Duke Energy Indiana to assess coal unit sale while advancing gas power expansion at Cayuga

Duke Energy Indiana, a subsidiary of Duke Energy Corporation, announced on June 17, 2025, that it has reached a settlement with Reliable Energy Inc., a representative of Indiana’s coal production industry, that could shape the future of the Cayuga Generating Station in Vermillion County. As part of the agreement, Duke Energy Indiana will conduct a formal engineering study to assess the technical feasibility of continuing the coal-fired operations at Cayuga under third-party ownership, while also moving forward with its proposed natural gas-fired units scheduled for service in 2029 and 2030.

The move, which remains contingent on approval by the Indiana Utility Regulatory Commission (IURC), offers a dual-track path: modernizing the state’s grid through high-efficiency natural gas while keeping alive the possibility of continued coal use at the same site. It also aligns closely with recent executive orders issued by Indiana Governor Mike Braun aimed at ensuring a “deliberate, economically sound approach” to coal retirements in the state.

How does the Duke Energy Indiana and Reliable Energy Inc. settlement affect coal-fired power generation in Indiana?

The agreement between Duke Energy Indiana and Reliable Energy Inc. is the result of months of regulatory filings, state-level political engagement, and direct discussions between stakeholders on the future of Indiana’s energy mix. Duke Energy Indiana’s primary proposal is to build two state-of-the-art natural gas combustion turbines at the Cayuga Generating Station, replacing older coal-fired generation units that were originally planned for decommissioning.

However, amid resistance from coal industry stakeholders and new policy priorities from Indiana’s executive branch, the utility operator has agreed to take a significant additional step: a feasibility study to determine whether the current coal units could remain operational under new ownership. If technically viable, Duke Energy Indiana will issue a Request for Proposal (RFP) to solicit interest in purchasing the coal units — which would only become available for sale once the natural gas units are fully operational.

According to Stan Pinegar, President of Duke Energy Indiana, this solution reflects the state’s broader goals under Governor Braun’s energy leadership. “The new natural gas units we’ve proposed add additional, highly efficient power capacity to Indiana’s electric grid. This agreement commits to studying the feasibility of a third party continuing to operate Cayuga’s existing coal units once the Cayuga gas units are operational,” Pinegar said.

What is the timeline and projected impact of Duke Energy Indiana’s Cayuga natural gas unit development?

Duke Energy Indiana plans to bring the two new natural gas turbines online in 2029 and 2030. These gas units are projected to offer a more flexible and responsive source of generation capacity, especially critical during high-demand periods when renewable energy sources may fall short.

Natural gas remains a central component of Duke Energy Indiana’s near-term energy strategy. As a regulated electric utility developer serving more than 850,000 customers across central and southern Indiana, the company is under pressure to modernize its fleet while balancing regulatory requirements, political sentiment, and operational resilience.

Importantly, the proposed study into coal unit viability will not delay or alter the timeline for construction, cost estimates, or deployment of the gas units. The engineering analysis and potential RFP process are expected to run in parallel without interfering with the primary infrastructure schedule.

Duke Energy Corporation, the parent entity headquartered in Charlotte, North Carolina, has been pursuing a nationwide transition toward lower-carbon generation sources. However, Duke’s subsidiaries — including its Indiana utility operations — are adapting their timelines based on local policies and energy resilience requirements.

Why are Indiana’s coal producers supporting a third-party continuation of Cayuga coal unit operations?

Reliable Energy Inc., which represents Indiana’s legacy coal producers, described the settlement as a “milestone for maintaining in-state power generation capacity.” Savannah Kerstiens, President of Reliable Energy, said that the agreement would not have materialized without proactive engagement from Governor Braun and his administration.

“It wouldn’t have been possible without the leadership of Governor Braun and Secretary Jaworowski, whose continued commitment to Indiana’s energy resilience made this outcome achievable,” Kerstiens noted.

For Indiana’s coal sector, the ability to keep Cayuga’s coal units in play — even under different ownership — preserves critical load capacity, coal demand, and associated employment in coal-dependent counties. It also provides time for transition strategies to be developed without causing immediate shutdowns that might ripple across the local economy.

While Indiana, like many U.S. states, has seen a decline in coal’s share of the energy mix, it remains among the top five coal-consuming states in the nation. Several counties continue to rely on coal production, transportation, and plant operations for economic stability.

How does the Cayuga project align with Indiana’s current regulatory and energy policy environment?

The backdrop to the Cayuga settlement includes Governor Mike Braun’s recent executive orders mandating thorough due diligence before the retirement of coal generation facilities. These policies are rooted in concerns about grid reliability, affordability of electricity for working-class families, and the economic impact of abrupt energy transitions.

Braun’s administration has emphasized a diversified energy portfolio and the retention of firm generation capacity within the state, especially as Indiana courts new industrial investments and regional supply chain growth. By encouraging utilities like Duke Energy Indiana to pause and evaluate alternatives before decommissioning legacy assets, the state aims to balance progress and stability.

Under these directives, Indiana regulators — particularly the IURC — have a broader mandate to consider long-term reliability, employment, and economic development implications of major utility transitions. The Cayuga settlement is seen as directly reflecting this recalibrated state-level strategy.

What are institutional and investor perspectives on Duke Energy Indiana’s generation transition strategy?

While Duke Energy Indiana is not a publicly traded entity, its parent company, Duke Energy Corporation (NYSE: DUK), remains one of the largest utility holding companies in the United States. Institutional investors have tracked Duke’s multibillion-dollar capital allocation plans as it navigates the balance between emissions reduction targets and practical energy delivery.

Analysts have noted that hybrid strategies like Cayuga — where natural gas investment proceeds alongside legacy coal options — are becoming increasingly common in states where political or geographic constraints slow full decarbonization. As such, the market is unlikely to penalize Duke for this compromise. On the contrary, many view these hybrid strategies as risk-hedging mechanisms that enhance long-term asset flexibility.

In its most recent earnings call, Duke Energy Corporation reaffirmed its commitment to a balanced transition roadmap, targeting a 50% carbon reduction by 2035 while maintaining sufficient dispatchable capacity to meet reliability metrics. The Cayuga project fits squarely into this roadmap by enabling fuel diversity and asset adaptability.

What are the next steps in the Indiana Utility Regulatory Commission’s review of the Cayuga project?

The Indiana Utility Regulatory Commission is now tasked with reviewing the full scope of the proposal — both the natural gas development and the associated feasibility study for coal unit continuation. While regulatory reviews can take several months, early indications suggest the project is consistent with state priorities around capacity adequacy and economic continuity.

If the Commission approves the gas plant construction and accepts the settlement’s provisions, Duke Energy Indiana will proceed with the engineering study, followed by an open RFP. The earliest potential transfer of the coal units would not occur before 2030, allowing several years for stakeholders to evaluate interest, technology upgrades, or compliance retrofits that could extend the coal units’ useful life.

What is the broader outlook for Indiana’s energy mix as it navigates legacy coal and emerging natural gas trends?

Indiana’s energy sector stands at a structural crossroads. While renewable penetration is increasing, particularly in solar, the state continues to rely heavily on fossil generation for grid stability. Projects like Cayuga highlight how Indiana’s policy and utility strategy are evolving not through abrupt replacement, but through layered implementation.

The future of the Cayuga coal units, even if sold, remains uncertain. Regulatory compliance, environmental upgrades, and operational economics will all influence whether a third party finds value in running the assets. However, the simple act of evaluating such a continuation — in parallel with new infrastructure development — signals Indiana’s preference for optionality and local resilience.

With federal regulatory shifts, inflationary pressure on capital projects, and changing customer demand, utilities are under increasing pressure to balance decarbonization with affordability and reliability. Duke Energy Indiana’s approach at Cayuga may well serve as a template for other regulated utilities navigating similar trade-offs.