Duke Energy's Bad Creek Hydro Extension: A Pillar of Stability in the Renewable Energy Transition

In the rapidly evolving energy landscape, where decarbonization and grid resilience are paramount, Duke Energy's strategic move to extend the operations of its Bad Creek Pumped Storage Hydroelectric Station stands out as a masterclass in long-term asset stability and regulatory foresight. As the world transitions to renewable energy, the ability to store and dispatch carbon-free power becomes a critical differentiator. Duke Energy's Bad Creek project, with its 50-year relicensing timeline and potential for expansion, is not just a technical upgrade—it's a calculated bet on the future of energy infrastructure.

Regulatory Certainty: The 2027 FERC Decision as a Catalyst for Capital Confidence

The Federal Energy Regulatory Commission (FERC) is set to issue a final decision on Duke Energy's relicensing application for Bad Creek by 2027, aligning with the expiration of the current license in July 2027. This synchronized timeline is no accident. By securing regulatory clarity well in advance, Duke Energy mitigates the risk of operational gaps and ensures uninterrupted cash flow from one of its largest carbon-free assets. The Bad Creek facility, with its 1,680-megawatt capacity, serves as a “battery” for Duke's grid, storing energy during low-demand periods and releasing it during peak times. This flexibility is increasingly valuable as renewable sources like solar and wind require robust storage solutions to balance intermittency.

The relicensing process, initiated in 2022, has already involved extensive stakeholder engagement and environmental assessments under FERC's Integrated Licensing Process (ILP). This proactive approach not only strengthens Duke's regulatory standing but also positions the company to avoid the costly and time-consuming delays that often plague energy projects. For investors, this translates to reduced uncertainty and a clear path for capital allocation.

Bad Creek II: Future-Proofing the Grid for a Decarbonizing World

Beyond the relicensing of the existing facility, Duke Energy is exploring the Bad Creek II Power Complex, a proposed expansion that would double the project's capacity. This initiative, if approved, would add new infrastructure such as underground powerhouses and transmission lines, all within the existing footprint. The project aligns with Duke's net-zero carbon emissions goal by 2050 and supports the integration of renewable energy by enhancing grid reliability.

The regulatory hurdles for Bad Creek II are significant, requiring permits from the U.S. Army Corps of Engineers and South Carolina's environmental agencies. However, Duke's track record of navigating complex approvals—evidenced by its successful relicensing of Bad Creek—suggests a high probability of eventual approval. For capital markets, this means Duke Energy is building a pipeline of infrastructure projects that align with both regulatory expectations and investor demand for sustainable growth.

Dividend Security: A Credit-Strong Foundation in a Low-Growth Sector

Duke Energy's financial metrics reinforce its appeal as a dividend-secure investment. As of August 2025, the company offers a 3.43% dividend yield, supported by a payout ratio of 85% (based on Q2 2025 earnings). While this ratio is elevated, it remains within historical ranges and is cushioned by Duke's Baa2 (Moody's) and BBB+ (S&P) credit ratings, both with stable outlooks. These ratings reflect the company's disciplined capital structure, including a revised FFO-to-debt target of 15%, which provides a buffer against potential downgrades.

Duke's recent strategic transactions—such as the $6 billion Brookfield investment in its Florida business and the $2.5 billion sale of its Tennessee LDC—have further strengthened its balance sheet. These moves not only reduce leverage but also free up capital for high-impact projects like Bad Creek II. Analysts project 5–7% annual EPS growth through 2029, driven by grid modernization, renewable integration, and regulatory tailwinds in key markets like North Carolina and South Carolina.

Investment Thesis: Why Duke Energy is a Buy in 2025

1. Regulatory Tailwinds: The 2027 FERC decision ensures continuity for Bad Creek, a critical asset in Duke's portfolio. This certainty allows the company to lock in long-term cash flows and reinvest in growth projects.
2. Credit Strength: With stable credit ratings and a robust capital structure, Duke Energy is well-positioned to fund its $87 billion capital plan without sacrificing dividend security.
3. Dividend Resilience: The company's payout ratio, while high, is supported by consistent earnings growth and a conservative FFO-to-debt target. Analysts project the dividend to remain intact even in a low-growth environment.
4. Infrastructure Leadership: Bad Creek and its potential expansion underscore Duke's role as a leader in grid-scale energy storage, a sector poised for explosive growth as renewables dominate the energy mix.

Conclusion: A Strategic Bet on the Energy Transition

Duke Energy's Bad Creek hydro extension is more than a technical upgrade—it's a strategic pivot toward a decarbonized future. By securing regulatory clarity, expanding its storage capacity, and maintaining a credit-strong balance sheet, Duke is building a moat around its infrastructure assets. For income-focused investors, the 3.43% yield offers an attractive entry point, while the company's growth initiatives provide upside potential. In a world where energy transitions are reshaping industries, Duke Energy's Bad Creek project is a testament to the power of long-term thinking—and a compelling case for immediate investment.