NC Utilities Commission’s Carbon Plan Order
The North Carolina Utilities Commission issued its first Carbon Plan order on December 30, 2022, after more than a year of proceedings. The process was directed by HB951, which required NCUC to take "all reasonable steps" to achieve 70 percent carbon emissions reductions from 2005 levels by 2030 and achieve carbon neutrality by 2050. The following article, co-authored by NCSEA’s Policy team, summarizes the Carbon Plan order and provides an overview of next steps.
Carbon Plan Context
With the passage of HB951 in October 2021, the NC General Assembly directed the NC Utilities Commission (NCUC) to develop a plan for a 70% reduction in carbon emissions in the electricity sector by 2030 and to reach carbon neutrality by 2050. The bill delegated significant authority to the NCUC for developing the plan, with a requirement for completion by December 31, 2022.
Shortly after the bill passed, the NCUC opened a docket and outlined a process for developing the Carbon Plan. This included a set of mandated stakeholder meetings hosted by a facilitator selected by Duke Energy (Duke), followed by the utility proposing its own proposals by the middle of May 2022. The proposal relied heavily on new fossil fuel generation and unproven, expensive technologies like small nuclear reactors (SMRs) and green hydrogen. Their plan also set artificial caps on new solar, storage, and wind assets, raising concerns amongst clean energy and consumer advocates across the region.
Prompted by these shortcomings, NCSEA, along with our partners at the Southern Environmental Law Center (SELC), the Natural Resources Defense Council (NRDC), the Southern Alliance for Clean Energy (SACE), and the Sierra Club jointly filed comments and carbon plan modeling that showed a way to comply with the carbon pollution reductions required by law in a more cost-effective and timely manner. The group, collectively known as The CLEAN Intervenors, presented data-backed, independent modeling illustrating how the widespread deployment of clean energy resources—initially driven by significant new deployments of solar and storage—could more effectively contain costs and provide reliable energy across the state in both the near- and long-term future.
As a quick recap, the CLEAN Intervenors modeling resulted in 2-7% cost savings by 2030 and 15-19% by 2050 over Duke Energy’s plans. The modeling conducted by Synapse on behalf of the CLEAN Intervenors also proposed retiring the last coal facility in North Carolina by 2030—about five years ahead of Duke’s proposed retirement schedule—and did not include any new or expanded gas facilities. At the same time, the CLEAN Intervenors plan called for significantly more solar procurement by 2024—5200 MW—compared to the 3100 MW in Duke’s plan.
Next, the Commission held a three-week evidentiary hearing in which numerous witnesses testified and presented common faults within some of Duke’s key modeling assumptions. From there, the CLEAN Intervenors joined together with other groups—the Carolina Clean Energy Business Association (CCEBA), Clean Power Suppliers Association (CPSA), and MAREC Action—to file a joint proposed near-term action plan, proposed order, and brief to the Commission.
The plan represented a synthesis that was supported by the modeling introduced to the Commission. The joint proposal from Synapse and the Brattle Group, on behalf of CPSA, was consistent with modeling presented by the Tech Customers (Apple, Google, and Meta) and the Attorney General’s Office from Strategen, while also complying with HB 951’s emissions reduction mandates.
This Joint Near Term Action Plan, as it became known, represented a “no regrets” strategy by accelerating the procurement of solar over the next few years while keeping the Commission’s options for future actions open. Importantly, the plan did not require the addition of new, polluting gas-fired generation as part of Duke’s procurement strategy over the next two years.
NCUC’s Carbon Plan Order
The Carbon Plan ordered by the NCUC on December 30 endorsed Duke’s proposed near-term action plan, with one exception: delaying a decision on an offshore wind lease area to pursue. The Commission left the door open for the buildout of new gas, hydrogen, and SMR facilities. And though no single portfolio was selected from the four scenarios that Duke presented (three of which failed to meet the 2030 deadline for 70% emissions reduction), NCSEA and our partners believe there is significant room for improvement.
Clean energy and consumer advocates hoped for a larger focus on energy efficiency and renewables like solar, battery storage, and wind moving forward. With an increasing amount of data showing that renewable energy is a more cost-effective form of electricity generation than fossil fuels, it’s clear that our state is ready for a wide-scale transition to low-carbon sources. This is especially true considering the expansion and extension of federal tax incentives, particularly the Investment (ITCs) and Production Tax Credits (PTCs), found in the $370 billion Inflation Reduction Act.
Figure 1 below, created by the Southern Alliance for Clean Energy, compares some of the supply-side resource selections in the Commission’s Carbon Plan with the proposals of both Duke and other intervening parties, including the NCUC Public Staff.
While the Commission’s order marks a milestone in utility regulation for North Carolina, NCSEA and our partners are eager to continue pursuing an energy future more closely aligned with our original, more cost-effective proposal and the Joint Near-Term Action Plan endorsed by a number of intervenors.
Figure 1: Comparing Supply-side Resources of the Carbon Plan with Other Proposals
High-Level Takeaways of The Carbon Plan
Of note, the NC Utilities Commission’s Carbon Plan order included the following:
- Coal-fired power plant retirements: The order accepted Duke’s proposed retirement schedule for 8,400-megawatts (MW) of its coal-fired power plants by 2035, with some remaining in operation as late as 2035, as “reasonable for planning purposes.” On top of the unnecessary pollution and carbon emissions created by this prolonged retirement schedule, ratepayers would also bear the risks associated with volatile fuel costs and keeping old, uneconomic coal plants running. On the other hand, earlier coal retirements like proposed in our modeling would avoid expensive utility retrofits, and lead to additional savings associated with securitization, a way of refinancing a portion of the outstanding balance of coal plants that are retired ahead of schedule.
- Natural gas, hydrogen, and nuclear energy: The Commission approved for planning purposes 800 MW of combustion turbine and 1,200 MW of combined cycle gas generation capacity. It also upheld using a 35-year operational life assumption for these new gas plants, with an assumption that green hydrogen fuel will replace gas to offset carbon emissions. It is yet to be determined if this assumption is technologically or financially feasible.
We, along with other parties who conducted modeling, challenged the 35-year operational life assumption of a power plant. It’s important to note that continuing to operate gas plants for that long in the event that hydrogen is not a viable option would violate the law’s net-zero by 2050 requirement. The order also determined that Duke may pursue unproven SMR nuclear technology, allowing Duke to spend up to $75 million of ratepayer money in the near term for permitting and development of this speculative technology.
- Renewables:
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- Solar: The Carbon Plan order outlined renewable energy capacity additions that includes 1200 MW of solar procured through the 2022 competitive procurement for renewable energy RFP process (which includes 441 MW that Duke was supposed to procure in 2021 under previous state law), and an additional 2350 MW to be procured in 2023 and 2024.
- Storage: The Carbon Plan states that 1000 MW of standalone battery storage and 600 MW of solar plus storage shall be procured between 2023 to 2024.
- Offshore Wind: The commission ordered an offshore wind study to be conducted by Duke Energy to consider each of the three wind energy areas off the coast of North Carolina, one of which is owned by one of Duke’s unregulated affiliates. The Commission directed that the utility's study of these lease areas remain unbiased despite Duke Energy Renewables Wind’s ownership of the Carolina Long Bay lease and Duke’s prior argument that it should be allowed to move forward with its affiliate’s lease area.
- Onshore Wind: Duke was ordered to conduct stakeholder engagement sessions to determine viability of onshore wind as soon as practicable and to incorporate those findings into the next iteration of the Carbon Plan.
- Pumped Storage Hydropower: NCUC gave its nod of approval to the proposed Bad Creek pumped storage hydro facility expansion, allowing Duke to spend up to $40 million to add 1700 MW of capacity—effectively doubling this resource’s capabilities.
- Energy efficiency and demand-side management: The Commission approved Duke’s target of 1% eligible load reduction per year for planning purposes, though required the modeling of a 1.5% aspirational efficiency savings goal as part of the next Carbon Plan.
- Proactive transmission planning: 14 red-zone transmission upgrade projects were approved by the Commission. These red-zone areas are locations in need of significant upgrades to interconnect additional solar across the grid in North Carolina. In fact, these upgrades would enable an additional 3000 MW of solar interconnection. These projects will still need approval from the North Carolina Transmission Planning Collaborative. In addition, the Commission “strongly advised” Duke to look for ways to improve the local transmission planning process and quickly implement any improvements that FERC may require in a final rule resulting from its recent regional transmission planning proposed rulemaking.
- Justice & Equity: The Commission directed Duke to develop targeted engagement plans for impacted communities, enact these plans in the near term, and report on progress and the ensuing engagements with stakeholders in the upcoming combined proceedings.
Next Steps for the Road Ahead
In summation, there were over 30 intervenors, including large corporations, municipalities, tech companies, environmental and justice advocates, along with numerous others that found it important to be involved in the process of shaping what our grid will look like over the course of the next decade and beyond. Unfortunately, we saw an order from the Commission that endorsed Duke Energy’s proposal. The order opens the door for additional gas, keeps coal burning longer, greenlights the potential buildout of nuclear and hydrogen, and is conservative on energy efficiency investments.
In contrast, the CLEAN Intervenors asked for an additional 5,241 MW of solar, expanded reliance on bill-saving energy efficiency, new onshore wind development, and no new or expanded natural gas facilities. We plan to continue pushing for a better, cleaner plan for meeting our state’s carbon emissions reduction requirements.
From here, the Carbon Plan will be updated by the Commission every two years, with its first update slated for December 2024. This new proceeding is being coined the Integrated Carbon Plan and Integrated Resource Planning (CPIRP). In general, it’s expected that this process will serve as a means to combine carbon planning and integrated resource planning into one proceeding for the Duke Energy utilities moving forward. The updates to the Carbon Plan will afford the Commission and intervenors the opportunity to incorporate new developments in federal funding, technological innovations, and market conditions into future planning.
However, the Commission preserved the process of Duke as the first mover with the opportunity to rebut all intervenor analysis. For context, Duke had more than eight months to prepare its proposed plan last year, while NCSEA and partners had less than 60 days to digest the document, provide feedback, and conduct our own modeling in response.
Later this year, Duke is required to file its first CPIRP by September 1, 2023. Intervenors will have an additional 180 days after that to file testimony and modeling, followed by 45 days for the utility to provide rebuttal testimony.
NCSEA will continue to provide updates on all the various provisions and near-term actions outlined in this order and keep the energy community abreast of next steps in the 2024 proceedings.
“NCSEA is disappointed that North Carolina’s inaugural Carbon Plan does not support higher levels of energy efficiency and a greater diversity of resources, for which we advocated, to provide cheaper, cleaner, and reliable electricity,” said Taylor Jones, Senior Regulatory Counsel at NC Sustainable Energy Association. “In light of failures at various fossil-fuel fired power plants within Duke Energy’s service territory during Winter Storm Elliott, we look forward to engaging in the process to revise the Carbon Plan, set to kick off this year. We will continue to advocate for an equitable, clean energy future that meets the requirements of HB951.”
For additional analysis on the 2022 NC Utilities Commission Carbon Plan order take a listen to Episode 83 of the Squeaky Clean Energy Podcast and watch the recording from NCSEA’s Carbon Plan Webinar.