Five Things to Know as NC Plans its Energy Future  

The coming months are hugely important to North Carolina’s future as the North Carolina Utilities Commission reviews, and ultimately decides, Duke Energy’s plans for the next several decades. 

This Carbon Plan / Integrated Resource Plan (CPIRP) process will lay out how Duke Energy produces electricity for decades and, as a result, how much we pay. Duke Energy has pushed for the largest commitment to natural gas in the country at a time when renewable energy is clearly the cheaper option. 

We believe this is because of a profit motive baked into North Carolina policy: Duke Energy is guaranteed a nearly 10% return on capital investments, incentivizing expensive projects like natural gas and nuclear plants. 

With natural gas there’s an additional incentive: The company can pass 100% of its fuel costs on to customers through fuel riders added to bills, meaning customers, not Duke Energy executives or shareholders, carry the risk when natural gas prices spike due to world events, as this chart shows they frequently do. 

Indeed, natural gas price spikes are the primary reason for Duke Energy’s recent and repeated rate increases, as this analysis shows. 

As part of the CPIRP, the North Carolina Sustainable Energy Association, Southern Environmental Law Center, and a myriad of other groups filed detailed written testimony from distinguished experts ahead of in-person hearings that begin July 22. Those filings can be found here, but here are 5 key takeaways from NCSEA’s filings.

1. Offshore wind should be pursued at least on equal footing with experimental new nuclear plans.

That’s according to John O’Brien and Philip Moor, who both have extensive careers in the nuclear industry and are pushing back against Duke Energy’s proposal to put offshore wind on the backburner while pursuing a speculative new nuclear technology called Small Modular Reactors (SMR). Given that there’s not a single licensed SMR project right now in the United States – and the only one in history was canceled last year over cost concerns – the two experts conclude SMRs carry (page 15) “significant uncertainty.” At the same time, these experts conclude that development activities for offshore wind should be accelerated to ensure adequate resource diversification and to hedge against uncertainty on development timelines of other more speculative technologies to meet future energy demand. More from them: 

Page 7-8: “We further believe that early development for both technologies should be funded and undertaken in the near term. …“Our examination concludes that OSW [Off Shore Wind]  is equally as deployable as new nuclear.” 

Page 15: “If a design-certified technology was chosen by Duke Energy in 2027, the optimistic commercial operation date (COD) for New Nuclear would be 2037. However, that optimistic COD assumes no delays in the permitting and licensing for the construction of the selected technology. Since there has also been a consistent pattern of delays in U.S. nuclear construction, for planning purposes it would be a reasonable practice to add a 20% schedule contingency – or approximately two years – to the estimated completion date for the Companies’ first New Nuclear facility.”

2. Duke Energy’s own modeling says solar and wind are the cheapest, right up to an arbitrary cap on solar that the company baked into its modeling. That’s regardless of decarbonization goals, federal regulations or state regulations. Here’s how Maria Roumpani, a Stanford PhD who works in grid planning and is the managing director of ELO Engineering Consulting, put it:

Page 10: “Renewable energy resources and energy storage are the most cost effective, least risk options in addressing the Companies’ energy needs within the changing market and policy landscape. This is consistently shown in the Companies’ own modeling, even when the Companies include unjustified cost adders. Their potential is only limited by the Companies’ assumptions about what is feasible. 

Page 81:“It is also worth mentioning that the model’s preference for renewable resources does not even consider federal policy and other risks: solely from an economic standpoint, renewable resources are preferred.”

3. Duke Energy can’t back up its renewable-limiting assumptions. One of the key ones is how difficult the company says it is to add new solar energy to the grid. That can be a complex process, requiring planning, but other states are already adding solar at higher rates. Let Michael Goggin, who has worked on transmission and renewable energy issues for nearly two decades, explain: 

Page 13: “These limits do not reflect reality, and there are many potential solutions to the interconnection challenges Duke claims in its attempt to justify these limits. These limits artificially constrain the contributions of solar and storage in the portfolios presented in Duke’s CPIRP. In particular, this limits solar and storage from realizing their full potential to displace Duke’s claimed need for new gas power plants to meet a need for energy and capacity.” 

Page 18: “It is simply not credible for Duke to claim that it cannot accommodate a temporary 3-6% increase in transmission outages as it brings new resources online. When asked about this in discovery, Duke was unable to provide support for its claims.”

4. This is all BEFORE you account for decarbonization mandates and new Environmental Protection Agency rules that would radically increase the cost of natural gas. This is one of the reasons that Duke Energy itself proposes phasing out its own new gas plants long before their normal lifespan. This is what people mean when they talk about “stranding” assets. From Roumpani (and note that “CC” stands for “Combined Cycle” - a type of natural gas plant):

Page 50: “The net cost of new gas resources is understated. Even absent federal regulations, the Companies’ analysis does not include the full costs of operating the proposed gas units in the future. With the new final federal regulations, the units will require significant investments, the costs and risks of which are not considered in the CPIRP analysis.” 

Page 74: “Under the proposed CC buildout, ratepayers will not only have to pay for expensive resources in the near term but will also be locked in to cover the cost of those assets even if they become stranded, a highly likely scenario. I recommend that the Commission hold in abeyance any decision on Duke's proposed gas buildout, or at a minimum on the Companies’ CC buildout, due to the already existing cost, reliability, gas supply, and technical challenges that such a buildout would face. The final EPA section 111 rule, which Duke’s analysis and portfolios fail to account for, is an especially important reason for the Commission to halt the Companies’ plans to build new gas CC resources.”

5. Duke Energy’s plan to burn hydrogen instead of methane gas in its natural gas plants is a pipe dream, and the company itself has acknowledged the challenge. Plus: Natural gas pipelines weren’t made to transport hydrogen. It’s dangerous. Roumpani again: 

Page 56: “As previously mentioned, the Companies have also expressed concerns about their ability to achieve this, noting that “volumes necessary to utilize the hydrogen compliance pathway are not thought to be achievable on the timelines presented in the EPA CAA Section 111 Proposed Rule.” 

Page 61: “The existing gas network is unsuitable for hydrogen since it is more permeable than methane and poses a greater safety risk. The Companies acknowledge these risks, stating, "There are risks that high blends could lead to pipe material embrittlement, which is a limitation to injecting hydrogen into existing natural gas piping.” 

In closing: The Commission should require Duke to work with offshore wind developers to speed up the timeline of offshore wind development by offering contract certainty. Arbitrary limits on solar plus storage should be dropped. And since going in as heavily for natural gas as Duke Energy proposes makes little financial sense, the N.C. Utilities Commission shouldn’t lock its customers into expensive assets that the company itself has predicted may end up as stranded assets well before their useful life ends. 

We respectfully ask the N.C. Utilities Commission to: 

• Press Duke Energy to comply with House Bill 951 by sticking to the 2030 deadline to cut carbon emissions by 70%. 
• Adopt a procedural schedule requiring interim updates from Duke and the wind energy area leaseholders of the Acquisition Request for Information (ARFI) process and its preliminary results in the Fall of 2024. 
• Accelerate the development of offshore wind in North Carolina, starting by allowing offshore wind developers and/or Duke Energy to incur early development costs on projects. 
• Consider the impact that new federal rules will have on gas plant costs, and require Duke Energy to model those costs before approving new plants.