Duke Energy’s Carbon Plan: What Missed the Mark and What Should Be Changed To Protect Ratepayers

by | Jul 20, 2022 | Uncategorized

In October 2021, Governor Cooper signed House Bill 951 into law. Among other provisions, HB 951 codified the carbon reduction goals set under the state’s Clean Energy Plan: 70 percent power sector emissions reduction (from 2005 levels) by 2030, and net-zero by 2050. It requires that the N.C. Utilities Commission (NCUC) develop a Carbon Plan by the end of this year that outlines a least-cost path to achieving emissions goals.

On May 16, 2022, Duke Energy filed a proposed Carbon Plan with the NCUC. Public hearings are currently underway to contribute to the Carbon Plan development process. CCEBA appreciates the development work and applauds certain components of Duke Energy’s proposal including (1) the consolidation of system operations across Duke Energy Progress (DEP) and Duke Energy Carolinas (DEC); (2) a near term execution plan to begin implementation of HB 951 goals; and finally, (3) transmission upgrades in areas Duke Energy has identified as “The Red Zone”, which are critically important to connecting distributed energy resources to the grid. 

Despite these positive aspects of Duke Energy’s Carbon Plan, their overall draft misses the mark. The primary goal of HB 951 is to reach a 70 percent reduction by 2030, with 2050 neutrality as a secondary target. Duke’s Plan conflates the 70 percent goal with full neutrality and offers two pathways that instead center a 2050 net-zero target. Of these, only one pathway includes a portfolio that actually hits 70 percent by 2030. The second pathway includes three less-rapid portfolios: one achieving 70 percent by 2032 and two more aiming for 2034. 

While there are limited exceptions to HB 951’s 2030 date, Duke Energy’s second pathway assumes extra time without showing such time is necessary or allowed under HB951. Let’s take a closer look at a few other issues with the proposed Carbon Plan:

  • There are inconsistencies in Duke Energy’s Carbon Plan modeling and their filings.

For some Plan data, there are inconsistencies in proposed capacity between stated necessity and what is actually included in the portfolios. For example, Duke Energy states a specific amount of energy storage required to meet HB 951 targets, but then does not include enough megawatts (MW) in its pathways. The numbers also fall lower than in similar portfolios from Duke Energy’s 2020 Integrated Resource Plan (IRP).

  • In all proposed portfolios, Duke Energy imposes an arbitrary cap on initial solar interconnection. 

HB 951 specifies that utilities must take “all reasonable steps” to meet emissions targets, and utility scale wind and solar are the two least cost forms of generation. Why, then, are there maximum limits on the amount of solar allowed to connect annually? In both Duke Energy’s high-interconnection (by 2030) and low-interconnection (by 2034) scenarios, solar is limited to 750 MW (2027), 1050 MW (2028), and 1350 MW annually from 2029 and beyond. In the near term, Duke Energy plans to pursue the low-procurement approach totaling 3,100 MW by 2024. These limited numbers are based on Duke Energy’s historic capabilities, not their potential capabilities. The solar caps are a constraint on their modeling and prohibit a true comparison of costs and portfolio possibilities. That leads us to our next point:

  • Duke Energy is relying too heavily on pie-in-the-sky technologies that are still too far down the road in terms of development.

The Carbon Plan’s capped solar modeling is not the only thing inhibiting an accurate least-cost determination. Duke Energy’s proposal also relies on unproven, immature technologies which may not develop for years (if at all). The portfolios rely on new nuclear, including small modular reactors (SMRs), particularly after 2035. SMRs are a particular technological gamble–though potentially less costly and less dangerous than traditional nuclear plants, there is not yet a single SMR operating in the United States. And, with less than 50 in development around the world, large-scale operationalization is hard to predict. On the whole, new nuclear energy is an uncertain venture. Existing projects have proven to be expensive (think about the never-completed V.C. Summer nuclear plant), and the technology will have difficulty being cost-competitive with solar and wind.

Duke Energy’s Plan also draws on green hydrogen, a technology that does not have the infrastructure or market to even consider as a pre-2030 strategy. As a precursor to green hydrogen deployment, Duke Energy proposes to build new natural gas resources, which could potentially be converted to hydrogen assets later down the road. Building more fossil infrastructure is counterintuitive to the immediate goal of emissions reductions. As gas has become a global commodity, prices have soared and are likely to remain both high and volatile. Gas resources will also likely become stranded assets and cost-inefficient long before green hydrogen is a competitive (or even available) fuel.

If SMRs and green hydrogen technologies do not develop as hoped, the opportunity to achieve carbon reduction earlier and at a lower cost to ratepayers is completely lost.

  • Duke is not adequately utilizing existing clean, cost-effective technologies

It is important to consider all possible options to reduce carbon emissions, but speculative, costly choices should not be used in lieu of least-cost, clean, and mature technologies. Solar energy is rapidly scaling and becoming the cheapest form of energy across the world. Energy storage (stand-alone or paired with solar) increases the efficiency and reliability of renewable generation. Wind–and particularly offshore wind–is underutilized and lumped in with experimental options in Duke Energy’s plan. Yet, wind is an established and increasingly cost-effective generation technology. Why not give more attention to further developing and utilizing these resources to their fullest potential?

In short, limiting proven clean and less expensive technologies such as solar and wind while relying on technology to rapidly improve and costs to rapidly fall in advanced nuclear to make up the gap between 2035 and 2050 is a strategy that risks failure and massive expense to ratepayers. On the other hand, continuing to aggressively develop mature technologies while exploring and preparing the way for future technology to deal with the last 10% of carbon emissions is a win-win for ratepayers – if less profitable for utility shareholders.

House Bill 951 is essentially a three-legged stool with a goal of carbon reduction along with least cost and reliable energy generation. The North Carolina Utilities Commission will consider all of these issues in its decision making. With more transparency on issues like transmission, we have the lowest cost, safest generation to stake making a difference for North Carolinians today.