by Private: André Béliveau
Visiting Fellow, John Locke Foundation
A Brief Analysis and Inquiry
Last Friday, the North Carolina Utilities Commission (NCUC) issued a press release announcing it completed the initial Carbon Plan, which they were mandated to do per House Bill 951, a bipartisan piece of energy legislation signed into law in October 2021 by Gov. Roy Cooper.
The NCUC’s initial Carbon Plan raises several questions when comparing it to the law established by H.B.951 and the surfeit of research surrounding energy policy for North Carolina.
Three crucial questions need answering: what is the cost, why the clear preference for solar, and does this comply with the law overall?
The John Locke Foundation issued comprehensive research on energy policy for North Carolina in June 2021, entitled “Energy Crossroads.” The study in “Energy Crossroads” was published before the signing of H.B. 951 and significantly impacted the choices legislators made when crafting the law in the summer and fall of 2021, which established a clear policy framework for least cost and reliability in reaching the carbon dioxide (CO2) emissions goals.
H.B. 951’s brilliance was the inclusion of this language on least cost (which is different from affordability) and reliability ⏤ it must be the least cost, most reliable plan. These policy guardrails made this energy legislation what could be a fiscally responsible and prudential alternative to costly and unreliable “Green New Deal” styled pathways. Likewise, the bill was energy source agnostic, allowed for discretion in timing, and anticipated the potential for technological advancements.
The pathway to success, however, was always going to be in the law’s implementation.
The John Locke Foundation’s Center for Food, Power, and Life has continued to provide research surrounding the implementation of H.B. 951 and energy policy more broadly. Most notably, Locke submitted a report providing the NCUC with an alternative plan and critical analysis of Duke Energy’s proposals during the NCUC’s public comment hearing process for the Carbon Plan.
The General Assembly enacted legislation to reduce North Carolina’s CO2 emissions while protecting ratepayers from high costs and ensuring the grid’s reliability was maintained or improved. With that clear legislative intent, clearly expressed in the statute, the NCUC’s initial plan raises some critical questions.
The NCUC’s initial Carbon Plan does not estimate the plan’s cost or offer any fiscal analysis.
Locke provided cost estimations for our proposed alternative plan (page 39) and cost estimations for the portfolios submitted by Duke Energy to the commission during the stakeholder process.
The public deserves to know what this plan will cost, and it should be transparent if it meets the least cost parameters mandated in the statute.
So, what is the total cost of the NCUC’s initial Carbon Plan? What are the estimated costs to ratepayers? What is the fiscal impact on the state? Does it comply with the least cost statute?
The NCUC’s initial Carbon Plan’s only mandated energy source was solar power. Whereas it asked Duke Energy to pursue extending the licenses for its current nuclear fleet, examine the potential for additional nuclear power, explore the potential to expand on natural gas, and inquire about wind options, the only fuel source mandated to be implemented upfront was solar power: an unreliable, non-dispatchable, non-baseload power source. Why?
The NCUC claims in its initial plan that “significant new solar generation must be added to Duke’s resource mix in the short term to achieve the Interim Target.” Why?
Locke’s alternative plan would achieve the interim target with the flexibility the law provides using nuclear, pumped storage, battery storage, and natural gas. No new solar. So, at least in one alternative scenario, the target goals can be reached without “significant new solar generation.” Thus, the NCUC’s belief that solar “must be added” to the grid seems arbitrary.
The commission also seems to be creating at least two artificial constraints with their choice of new solar.
First, H.B. 951 allows the commission to reasonably extend the reduction targets for specific energy sources, including nuclear. The Locke plan conforms with the law’s mandate. By wedging solar upfront and ignoring the law’s flexibility, the NCUC’s plan seems to create an artificial constraint mandating new unreliable solar and ignoring the targeting flexibility to implement a more reliable option. Why?
Second, by mandating new solar upfront, they are creating a constraint and potential barriers on baseload, dispatchable (more reliable) options for a least-cost pathway in the future. For example, the NCUC directed Duke Energy to explore more reliable options (like nuclear and natural gas) but mandated solar power, seemingly imposing unnecessary costs upfront to an unreliable source when that money could be focussed on more reliable options. Why?
The NCUC authorized “Duke to upgrade necessary transmission facilities to interconnect new solar generation.” The grid was designed for dispatchable, baseload power, not intermittent sources like solar, which significantly destabilizes the grid. These grid updates to add new solar seems like an unnecessary cost, especially when adding sources the grid is designed to take would not incur these upgrades.
Why did the NCUC choose unreliable solar generation, which requires grid upgrades, rather than a more reliable source that would not incur these grid upgrades? How is this least cost and reliable?
There seems to be an unreasonable and arbitrary preference given to solar power in the NCUC’s initial Carbon Plan.
As stated in Locke’s press release regarding the NCUC’s initial plan, it appears it may not comply with the law.
The initial plan spends multiple paragraphs discussing reliability, which is good. Yet, the only energy source it mandates is an unreliable, intermittent source, which also comes with additional costs to bring it on board the grid.
Additionally, the initial plan, owing to its upfront new solar generation mandates, seemingly creates artificial constraints to a least-cost pathway in the future that maintains or improves the grid’s reliability.
Owing to what we experienced recently over the holidays with blackouts here in North Carolina, current reliability needs to improve. Does adding more solar to the grid while removing baseload coal improve its adequacy and reliability as the law requires?
The questions raised in this article indicate that it is not clear whether the initial Carbon Plan issued by the NCUC fully complies with the law.
The NCUC’s initial Carbon Plan raises many questions, some of which have been asked here. Indeed, there are certainly more questions that one can ask after reading the NCUC’s plan ⏤ hopefully, citizens, stakeholders, and lawmakers alike will continue to ask questions.
To fully understand the logic, empirical reasoning, and data behind what we see in the plan, we need to hear from the North Carolina Utilities Commission directly. Our questions need answers.
To address these concerns and transparently ensure H.B.951’s implementation, the North Carolina General Assembly should initiate oversight hearings into the NCUC’s initial Carbon Plan.