by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
At year’s end 2022, the North Carolina Utilities Commission (NCUC) released an initial “Carbon Plan” for future electricity generation in North Carolina. The NCUC issued this plan in response to a law passed in late 2021, House Bill 951. That law took Gov. Roy Cooper’s arbitrary, aspirational goal in certain executive orders to reduce the state’s carbon dioxide (CO2) emissions from electricity generation by 70 percent below 2005 levels around 2030 (and then to net zero by 2050).
What the law does that the governor would not, however, is institute extremely important protections for the grid and for electricity consumers.
Those protections in law include the following requirements that a plan approved by the NCUC must meet (emphasis added):
They are in keeping with North Carolina’s longtime protections in law. Recognizing that “the rates, services and operations” of electric power utilities are “affected with the public interest,” the law makes it state policy to require “adequate, reliable and economical utility service to all of the citizens and residents of the State” as well as “the least cost mix of generation and demand-reduction measures which is achievable.”
North Carolina law has kept in focus that the top stakeholders in electricity policy are the consumers.
The State of North Carolina has long recognized that least-cost, reliable electricity at the flip of a switch is in the public interest. By seeking the “reasonable,” “least cost path” to emissions reductions with “least cost planning of generation” that would “maintain and improve upon the reliability of the grid,” the text of the law seeking to reduce North Carolina’s electricity-based CO2 emissions recognizes the very same ideal.
This brief and the next ones will discuss the implications of the different mandates in the NCUC’s initial Carbon Plan and focus on whether each would help keep the plan within the law’s all-important parameters. The mandates will be discussed in order of impact and significance to electricity consumers at the mercy of this decision rather than to the coterie of industry groups, special interests, and outside activist groups given the label “stakeholders.” At least North Carolina law has kept in focus that the top stakeholders in electricity policy are the consumers.
Retiring coal power plants is at the heart of the plan, because coal is the greatest source of CO2 emissions. Replacing these existing plants with different ones necessarily increases electricity costs. According to the Institute for Energy Research (see the graph), the levelized cost of existing coal-fired power plants is less than half that of new solar and wind facilities plus their required backup generation.
Source: Institute for Energy Research
The costs to Duke Energy of existing power plants are in operations and maintenance. Building new plants incurs capital costs on top of operations and maintenance. Those costs get passed through to electricity consumers on their power bills.
The amount of coal generation to be retired is enormous; it represents one-fourth of the installed capacity in the state. How the plan would replace all that generation capacity is extremely important.
The amount of coal generation to be retired is enormous; it represents one-fourth of the installed capacity in the state. How the plan would replace all that generation capacity is extremely important. It makes all the difference between whether the plan upholds its legal requirements to chart the least-cost path to emissions reductions that maintains or improves the reliability of the grid, or if it socks North Carolinians with electricity priced much higher than necessary while destabilizing the grid.
The mandate also forecloses the possibility of a breakthrough in carbon-capture technology. As a fuel source, coal is cheap, abundant, and reliable. With respect to the CO2 emissions reduction goals, the only problem with coal is its emissions. Meanwhile, companies in Cary and Charlotte have been awarded grants by the Biden administration’s Department of Energy to test carbon-capture technologies.
We cannot know for sure if that or some other disruptive innovation might make plentiful and inexpensive coal a low-emissions resource. Consider that, prior to the breakthrough combination of hydraulic fracturing and horizontal drilling in the late 2000s, low-emissions natural gas seemed hopelessly unable to compete with coal, but within a few years it had overtaken coal. Technological innovation happens fast, but government bureaucracy creeps.
This is the most important aspect of the plan. Our current nuclear facilities are by far the lowest-cost, most efficient, fully zero-emissions generation source out there. There is absolutely no way to replace any of our preexisting nuclear generation with any other source of generation (even solar and wind) without making electricity cost more and emit more CO2. Retaining the nuclear fleet has for that reason been Locke’s top recommendation for energy and electricity policy.
The previously unheard-of blackouts of Christmas Eve 2022 underscored exactly how important nuclear power is to reliable generation:
Nuclear stayed steady throughout; solar provided only a few hours of production per day, only because it was sunny, and only after the early morning peak demand
As can be seen in the graph above from the U.S. Energy Information Administration, which shows the hourly generation by Duke Energy’s different electricity sources, nuclear generation was steady throughout. At first glance one might even miss the line at the top of the graph showing nuclear generation, because it is so steady it looks like the chart’s upper bound and not a graph line in itself.
New nuclear generation is the most sensible way to add new zero-emission generation that maintains or improves grid reliability while keeping the costs of adding new generation reasonable and lower. New nuclear would be highly efficient and readily available, not weather-dependent like solar and wind. Because of that, there would be no need to overbuild as there is with solar and wind (add redundant facilities at enormous expense because they are so unreliable). It likewise requires a very small amount of land, especially in comparison with solar and wind facilities, even before considering having to overbuild solar and wind because of their unreliability.
The only thing lacking with this mandate is requiring that Duke must develop new nuclear generation. As will be shown later, the NCUC has no qualms against making such a mandate for procuring solar.
Future briefs will examine the rest of the NCUC plan’s mandates, including those involving natural gas, solar, and wind, plus what the plan has to say about their potential effects on electricity rates and jobs.