Duke Energy Cleans Up Its Act

Being a "first mover" can be a double-edge sword. On the one hand, if a company strikes out in a bold, innovative way or embraces a new technology before its competitors, it can secure a stronghold in the commercial marketplace. On the other hand, if a company moves too fast -- before either its technology has been fully vetted or before the marketplace is willing to embrace it -- it may find itself at an economic disadvantage as sales and profits fail to materialize at the expected rate.

Such a scenario is one that is fairly familiar in the fast-paced world of high technology. Yet it now appears that just such a scenario may be unfolding in the energy industry. In a recent Associated Press article about Duke Energy (NYSE: DUK  ) , the company's CEO, James E. Rogers, is quoted as saying (regarding global climate change), "The science says we need to act." Rogers then backs up this statement by embracing the notion of either a "carbon tax" or a "cap and trade" approach to limiting carbon dioxide emissions.

This may or may not strike you as progressive, but Rogers is no ordinary energy executive. He is also the chair of the Edison Electric Institute (EEI) -- the electricity industry's main trade group. It also happens that EEI is vehemently opposed to caps on carbon emissions, arguing that they will impose an unnecessarily high cost on businesses and consumers.

As a result of his association's opposition, it is unlikely that carbon caps of any kind will be imposed anytime soon. Rogers, though, is putting his money where his mouth is and positioning Duke Energy to be a "first-mover" in this area by accelerating its use of cleaner coal-burning technologies, engaging in large-scale carbon sequestration projects, and making investments in alternative fuel demonstration projects. Along with NRG Energy (NYSE: NRG  ) , Entergy Corp., and Exelon (NYSE: EXC  ) , Duke Energy has also notified the Nuclear Regulatory Commission that it plans to apply for licenses to build new nuclear reactors.

All of the aforementioned actions will reduce the company's carbon emission and could position it nicely in a "carbon-constrained economy." But the actions also carry considerable risk in the form of either large, up-front capital expenditures or producing electricity a higher per-kilowatt cost than the industry average.

The question, then, is this: Which side of the doubled-edged "first-mover" sword is Duke wielding on its competitors? Like Rogers, I am of the opinion that the matter of limiting carbon emission is no longer a question of if, but when. And, as such, I believe his company's move -- while unpopular with others in the industry -- will be a winner in the broader commercial marketplace.

First-mover advantage is one of the key principles to Rule Breaker investing. To learn more, consider a free, 30-day trial toMotley Fool Rule Breakersnewsletter. Duke Energy is aMotley Fool Income Investorrecommendation.

Fool contributorJack Uldrichdoes not own stock in any of the companies mentioned in this article. The Fool has a strict disclosure policy.


Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 516569, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:33:01 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement