This post appears here courtesy of the John Locke Foundation
. The author of this post is Jon Sanders
- The Carbon Plan acknowledges that Duke Energy Progress (DEP) customers pay electricity rates that are 19 percent higher than Duke Energy Carolinas (DEC) customers, because DEP has more solar and less nuclear generation than DEC
- DEP would be made to take on the bulk of the plan's new solar and wind generation, which would worsen this rate disparity and harm job creation in DEP territory
- Rather than rethink requiring so much new solar and wind generation, the plan would have the Utilities Commission consider a merger of DEP and DEC to spread out the presumed rate increases
Background: 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' arbitrary, aspirational goal in certain executive orders to reduce the state's carbon dioxide (CO2) emissions from electricity generation by 70 percent from 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):
- be "reasonable"
- set forth the "least cost path ... to achieve compliance"
- comply with "current law and practice" regarding "least cost planning of generation"
- "maintain or improve upon the adequacy and reliability of the existing grid"
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."
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.
The first brief in this series discussed the plan's mandates to retain existing nuclear power plants, look into adding more nuclear, and also to retire all coal plants by 2035. The second brief discussed the mandates to add more natural gas generation and ensure more natural gas is available here. The third brief examined the plan's mandates to procure new solar generation and batteries right away and upgrade transmission facilities for interconnecting all this new solar, and it also discussed the ramifications of Duke Energy already requesting large new rate hikes mostly to pay for electric grid infrastructure improvements made necessary by the plan. The fourth brief discussed the plan's direction to Duke to model taking on onshore wind generation and study offshore wind generation.
This brief will discuss the Carbon Plan's surprising admissions:
interconnecting solar and wind facilities imposes significant costs on people
those costs are greater the more solar and wind generation is added
those costs also include negative impacts on jobs and employment
Those are outcomes the Locke Foundation's Center for Food, Power, and Life (CFPL) have been specifically warning about.
Carbon Plan admission: More solar, more wind, and more transmission upgrades to support them mean much higher rates
The initial Carbon Plan discusses various generation sources and mandates Duke Energy to plan to either retire them (coal), procure them right away (solar), look into adding some (natural gas), start project development for adding some (nuclear), and model and study adding some (onshore and offshore wind).
Elsewhere, however, the initial plan acknowledges that more solar and wind generation will be more expensive. Is that surprising?
The plan acknowledges a large rate disparity between Duke Energy Progress (DEP, which operates primarily on the eastern side of the state) and Duke Energy Carolinas (DEC, mostly western). While a DEC residential customer would be charged $106.23 for 1,000 kilowatt-hours (kWh) of electricity, a DEP customer would be billed $125.94 for the same amount. In other words, DEP customers pay 19 percent more for electricity than DEC customers. Why? That's a good question.
DEP and DEC are "separate utilities, each possessing a unique service territory, customer base, and generation, transmission, and distribution assets."
Testimony from the Public Staff "points to the impact of the significantly greater amount of solar generation developed in DEP's service territory, along with associated transmission and distribution system upgrades, as a likely significant driver of the current disparity"
in rates between DEP and DEC. At the same time, "DEC has a higher percentage of low fuel cost nuclear generation than DEP has."
In sum: DEC has more nuclear, less solar, and less need of rebuilding transmission and distribution systems to interconnect with solar than DEP. So DEC customers have significantly lower bills than DEP customers.
Carbon Plan admission: Higher rates from more renewables would mean fewer jobs
Geography means this rate disparity between DEP and DEC would worsen with interconnecting more renewables. It makes more sense to place solar facilities in the coastal plain (eastern NC - DEP's territory). The same goes for onshore wind, and of course for offshore wind. So procuring large amounts of new solar generation and adding wind generation would hit DEP customers much harder.
The reason for the NCUC to discuss solar's impact already on the significant higher electricity rates faced by DEP customers is that "DEP's service territory will continue to be the likely location for much, if not all of the solar, Solar Plus Storage, and onshore wind resource development, and any offshore wind generation will require significant transmission development and upgrades on DEP's system."
Public Staff noted that DEP's customers would "absorb a disproportionate share of the costs to achieve statewide compliance with the Carbon Plan,"
but the damage would not stop there. The resulting much higher electricity rates could make it "increasingly difficult to recruit new economic development into DEP's service territory."
Worse, "the higher electricity costs will likely drive out existing businesses."
DEP's customer base would face proportionately higher rates than DEC customers and the loss of jobs and employers to lower statewide CO2 emissions from electricity through adding expensive, unreliable renewable sources. Do these revelations not cause the NCUC to rethink solar and wind mandates? What about zero-emissions, highly reliable nuclear generation? What is the plan's answer to this dilemma?
Carbon Plan "solution"
: Assume the damage, then consider whether a merger might spread out the damage more fairly
The plan's proposed solution to this problem was not to rethink the rush into solar and planning for more onshore and even offshore wind generation. It was to declare it "appropriate for Duke to pursue a merger of DEC and DEP."
Even so, the NCUC would not "prematurely judge the prudency of the proposal."
So as far as the plan is concerned, regardless of the "least cost path" standard in law, higher rates from interconnecting solar and wind facilities are coming. The only question, then, is whether those rate hikes will be distributed equally across the state.
In our analysis before the NCUC, the Locke Foundation's Center for Food, Power, and Life (CFPL) showed that such a presumption is entirely off-base. We demonstrated that, in comparison with plans before the commission, a lower-cost path to the compliance with the law's CO2 emissions reduction goals could be charted without hobbling the grid and ratepayers with more weather-dependent, unreliable solar and wind generation. Our analysis showed it could be achieved by adding more zero-emissions nuclear power, pumped storage, battery storage, and natural gas facilities:
Model Least-Cost Decarbonization Portfolio: Nuclear, Pumped Storage, Battery Storage, and Natural Gas
The drive to add more unreliable, expensive renewable energy sources - no matter how politically favored they are - cannot take prominence over the all-important safeguards written in North Carolina law.
The law requires the plan to result in a "reasonable," "least cost path"
to emissions reductions with "least cost planning of generation"
that would "maintain and improve upon the reliability of the grid."
What do we get from the plan?
- Admitting that, because of already interconnected solar and less nuclear, DEP's rates are 19 percent higher than DEC's
- Acknowledging that the bulk of new solar and wind generation would be absorbed into the DEP resource mix
- Admitting that doing so would increase rates disproportionately on DEP customers, furthering the gulf between DEP and DEC rates and harming job creation in DEP territory
- Considering merging DEP and DEC in order to spread out the rate impacts
- Presuming those rate impacts by determining, despite the law, not to rethink adding expensive new solar and wind
As the CFPL analysis showed, and as the law expects, there's a better way.