Why the Carbon Plan flunked affordability and reliability

• When the General Assembly passed the Carbon Plan law (House Bill 951) in 2021, we warned that it could work only by strict adherence to the law’s least-cost and reliable guardrails
• Early Carbon Plan orders have strayed far from affordable and reliable resources, and it turns out the modeling was aimed at reaching the plan’s interim goal of 70 percent reduction in CO₂ emissions regardless of affordability and reliability
• Senate Bill 261 would eliminate the interim goal, an idea that could save ratepayers $13 billion, and it could perhaps do even more

In 2021, the General Assembly passed House Bill (HB) 951 to require electricity generation in North Carolina to reach “carbon neutrality” by 2050. This Carbon Plan law also set an interim goal of reaching 70 percent reduction from 2005 levels in carbon dioxide (CO₂) emissions from electricity generation by 2030. Without the Carbon Plan, however, the state had already cut its CO₂ emissions by more than half, calling into question the necessity of the Plan.

At the time of its passage, I warned that the law would result in higher power bills. It shifts state policy away from requiring the “least cost mix” of electricity resources and ensuring “adequate, reliable” service, and it also requires closing and replacing working power plants (coal).

The need for strict adherence to affordability and reliability

Nevertheless, I pointed out that the law could ward off unnecessary rate hikes and uphold grid reliability, but only by “strict adherence to the law’s text” — specifically, its least-cost and reliable guardrails. The law requires utilities to take the “least cost path” toward carbon neutrality that will “maintain or improve upon the adequacy and reliability of the existing grid.” I wrote:

Strict adherence to “least cost path” would, as demonstrated in Locke’s “Energy Crossroads” report, require more efficient, reliable low-emissions (natural gas) and zero-emissions (nuclear) sources.

The law does point back to the “least cost mix” standard in long-term planning with regard to the Carbon Plan, and it includes that it must also “Ensure any generation and resource changes maintain or improve upon the adequacy and reliability of the existing grid.” Strictly followed, such a standard would prevent a great amount of expensive new solar and wind generation from being placed on the grid. (Emphasis in original.)

In 2022, the John Locke Foundation’s Center for Food, Power, and Life (CFPL) presented modeling to the North Carolina Utilities Commission (NCUC). The CFPL’s model showed that the least-cost portfolio that maintains grid reliability would be mostly nuclear energy, with some battery storage, hydroelectric power, and a modicum of solar (the pre-existing solar facilities).

Model Least Cost Decarbonization Portfolio (2022): Total Installed Capacity by Year

Constrained modeling steers clear of affordable, reliable resources

Unfortunately, the Carbon Plan’s implementation seemed to go awry from the beginning. The initial Carbon Plan was very different from the model least-cost portfolio the CFPL presented. The same is true for the most recent (November 2024) Carbon Plan order from the NCUC. To replace the more than 8,000 megawatts (MW) of baseload coal remaining, the NCUC would have Duke add just 600 MW of baseload nuclear power and only 3,620 MW of baseload/dispatchable natural gas resources but approximately 10,000 MW of solar, wind, battery, and hydropower resources (none of which is capable of baseload generation).

Going forward also requires rethinking whether the 2050 goal of carbon neutrality should be an absolute mandate as opposed to an aspirational goal subject to, rather than superseding, affordability and reliability.

Since the NCUC’s orders diverge so significantly and obviously from upholding the least-cost and reliable guardrails, it falls on the legislature to ensure the strict adherence to the Carbon Plan that we called for back in 2021. Perhaps it is happening. In a March 11, 2025, meeting of the state Senate Committee on Agriculture, Energy, and the Environment, Sen. Paul Newton (R-Cabarrus), who championed adding those guardrails to HB 951 when it came before the Senate, discussed several problems with how the NCUC was implementing the law.

Newton, who has since taken the position of general counsel at UNC–Chapel Hill, explained how the NCUC’s modeling elevating the law’s interim goal of 70 percent reduction in CO₂ emissions by 2030. Doing so, he explained at length, “drove the commission to be very short-sighted” and basically “cut off natural gas.” Already limited by an assumed lack of new natural gas pipeline capacity in the short term (an assumption that is changing with the Mountain Valley Pipeline Southgate project nearing completion), the model was not allowed to pick natural gas after 2034, when new nuclear capacity and offshore wind capacity would start being accessible, leaving little to no room for natural gas in the mix. Thus, natural gas was essentially excluded in both the short and the long terms. 

Even more concerning, Newton revealed that the NCUC modeling would essentially “charge a carbon tax for every metric ton of carbon [dioxide] after 2034.” The premium would be extremely high: “$10,000 per metric ton of CO₂ emitted from any source on the grid after the interim goal date” (emphasis added). To be sure, there is nothing in the Carbon Plan law or any other state law that provides for a carbon tax.

Without all the constraints, Newton said, “[t]he model will pick natural gas and nuclear resources every time when allowed to do so because they’re at least-cost” — as the CFPL’s model did. Instead, the model was made to select less reliable and more expensive options. 

How much more expensive is jaw-dropping.

Newton asked the Public Staff to do a model run without the interim goal while keeping the 2050 goal of carbon neutrality. Compared with the current model, this model — not encumbered with satisfying the interim goal — would save electricity consumers $13 billion.

New legislation would get rid of the interim goal, but could it do more?

Newton’s comments came in introducing legislation to address the problem: Senate Bill (SB) 261, co-sponsored by Senate Pres. Pro Tempore Phil Berger (R-Rockingham) and Sen. Lisa S. Barnes (R-Franklin). The bill, which has passed the Senate, would eliminate the Carbon Plan law’s interim goal. (It would also, however, have customer rates pay for construction work in progress (CWIP) on baseload generating resources, which could present challenges to maintaining affordability. If allowed, it would need to have provable, independently verified cost savings to ratepayers and require any bill impacts to be limited to, for example, a couple of percentage points above the Consumer Price Index.)

The primacy of least-cost and reliable service clearly merits eliminating the interim goal, of course. Doing so would save ratepayers $13 billion and preserve grid reliability. Nevertheless, going forward also requires rethinking whether the 2050 goal of carbon neutrality should be an absolute mandate as opposed to an aspirational goal subject to, rather than superseding, affordability and reliability.