John Locke Update / Research Brief

Energy Crossroads, Part 1: Cooper’s Plan Is Unnecessary and Fraught with Costs to Consumers and the Environment

posted on in Economics, Economics & Environment, Energy & Environment, Law & Regulation, Rights & Regulation
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  • Cooper’s “Clean Energy Plan” has a very definite preference for extremely expensive, intermittent, and unreliable electricity resources, to the exclusion of viable, dependable resources
  • A report for Locke by energy researcher Jordan McGillis showed that Duke Energy’s scenario most closely aligned with Cooper’s plan would level enormous costs to consumers
  • Such reliance on wind and solar generation and battery storage carries many hidden and unconsidered environmental, supply-chain, ecological, and land-use costs

On June 23, the John Locke Foundation published “Energy Crossroads: Exploring North Carolina’s Two Energy Futures” by Jordan McGillis, deputy director of policy at the Institute for Energy Research. The paper offers a comprehensive look at North Carolina’s electricity future as envisioned by Gov. Roy Cooper and his administration’s “Clean Energy Plan” (CEP) and under alternatives that protect ratepayers from excessive dependence upon the extremely expensive, intermittent, and unreliable sources favored by Cooper.

This series discusses highlights and insights from McGillis’ paper. Given the critical importance of electricity to our very lives, not to mention our economy, policies determined to reshape the future of this entire industry deserve special scrutiny. For very good reason, the standards in North Carolina law concerning electricity provision is “adequate, reliable and economical utility service to all of the citizens and residents of the State” and, just as important, “the least cost mix of generation and demand-reduction measures which is achievable.”

The CEP aims to reduce greenhouse gas (GHG) emissions from the electricity sector in North Carolina by 70% from 2005 levels by 2030 and be “carbon neutral” by 2050. Such an imposition of policy is a long-term executive move to get around the statutory guarantees of least-cost, reliable electricity at the flip of the switch by forcing the closures of certain electricity facilities and promoting others. Closing existing facilities and replacing them with new ones is capital destruction, which is expensive in and of itself. But to replace existing capital with less efficient capital would mean ongoing higher costs. That is what Cooper’s CEP would do, and it’s the glaring problem that McGillis’ paper addresses.

North Carolina has been cutting GHG emissions already, thanks to nuclear and natural gas

But first, McGillis demonstrates how unnecessary this plan is, citing data from the U.S. Energy Information Administration and the state Department of Environmental Quality (DEQ) to show an impressive decline in GHG emissions this century. As demonstrated here, those declines include:

  • Carbon dioxide (CO2): Down 40.4% — 54.1% per capita
  • Nitrogen oxides (NOx): Down 74.2% — 80.1% per capita
  • Sulfur dioxide (SO2): Down 92.9% — 94.6% per capita

McGillis further noted:

According to the World Resources Institute (WRI), North Carolina is among the nation’s leaders in “decoupling” emissions from economic performance, having better-than-average carbon intensity and better-than-average improvement from 2005 to 2017. WRI reports that North Carolina reduced emissions by around a quarter in that period while increasing state GDP by almost a fifth. Only New York and Massachusetts experienced better economic growth with as deep of reductions in emissions.

North Carolina’s relatively low per capita electricity emissions and carbon intensity profiles can be attributed to nuclear and natural gas leading its existing electricity mix.

The CEP is a very expensive plan favoring high-cost, unreliable resources

The state’s predominant electricity provider, Duke Energy (comprising Duke Energy Carolinas and Duke Energy Progress), has presented six Integrated Resource Plans (IRPs) to the North Carolina Utilities Commission to determine the least-cost way of achieving Cooper’s goals in future decades through the CEP. McGillis discusses them all in detail, but as he explains, Duke’s Portfolio D is the plan most aligned with Cooper’s goal.

Not coincidentally, it’s also the most expensive save one, Portfolio F, which McGillis describes as “a foil” because it is “a scenario in which no natural gas generation is added to the system.” McGillis compares them all against Portfolio A, the status quo scenario without complying with the CEP. Under that base plan, GHG emissions would continue their centuries-long decline — they would just not decline to the levels arbitrarily set by a governor’s goal. McGillis estimates the cost to Duke’s customers of keeping Duke’s plans unaffected would be $79.8 billion plus $0.9 billion in needed transmission investment.

Status quo with continuing decline in GHG emissions isn’t what Cooper and his administration’s DEQ demand, however. Nor, strangely, is least-cost, reliable provision that contributes to cutting GHG emissions. Instead, as McGillis writes, they have a definite preference for generation sources “to the exclusion of viable, and, arguably, more dependable sources,” and the sources they’ve fixated upon are “wind and solar energy, with copious battery storage.”

Portfolio D, which would rely heavily on generation from wind facilities, onshore and off, as well as increasing amounts of solar production, would blow those costs sky-high. McGillis estimates the costs of this plan, which comes closest to Cooper’s CEP, at $100.5 billion to Duke’s customers plus another $7.5 billion for transmission investment. Its average annual costs to residential customers above the baseline (status quo assumption) would be $411; on commercial customers, $1,705; and on industrial customers, $48,553.

Cooper’s preferred sources have other environmental costs

McGillis shows that there are other costs, including environmental, to Cooper’s preferred wind and solar energy with battery storage, costs that are hidden. They include:

  • Wind and solar’s low capacity factors (mere fractions of those of nuclear or natural gas) require much more grid investment than other sources
  • Intermittency of wind and solar require expensive backup generation by quickly dispatched fossil-fuel sources (we have shown that this reality also necessitates greater GHG emissions)
  • Wind and solar and battery storage are heavily dependent upon rare-earth elements, which pose their own environmental problems of mining, toxicity, radioactivity, and groundwater contamination
  • These material are predominantly controlled by China, and the U.S. has no production whatsoever of roughly half of them (while being the world’s top producer of natural gas)
  • They also contribute to the growing and already severe problem of hazardous waste from spent wind, solar, and battery materials

Not to be overlooked, different energy resources have extremely different environmental and ecological footprints in terms of land use. It should not be surprising that the most efficient resources are also the most efficient in use of land:

Using modeling by the Center for the American Experiment, McGillis shows how much land is required by wind and solar just to provide the same amount of power as nuclear and natural gas.

To provide 1,000 megawatts, nuclear would need only a half a square mile (350 acres), and combined-cycle natural gas would need only two square miles. By contrast, solar would need 61 square miles, offshore wind would need 267 square miles, and onshore wind would need 576 square miles — i.e., more land than Mecklenburg County.

As McGillis writes,

A sound electricity framework would attempt to maximize a system’s affordability and reliability while minimizing the disruption it causes and risks it imposes on ecosystems and communities. The weight of the evidence suggests that nuclear energy and natural gas provide electricity in a manner consistent with that framework. Wind and solar do not.

The second part of this series will discuss McGillis’ alternatives to Cooper and DEQ’s preference as represented by Duke’s IRP Portfolio D. These alternatives offer reductions in GHG emissions without the enormity of the costs to consumers and the CEP/Portfolio D’s other environmental, supply-chain, ecological, and land-use costs.

Jon Sanders is an economist studying state regulations, that spreading kudzu of invasive government and unintended consequences. Serving as Senior Fellow of Regulatory Studies and also Research Editor at the John Locke Foundation, Jon gets in the weeds of all… ...

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