Duke Energy Corp (NYSE:DUK) finds itself in a rough spot today, with electricity demand growth slowing, coal and nuclear power becoming more expensive, and challenges to its business posed by renewable energy. The company's earnings of $2.20 per share in the first half of the year are down from $2.28 a year ago, and that's despite buying 15 million shares back over that time. 

Like many utilities around the country, Duke Energy is between a rock and a hard place. Utilities run regulated monopolies that have always relied on growing demand to grow their asset base. The more assets, the more profit shareholders could make. But Duke Energy is only expecting demand to grow 1% per year over the next 15 years, and with renewable energy posing a threat to even that small amount of growth, the company doesn't know quite what to do. 

The tough spot utilities find themselves in
Utilities are getting hit from both sides of their businesses: Slowing demand growth for electricity in the U.S. means they don't have to spend as much money on new assets, but solar energy on consumers' rooftops or businesses has reduced demand and added stress to the grid. 

It may not seem like an obvious state for solar adoption, but North Carolina, where Duke Energy is based, was the No. 2 solar state in the U.S. last year, with 397 MW installed. Duke itself is building 128 MW of solar this year, and will be serving 600 MW of solar capacity to the state by the end of the year. 

But therein lies the rub. The company is also proposing a $750 million 650 MW natural gas plant on the site of the Asheville coal plant, which local renewable energy supporters are fighting tooth and nail. The argument is that with renewable energy being cheaper than fossil fuel today, why not just build the grid of the future instead of more fossil fuel plants? 

Duke Energy argues that more natural gas plants are needed to pick up the slack in evening hours when the sun goes down or in early-morning hours during the winter. Both sides have a point, which is why utilities need to think more about building a more dynamic business in the future. 

How to build a utility of the future
While Duke Energy has moved into renewables at a fairly quick pace, it may not be as nimble in upgrading its own infrastructure. And for utilities with paltry growth in consumer demand, that's not a good sign. 

While Duke Energy is fighting for new natural gas plants to provide reserve margin (extra capacity) for when renewable energy isn't running, it could be fighting for grid upgrades that would make it easier and more profitable to install renewable energy in the future. Smart meters, energy storage, EV charging, new transmission lines, and demand response infrastructure have all been rate-based by regulators around the country in an effort to modernize the grid. 

Those kind of changes are what's needed to expand the base of renewable energy North Carolina is building and create a utility of the future. Duke Energy can't look at itself as only a supplier of energy, it has to look at itself as a facilitator of the electric grid, which means building next-generation grid assets. 

Time for a visionary utility
The more utilities fight rooftop solar, energy storage, electric vehicles, and other energy advancements for more fossil fuels, the deeper hole they'll dig for themselves. Customers will have more reason to leave the grid, and the customer base will get smaller, which will lead to even more customers finding alternatives to the grid. It's a potential downward spiral.

Utility stocks like Duke Energy can be enticing for investors, with a 4.5% dividend yield and a seemingly stable business. But utilities of tomorrow won't be as stable as the utilities of yesterday. Duke Energy's slowing growth and falling earnings are just the first warning sign of that.