Climate takes a backseat as the NCUC adopts Duke's preferred approach of meeting new load growth with a massive fossil gas buildout over decarbonization

On Friday, November 1, 2024, the North Carolina Utilities Commission (NCUC) issued its Order in the 2024 Carbon Plan and Integrated Resource Plan (CPIRP). Here’s a quick reminder of how we got here and why we think this Order is a bad deal for North Carolina communities.

North Carolina legislation (HB 951, passed in 2021) requires that the NCUC develop a Carbon Plan that achieves a 70% reduction in carbon emissions from 2005 levels by 2030 and net zero by 2050, and that the NCUC reviews that plan every two years. The NCUC enacted a Carbon Plan process in 2022 modeled on the existing rules around Integrated Resource Planning: the utility files a resource plan; intervenors file comments; and the Commission makes a decision. The initial Carbon Plan was adopted in the NCUC’s final order in the last days of 2022.

In the fall of 2023 and early in 2024, Duke filed its updated resource plan with the NCUC. Most notable in the plan is that it included a much higher load forecast than previous plans, and an even higher amount of new fossil gas power plants. SACE, with fellow intervenors, made the case that continuing to build new fossil fuel power plants is risky, expensive, and based on flawed analysis.

The NCUC’s final order adopts Duke’s preferred approach of meeting new load growth with a massive fossil gas buildout over decarbonization, despite clear intent of state legislation; despite clear evidence from witnesses on the risks involved; and despite the clear impacts climate change is already having on fellow North Carolinians. Unfortunately, this is a huge step back for efforts to reduce carbon emissions by 40% by 2030 to avoid the worst of climate change. Beyond the obvious climate impacts, this move will also lock North Carolinians into a bad deal: continued reliance on risky, unreliable, and expensive fossil fuels.

Climate Change Takes a Back Seat

Climate change is top-of-mind in this state following the devastation wrought by Hurricane Helene. While the state grapples with climate change vulnerabilities and destruction from the mountains to the sea, the NCUC’s order allows the state’s single largest emitter of greenhouse gases – Duke Energy – to dictate the terms of what is possible when it comes to decarbonizing the grid.

References to climate change do appear in the NCUC’s 183-page order 8 times: the first 7 times are at the beginning, where the Commission documents that public commenters brought up “climate change” at the public comment meetings held in April. Then climate change disappears while the Commission explains what it is deciding and why. It only reappears in the second to last page – Commissioner Jeffrey Hughes’ concurrence with the Commission’s decision. 

I would have liked to see more acknowledgement that producing carbon emissions, whether directly through the combustion of gas or coal or indirectly through the production and delivery of those fuels, carries a significant economic cost in terms of climate change. (…) However, future CPIRPs should include additional cost analyses in which costs are defined more broadly as not just direct customer costs but also indirect costs (and benefits) that we are all incurring through energy generation. As these external costs increase and become impossible to ignore, it is my hope that future analysis and the orders that arise from them will include some representation of these costs and acknowledge that, while a delay in capital investments may lead to a lower customer bill in the short term, it also likely carries an increase in cost in terms of climate warming impact. ~Commissioner Jeffrey Hughes, concurrence with NCUC 2024 CPIRP Final Order

While he agrees with the Commission ruling, he laments that there is no acknowledgment of the climate costs of producing, delivering, and combusting fossil fuels.

Commission Finds New Ways to Dismiss Non-Duke Experts

Countless intervenors built a record to disprove Duke Energy’s claims that a significant fossil gas buildout is the only path forward. The hearing with expert witness testimony lasted more than two weeks. The transcript consists of 24 volumes. The record, created by intervenors who overwhelmingly support more aggressive decarbonization, was immense. The expert witnesses who provided testimony for the intervenors were just that – national experts in the fields of clean energy integration, clean energy development, transmission planning, behind-the-meter and demand side programs, and other non-combustion alternatives that can meet load growth – often faster than new gas can.

We invested this much time and attention in this process because we recognize the existential importance of the energy choices we make. But in the end, the Commission dismissed it all and chose the path of least resistance: adopting a settlement between Duke and the Office of Public Staff as the foundation of the Order.

For example, throughout the Order, the NCUC cited the lack of alternative modeling as a reason for approving Duke’s resource plan. However, past history suggests that presenting alternative modeling to this Commission is of questionable value. Our analysis presented to the Commission during the 2020 IRP review showed that Duke was missing an opportunity to achieve 70% carbon emissions before 2030 while lowering customer bills. While load growth assumptions have changed since then, if Duke had spent the last four years deploying more clean energy as we recommended, North Carolina would be better positioned to meet current load projections without the need for more fossil fuels.

Likewise, in the 2022 Carbon Plan we submitted alternative modeling that showed pathways to reach the 70% reductions by 2030 and that cost less than Duke’s proposal. The Commission disregarded that modeling and similar independent modeling from three other parties: the Attorney General, the solar industry, and large tech customers. Instead, the Commission’s first Carbon Plan was based only on Duke’s modeling.

Developing alternative modeling is an expensive endeavor. Therefore it is reasonable for the Commission to expect that intervenors will not continue to present alternative modeling unless that modeling is seen as having an impact on Commission outcomes. If the Commission continues to hold a football out for intervenors and then pulls it away, at some point, intervenors will stop trying to kick the football. In fact, the witness for the Attorney General was asked during the hearing why he did not undertake independent modeling in this docket, and he said, after noting the comprehensive modeling that he presented in the first Carbon Plan hearing, “We didn’t see any sort of reaction to the modeling in that case, you know, what would be the point of doing it here?”

As a reminder, statute is clear that the Carbon Plan is NCUC’s Carbon Plan, not Duke Energy’s.

Overview of the Carbon Plan Order

The Order largely approves a settlement between Duke Energy and Public Staff on many issues. In case you’re wondering what that means, here are several lists of what is included in the Order, separating out what the Commission ordered Duke to do and what it ordered to be included in the next Carbon Plan.

• The NCUC waives the requirement that Duke file at least one resource portfolio that meets the legislature’s target of reducing carbon emissions by 70% by 2030
• Directs Duke to procure the following:
  • 3,460 MW of new controllable solar to be online by 2031
  • 1,100 MW of battery storage, including 475 MW of standalone and at least 625 MW paired with solar, to be online by 2031
  • 1,200 MW of onshore wind to be online by 2033
  • 900 MW of new fossil gas combustion turbine capacity to be online by 2030
  • 2,720 MW of new fossil gas combined cycle capacity to be online by 2031
  • 1,834 MW of pumped storage hydro at Bad Creek II to be online by 2034
  • 600 MW of advanced nuclear, half to be online by 2034 and half to be online by 2035
  • 2,400 MW of offshore wind, 800-1,100 MW to be online by 2034, and 2,200-2,400 to be online by 2035
• Directs Duke to use an energy efficiency target of 1% of eligible sales
• Adopts Duke’s delayed coal retirement schedule
• Adopts Duke’s increased planning reserve margin of 22% by 2031 and Duke’s assumed capacity credit for generation resources
• Continue to pursue full merger of DEC and DEP territories with a target completion date of January 1, 2027

The Order requires several additional reports or updates before the next CPIRP:

• It requires Duke to file semiannual reports to the Commission on large load additions (anything over 20 MW), with the first report due on April 15, 2025
• It requests that Duke file for approval a non-residential PowerPair solar plus storage program
• It requires Duke to provide periodic status updates on transmission planning in a separate, new docket
• It requires Duke to hire an independent consultant to advise on the potential for EIR to provide ratepayer benefits, and file a report with the Commission by May 1, 2025 (note that Duke must apply for EIR by September 2026)

The Order requires the next CPIRP to:

• Include informational modeling of a combined DEC and DEP system
• Report on whether Duke and Public Staff reached consensus on using predictive methods for load forecasting
• Include an updated coal retirement forecast
• Update the Resource Adequacy Study
• Include a sensitivity for informational purposes that includes modeling PowerPair as a selectable supply-side resource
• Include a report on Duke’s evaluation of the interconnection of solar at existing utility-owned sites in an effort to reduce costs and development timelines
• Include a report on Duke’s engagement with operating solar QFs with contracts expiring within 60 months on potential procurement
• Include a report on Duke’s progress securing firm fossil gas supply for proposed new gas power plants
• Include a scope for a Hydrogen Pilot Project to be developed jointly by Duke and Public Staff
• Include an explanation if Bad Creek II pumped hydro storage cannot be completed by 2034 or if estimated costs increase by 15% or more
• Include a report on its progress executing the new advanced nuclear development activities and the feasibility and associated costs of bringing 1,200 MW of new nuclear online by 2036
• Model a large light water reactor, such as AP1000, as a selectable resource in its next CPIRP
• Include an explanation on Grid Enhancing Technologies (GETs)
• Include a study of energy-only (or ERIS) interconnection option, which could allow for the interconnection of larger values of solar on the grid

Points of Progress

The Order sets a performance target for energy efficiency, which many utilities across the region do not have. However, the target of 1% of eligible sales is low, especially since it allows much of the industrial load to opt out of the denominator, meaning the target is actually below 1% of total retail sales.

There are a few things we are looking forward to in the coming months or the next CPIRP, which Duke will file in the fall of 2025: proposal of a non-residential PowerPair program; regular reports on large load growth; updates on transmission planning; an independent look at EIR; modeling PowerPair as a resource in the next CPIRP; and evaluation of solar at Duke’s existing sites in the next CPIRP.

Stay tuned. We will continue to cover this issue as it progresses.