Can clean-energy advocates stop new gas plants in North Carolina?

For more than a year, critics of Duke Energy have been asking North Carolina regulators to reject the utility’s $100 billion plan to meet a state mandate to cut its carbon emissions by 70 percent from 2005 levels by 2030.

The reason? Duke’s plan for subsidiaries Duke Energy Carolinas and Duke Energy Progress, released early last year, calls for building more than 3 gigawatts of new fossil-gas power plants over the next decade — one of the biggest gas-plant buildouts being proposed by any U.S. utility.

Despite these concerns, the North Carolina Utilities Commission released a carbon plan on December 30 that largely adheres to Duke’s gas-heavy vision. If the state follows that path, Duke stands to reap significant financial rewards for decades by earning a steady rate of return on the cost of building those new gas plants.

Critics say that Duke has justified this buildout by misleading regulators and the public about the cost and reliability value of those gas plants, however. They also say Duke has downplayed the potential for investments in solar and wind power, energy storage and energy efficiency to deliver a far more cost-effective solution.

Allowing Duke to move forward could saddle millions of the utility’s Carolinas customers with a polluting, overly expensive and potentially less reliable resource mix than those carbon-free resources could provide, they say.

Now these critics — which include the state attorney general and at least eight local governments as well as consumer advocates, clean-energy trade groups, environmental activists and climate scientists — are getting ready for the next round in the fight over Duke’s plan.

NCUC’s December order, while it gives Duke permission to begin studying the potential addition of up to 2 gigawatts of new gas-fired power plants by 2029, is not a final decision. The NCUC will launch a new carbon-plan proceeding later this year, giving Duke’s critics ​“multiple opportunities to get a better reflection of the true potential of renewables and show that these gas plants aren’t necessary for reliability,” Will Scott, director of Southeast climate and energy for the Environmental Defense Fund, told Canary.

“Most of the parties are looking to get things right in the next round,” he said. 

The battle over new gas versus clean energy

One of the biggest points of contention in the carbon plan has been Duke’s treatment of the most cost-effective alternative to gas power plants — large-scale solar farms paired with lithium-ion batteries that can store and shift that solar power to serve the grid during times of peak demand in summer and winter.

Duke’s carbon-plan proposal would set a limit on how much new solar and solar-storage capacity it would add to its Carolinas grid, capping the annual total at 750 megawatts in 2026, 1,050 megawatts in 2027, and 1,350 megawatts per year from 2028 onward. Its critics have attacked this limit, pointing out that Duke has already been adding an average of 1,000 megawatts per year of solar to its system over the past several years.

Duke has said that it must limit new solar additions due to constraints in capacity for interconnecting to its transmission grid, and has asked regulators to approve a major grid expansion to increase that capacity in the latter part of the decade. It has also said that it needs to build new gas plants to ensure that its grid can reliably deliver energy during summer and winter peaks in electricity demand as it seeks to close all of its coal-fired power plants by 2035.

Duke wrote in a December 30 statement that its solar interconnection caps and new gas-plant additions are needed to ​“reduce risk for our customers while balancing affordability and reliability,” and that its plan represents ​“a diverse, ​‘all of the above’ approach that is essential for long-term resource planning.”

But that’s not true, according to multiple studies conducted by Duke opponents. A study by Synapse Energy Economics commissioned by the North Carolina Sustainable Energy Association, the Southern Alliance for Clean Energy, the Natural Resources Defense Council and the Sierra Club found that a more solar- and battery-heavy portfolio could save $700 million by 2030 compared to Duke’s plan while maintaining a reliable grid. Similar studies by The Brattle Group for the Clean Power Suppliers Association trade group and by Strategen for the state Attorney General’s Office also found that solar and batteries were more cost-effective than new gas plants.

Solar and solar-battery systems don’t offer Duke the same financial returns as gas plants, however. Under North Carolina law, Duke must allow third-party developers to build at least 45 percent of the solar and solar-battery systems procured in the state. By contrast, the utility is permitted to be the sole builder and owner of other types of power plants, offering it a larger rate of return for those resources than for the solar and battery-supplied electricity it purchases from third parties.

The NCUC’s new carbon plan largely hewed to Duke’s preferred portfolio over the alternative plans presented, as Maggie Shober, research director of the Southern Alliance for Clean Energy, explained in a blog post.

Lindsey Hallock, Southeast deputy program director for nonprofit Vote Solar, highlighted other disappointments in the NCUC order. The commission declined to push the utility to increase its targets for improving customer energy efficiency, accelerate the closure of its coal power plants, or consider the global-warming impacts of methane leakage from its fossil-gas system, she told Canary in an email.

But Hallock also noted that the commission was under enormous time pressure to complete this carbon plan by the end of 2022 as required under state law. ​“It is hard to know whether the NCUC truly agrees with Duke’s proposal, or whether the timeline on this first iteration was so short that they felt they didn’t have enough time to embrace and create an alternate vision,” she wrote.

That same rush should not apply to the next round of the carbon plan, Shober noted. The commission will be accepting alternative plans and other testimony this spring in advance of a May 2023 hearing, months before the September 1 deadline for Duke to file its own revised carbon plan and long-range resource plan, and will have until the end of 2024 to issue its next carbon plan.

In many respects, the NCUC ​“basically kicked the can down the road” with its December order, Jim Warren, executive director of nonprofit advocacy group NC Warn, told Canary.

As the NCUC works on the next phase of the process, it will have more information to consider — not just from Duke critics but also from Duke itself. The utility commissioned a study from the U.S. National Renewable Energy Laboratory that found Duke could add significantly more solar, wind and energy storage than called for in the plans the utility submitted to the NCUC. That study was completed early last year, but Duke did not submit it to the carbon-plan proceeding until after the deadline for considering evidence for the now-completed phase of the proceeding, raising the ire of critics who said it should have informed the commission’s decision.

Jake Duncan, Southeast regulatory director for Vote Solar, highlighted that any new power-plant construction plans will have to be approved in separate proceedings before regulators in either North Carolina or South Carolina, depending on which state the plants are to be built in. The fact that Duke’s two subsidiaries operate in both states complicates the regulatory process and will ​“have a significant impact on Duke’s implementation,” he said in an email.

How the Inflation Reduction Act could tip the balance on clean energy over gas

Another major factor to be considered is Congress’ passage of the Inflation Reduction Act this summer, after North Carolina began its carbon-plan process in late 2021. The act makes the case even stronger for replacing gas-fired power plants with new clean-energy alternatives, said Warren.

The law provides tax credits and incentives that will make solar, wind, batteries and customer energy-efficiency investments much more cost-competitive than they otherwise would have been — so much so that those resources will be a more cost-effective choice than new gas-fired power plants for almost any U.S. utility, according to a recent analysis.

Scott noted that the benefits of these tax credits and incentives have been built into a handful of utility resource plans since the law was passed. Michigan utility DTE Energy filed a long-range plan in November that forecasts an estimated $500 million in savings over 20 years by shifting to a portfolio that’s far more heavy on solar, wind and batteries, for example.

“With other utilities already anticipating nearly half a billion dollars in savings for their customers from the IRA, we’re hopeful that Duke will take a hard look at the available tax credits and meet with stakeholders to maximize customer savings by investing in clean energy, storage and other technologies,” he said.