Duke Energy is going to tap a landfill in Durham for methane gas that will be turned into electricity.

Duke (NYSE: DUK) said Thursday it had signed a contract with Methane Power, a renewable energy developer, to purchase two megawatts of power that will be produced by methane that is created by the landfill.

Financial terms were not disclosed. The agreement covers 20 years.

However, Duke Energy estimated the cost of the power would be “less than 10 cents a year” for residential customers.

Duke Energy has more than 2.3 million customers.

The gas is currently burned off at the landfill, which has been closed for several years.

According to Duke Energy, the gas will produce enough power for 1,600 residential customers. Duke expects to begin producing power as of May 1, 2009.

The agreement is one of several Duke Energy has signed in recent months to acquire energy from renewable resources, including three solar projects. Duke Energy also is investing in wind power projects.