Will Duke Energy Stock Soar on Clean Coal?
Duke Energy stoked its energy fires last week with the grand opening of a new "clean coal" power plant. "The other black gold" historically has a bad rap, and natural gas has recently stunted coal capacity. But with rising natural gas prices and new coal technology, is clean coal the secret to Duke Energy stock's success? Let's take a look.
"The world's cleanest"
Duke opened the doors to a new 618 MW Indiana coal-fired power plant last week. But unlike the 500 MW carbon coffer it replaced, this new plant is touted as "one the world's cleanest coal-fired power generating facilities." Using advanced gasification technology, Duke's new digs produce 10 times the power of the former plant with 70% fewer emissions.
Source: Duke Energy.
"Coal has powered Indiana for more than a century," said Duke Energy Indiana President Doug Esamann. "But today's air quality standards require us to use that fuel in a cleaner, more efficient way. Edwardsport turns coal into a cleaner-burning fuel and enables us to continue using an abundant local resource." In addition to fewer emissions, the facility also boasts less water use, as well as secondary product production like sulfur and slag for agricultural and construction materials.
Duke's not the only utility counting on clean coal. AEP was recently awarded a coveted Edison Electrical Institute Award for its own 600 MW "advanced ultra-supercritical steam cycle" coal fired power plant. While the technological feat by itself might've been enough to win over Edison, the utility also received major kudos for the seven years of construction, scheduling, and legal and regulatory challenges it pulled through.
Cutting back on coal
Both Duke Energy stock and AEP stock have long relied on coal, clean or not, to power their profits. But some historically coal-centric utilities are calling it quits. FirstEnergy counts on coal for around 64% of its total generation capacity and had to idle several of its power plants last year as cheap natural gas prices and EPA regulations cut out coal's competitiveness. In early 2012, the utility announced plans to retire a whopping 3,400 MW of coal-fired power generation, more than a quarter of its current capacity.
TECO Energy is as close to a pure coal pick as utilities get, but even TECO is taking a step back. The utility's Appalachian coal mines churn out 9 million tons annually, and its regulated division relies on coal for 61% of its capacity. But last week, the company announced that it's dishing out $950 million for a regulated New Mexico natural gas utility. The acquisition adds 50% to TECO's customer base and could provide some natural hedging if coal and natural gas continue their price tango.
Can Duke Energy stock soar?
Duke has a long history of coal use, and its newest facility hints that it's not done with the diamond yet. While some utilities are ditching coal for other energies, companies like Duke and AEP are tackling carbon emissions through technological innovation. Neither solution is fool-proof, but for now, at least, policymakers are satisfied, and costs are competitive.
"Clean coal" isn't the only option out there. As the nation moves increasingly toward clean energy, Exelon is perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance sheet health and its recent merger with Constellation, places Exelon and its resized dividend on a short list of the top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.
The article Will Duke Energy Stock Soar on Clean Coal? originally appeared on Fool.com.Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.