end of the day, nobody succeeds at creating value if they run from their problems or wait for those problems to show up in front of you. You've got to go get them. My fear is that we won't go get them."
Rogers has been a high-profile executive for nearly all of his 25 years leading utilities. To see his views on the current natural gas build-out, see May 2, 2012, article - Duke's Rogers Warns Against Building "All Gas, All the Time," But Dash to Gas Shows No Sign of Slowing. For his thoughts about Duke's investments in cutting-edge coal generation and advanced digital grid and meter technologies, see May 17, 2010, article - Duke Energy: 'No Regrets' About Hefty Investments in Electricity Generation and Smart Grid. Rogers' views about electric restructuring can be found in April 8, 2004, article - Cinergy Energy Chief James Rogers Speaks His Mind.
For more on what other PGI keynote speakers see as the most pressing strategic challenges facing the power business, see December 10, 2013, article - Utilities See 'Optionality' as Key to Success as Business Environment Shifts.
Rogers, who was chief executive at Duke from 2006 until mid-2013, and who engineered Duke's merger with Progress Energy (Raleigh, North Carolina), which closed last year, said power industry executives needed to work to change the regulatory model. "We must change our regulatory model to deal with our new responsibilities. There are more renewables being added to the electric system. Customers are installing solar power on their rooftops. That's why Duke sought and received permission to participate in that business."
Advanced technology, which has lowered the cost of rooftop solar and small-scale wind generation, combined with state and federal regulatory incentives and mandates, will continue changing the utility industry in ways that undermine a century of regulatory practices, he predicted.
In Rogers' view, the industry is shifting from an integrated generator, transmitter and distributor of electricity, to an industry whose main purpose is to "optimize the use of electricity on the grid. New technologies, micro grids, severe storms and cyber security are transforming utilities' primary role into the builders and maintainers of a resilient grid."
"Over the next couple of decades," Rogers forecast, "we're not going to be building central station generation, particularly when you factor in the effect of state renewable portfolio standards (RPS), more efficient appliances, more efficient buildings and new technologies that will help customers reduce electric usage." Going forward, he said state RPS policies would absorb most of whatever growth there will be in customer demand for electricity.
That's why the retiring Duke chairman, an energy lawyer with a background in journalism, sees transforming the utility regulatory model as the industry's top priority. For the foreseeable future, the electric utility industry will have an extraordinary need for capital as new environmental rules take effect, forcing the closure of coal-fired generation and the construction of replacement generation. But unless the regulatory model changes, the Duke chairman warned utilities won't be able to attract capital at affordable rates, which will push up electric prices and incent an increasing number of customers to investigate self-generating their electricity and "going off the grid."
Rogers is one of several utility executives who have discussed this much-feared "death spiral" for utilities: As more and more customers leave the system to self-generate, utilities will have a smaller pool of customers from which they can recover their capital and operating costs. Trying to recover rising capital costs from a smaller base of customers is a recipe for disaster, according to this view.
"The key is to get the regulatory model right," Rogers told the PGI conference. "Then we can get the business model right so we can make the investments in new technology that will transform the way we serve customers. Changing our regulatory model allows us to change our business model, which puts us in a much better place." The need for utilities to think differently about customers is an important first step to changing the regulatory model, he added.
"With a new mindset, and with the mindset of collaborating with customers, we can create a way forward that will make a difference," Rogers said.
The Duke chairman believes getting the regulatory model right includes putting a price on carbon dioxide (CO2) emissions, a stance that has put him at odds with other utility leaders.
"We need to put a price on carbon" Rogers told the PGI attendees. "Congress has the authority and the tools to do that. But it's difficult for me to envision how, if we don't have a commercially available technology, any regulatory agency can require us to build" carbon capture & sequestration (CCS) projects. "Then I ask how much is the government putting into CCS, compared to other things, and it's not clear to me that they believe it is an option. Otherwise, they'd be putting more money in it."
Rogers urged those in the power business to remember, "we have a noble purpose--we transform the lives of millions of people by providing them with electricity every morning. We have unique responsibilities and capabilities to transform energy and environmental policy--not just for today, but for future generations."
"I believe you will be part of an effort to reinvest this industry even more than it has been reinvented over the last 25 years," Rogers said in conclusion. "The success of this industry, for our customers and our investors, is really in your hands. Better days are ahead. More challenging days are ahead. Greater opportunities are in front of us."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
"I am not worried about our industry attracting great talent," Rogers told attendees November 12 at the PGI conference, which was produced by PennWell Corporation (Tulsa, Oklahoma). "I am not worried about our ability to come together with people of different views to build a way forward. My Number One fear is that we as an industry won't run to the problems of the future, that we'll be reactive. At the end of the day, nobody succeeds at creating value if they run from their problems or wait for those problems to show up in front of you. You've got to go get them. My fear is that we won't go get them."
Rogers has been a high-profile executive for nearly all of his 25 years leading utilities. To see his views on the current natural gas build-out, see May 2, 2012, article - Duke's Rogers Warns Against Building "All Gas, All the Time," But Dash to Gas Shows No Sign of Slowing. For his thoughts about Duke's investments in cutting-edge coal generation and advanced digital grid and meter technologies, see May 17, 2010, article - Duke Energy: 'No Regrets' About Hefty Investments in Electricity Generation and Smart Grid. Rogers' views about electric restructuring can be found in April 8, 2004, article - Cinergy Energy Chief James Rogers Speaks His Mind.
For more on what other PGI keynote speakers see as the most pressing strategic challenges facing the power business, see December 10, 2013, article - Utilities See 'Optionality' as Key to Success as Business Environment Shifts.
Rogers, who was chief executive at Duke from 2006 until mid-2013, and who engineered Duke's merger with Progress Energy (Raleigh, North Carolina), which closed last year, said power industry executives needed to work to change the regulatory model. "We must change our regulatory model to deal with our new responsibilities. There are more renewables being added to the electric system. Customers are installing solar power on their rooftops. That's why Duke sought and received permission to participate in that business."
Advanced technology, which has lowered the cost of rooftop solar and small-scale wind generation, combined with state and federal regulatory incentives and mandates, will continue changing the utility industry in ways that undermine a century of regulatory practices, he predicted.
In Rogers' view, the industry is shifting from an integrated generator, transmitter and distributor of electricity, to an industry whose main purpose is to "optimize the use of electricity on the grid. New technologies, micro grids, severe storms and cyber security are transforming utilities' primary role into the builders and maintainers of a resilient grid."
"Over the next couple of decades," Rogers forecast, "we're not going to be building central station generation, particularly when you factor in the effect of state renewable portfolio standards (RPS), more efficient appliances, more efficient buildings and new technologies that will help customers reduce electric usage." Going forward, he said state RPS policies would absorb most of whatever growth there will be in customer demand for electricity.
That's why the retiring Duke chairman, an energy lawyer with a background in journalism, sees transforming the utility regulatory model as the industry's top priority. For the foreseeable future, the electric utility industry will have an extraordinary need for capital as new environmental rules take effect, forcing the closure of coal-fired generation and the construction of replacement generation. But unless the regulatory model changes, the Duke chairman warned utilities won't be able to attract capital at affordable rates, which will push up electric prices and incent an increasing number of customers to investigate self-generating their electricity and "going off the grid."
Rogers is one of several utility executives who have discussed this much-feared "death spiral" for utilities: As more and more customers leave the system to self-generate, utilities will have a smaller pool of customers from which they can recover their capital and operating costs. Trying to recover rising capital costs from a smaller base of customers is a recipe for disaster, according to this view.
"The key is to get the regulatory model right," Rogers told the PGI conference. "Then we can get the business model right so we can make the investments in new technology that will transform the way we serve customers. Changing our regulatory model allows us to change our business model, which puts us in a much better place." The need for utilities to think differently about customers is an important first step to changing the regulatory model, he added.
"With a new mindset, and with the mindset of collaborating with customers, we can create a way forward that will make a difference," Rogers said.
The Duke chairman believes getting the regulatory model right includes putting a price on carbon dioxide (CO2) emissions, a stance that has put him at odds with other utility leaders.
"We need to put a price on carbon" Rogers told the PGI attendees. "Congress has the authority and the tools to do that. But it's difficult for me to envision how, if we don't have a commercially available technology, any regulatory agency can require us to build" carbon capture & sequestration (CCS) projects. "Then I ask how much is the government putting into CCS, compared to other things, and it's not clear to me that they believe it is an option. Otherwise, they'd be putting more money in it."
Rogers urged those in the power business to remember, "we have a noble purpose--we transform the lives of millions of people by providing them with electricity every morning. We have unique responsibilities and capabilities to transform energy and environmental policy--not just for today, but for future generations."
"I believe you will be part of an effort to reinvest this industry even more than it has been reinvented over the last 25 years," Rogers said in conclusion. "The success of this industry, for our customers and our investors, is really in your hands. Better days are ahead. More challenging days are ahead. Greater opportunities are in front of us."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
