) has entered into an agreement with Verizon (
) to use Verizon's 4G LTE network for improving energy efficiency
in buildings. Duke Energy's project "Envision: Charlotte" aims to
link 70 buildings from those of leading private companies to city
buildings and is part of its larger Energy Savings Program. Cisco (
) will provide the energy dashboards in the lobbies of the
buildings. This initiative and others being rolled out around the
nation are aimed at reducing energy use in large buildings to
improve energy efficiency and smart grid technology.
Duke is one of the largest electric utilities in the U.S. along
with American Electric Power Company (
), Exelon Energy Corp, Allegheny Energy (NYSE:AYE) and Progress
). Duke Energy has approximately 35,000 megawatts of electric
generating capacity in the Carolinas and the Midwest, as well as
natural gas distribution services in Ohio and Kentucky.
Even though the firm operates in international markets, the
majority of the value for the company comes from the U.S.
Franchised Electric & Gas segment. This segment alone
contributes nearly 80% of
our $19.38 stock value for Duke Energy
, which stands roughly in line with market value.
Moving Toward a Smart Grid
The infrastructure used to link the buildings will include
automation systems, smart meters, energy management software and
dashboards. As a result of the linking, building owners would be
able to save a significant amount of energy. It is expected that
the Envision: Charlotte project will help buildings in Charlotte to
reduce energy consumption by up to 20 percent.
It is estimated that the cost of purchasing and installing the
energy efficiency mechanism will be around $5.3 million. This cost
is expected to be split between Duke Energy and Cisco, with Duke
bearing around 80% and the rest 20% coming from Cisco. The
companies believe that the energy saved will more than cover for
For its residential customers, Duke Energy has been distributing
compact fluorescent lights free of cost as these lights are
much more energy efficient than incandescent bulbs. Duke Energy
estimates that through this initiative, customers were able to save
enough energy last year to power nearly 45,000 homes.
We estimate that the revenue per mwh increased from around $64
in 2005 to $73 in 2010, largely due to an increase in energy prices
reflective of an increase in input costs. As energy demand picks up
in the wake of the economic crisis, we anticipate the revenue per
mwh to increase steadily over the Trefis forecast period, reaching
However, if Duke's energy savings programs workout favorably, it
could translate into higher revenue per mwh for the company and
result in an upside to our forecasts. If the revenue per mwh
increases at a faster rate reaching around $100 by the end of our
forecast period, it would mean an upside of around 20% to our
current price estimate.
See our full analysis for Duke