The NCUC must finalize its Carbon Plan by the end of 2022. Here's a summary of the process so far, and some key ways it appears to be breaking down.

Under North Carolina legislation (HB 951) the North Carolina Utilities Commission (NCUC) is required to finalize a Carbon Plan by the end of this year. That Carbon Plan must meet the legislative goal of reducing carbon emissions from power in the state by 70% from 2005 levels by 2030 and to net-zero emissions by 2050. The NCUC has tasked Duke Energy with:

1. Running a stakeholder process that includes at least three meetings; and
2. Filing a draft plan with the NCUC by May 16, 2022.

Intervenors, including the Southern Alliance for Clean Energy (SACE), will then have the opportunity to file their own plans or evaluations of Duke’s plan within 60 days by July 15, 2022.

So far, Duke has hosted two stakeholder meetings and held smaller meetings with three subgroups. Technical subgroup meetings covered the following topics:

• Interconnection (which turned into a discussion about transmission planning)
• Costs and operational characteristics for wind and solar
• Costs and operational characteristics for energy storage resources

SACE staff has participated in all of the stakeholder meetings and subgroup meetings so far, including as a panelist on the Interconnection subgroup meeting.

The third, and likely final, stakeholder meeting will be held on March 22. Email [email protected] if you would like to be added to the invitation list to register for the third stakeholder meeting, or check Duke’s Carbon Plan landing page at a future date here. Follow along at the NCUC under Docket #E-100, Sub 179.

So, how is that Carbon Plan stakeholder process going so far?

The short answer is not so great. Below is a summary of some of the key ways the process appears to be breaking down.

On Monday, March 7, the NCUC will get updates on the stakeholder process from Duke and other parties that have intervened and requested to provide an update. SACE, along with co-intervenors and through our representation by the Southern Environmental Law Center, has requested an opportunity to present the NCUC with an update on the sufficiency of the stakeholder process during this March 7 update conference. Intervenors can also submit written feedback and letters to the Commission about the stakeholder process. SACE joined with a variety of organizations to submit a letter to the NCUC about the stakeholder process, and we will continue to provide feedback on the stakeholder process. The March 7 update conference will be streamed here beginning at 10 AM ET.

First, let’s start with transparency

A productive stakeholder process must include at least some basic levels of information sharing. While Duke has put together numerous slides for the stakeholder and subgroup meetings, it has provided very little in the way of substantive information to which stakeholders can react.

For example, during a subgroup meeting convened to discuss the cost and operational assumptions of wind and solar, Duke made it very clear that it will not release the cost assumptions it will use in its modeling – assumptions that will be the backbone of developing the Carbon Plan. For example, stakeholders have recommended that Duke use the National Renewable Energy Laboratory’s (NREL) Annual Technology Baseline (ATB), released each year, in several previous stakeholder processes, most recently during the Duke 2020 Integrated Resource Plan (IRP). All Duke would say during this subgroup meeting was that its assumed solar cost assumptions were about 5% from the NREL ATB. But since these are forecasted costs over many years, it’s hard to interpret what that really means. Are they 5% higher in the first year and remain so throughout? Are they higher in the early years and then approach 5%?

Instead of being transparent with stakeholders, Duke has said that after it files the draft plan in May stakeholders may intervene in the docket and submit data requests. However, all of those things take time, and stakeholders only have 60 days after the draft plan is filed to submit comments or alternate plans. Duke’s refusal to provide its data assumptions prior to submitting its draft plan will seriously limit stakeholders’ ability to provide meaningful comments to the NCUC.

Without early access to the cost forecast for all resources, as well as other key assumptions, stakeholders are not able to provide meaningful input, which undermines the whole point of the legislation’s directive that the Carbon Plan be developed with stakeholder input.

Duke taking advantage of loopholes: carbon “accounting” tricks, and already planning for a delay

Based on what has been presented to stakeholders so far, Duke appears to be proposing that the best way to reduce emissions in North Carolina is by shifting those emissions to South Carolina by using some slick accounting tricks. In addition to this major red flag, Duke has already admitted that meeting the 2030 goal will be hard, and so appears to be planning to try to push the NCUC to approve delaying compliance with that goal by at least two years.

HB 951 states that the reduction goal applies to “emissions of carbon dioxide (CO₂) emitted in the State from electric generating facilities owned or operated by electric public utilities.” Duke Energy appears to be reading this quite literally to mean that if it builds new CO₂-emitting resources outside the State, that resource would have no CO₂ emissions that are relevant to the Carbon Plan. Duke staff described this as purely “accounting” during the second stakeholder meeting. Not only does this feel blatantly out of line with the intention of HB 951, but it would also put an additional pollution burden on South Carolina residents. This chart Duke presented during that meeting clearly shows that the potential to reduce NC carbon is much higher for a gas combined-cycle “not in NC” compared to a gas combined-cycle “in NC.”

In addition to the carbon accounting loophole, there is another section of HB 951 that Duke appears to be ready to manipulate. HB 951 states that “the Commission shall not exceed the dates specified to achieve the authorized carbon reduction goals by more than two years,” with exceptions to allow for delays in the construction of new nuclear or wind facilities. While not written in its slides, the commentary from Duke’s staff during the stakeholder process so far appears to be setting the utility up to rely on at least a two-year delay of the 2030 goal. While the draft Carbon Plan filed this year may not officially propose a delay of the 2030 goal, commentary from Duke staff indicating they are already planning on a delay should serve as yet another red flag that Duke does not see the Carbon Plan as a binding goal.

Duke could show that it is serious about meeting the 70% reduction by 2030 target by proposing adequate near-term carbon-reduction actions in its draft Carbon Plan in May, and then following through to be sure those near-term actions are met or exceeded. We cannot get off track before we even begin.

Now let’s talk energy efficiency

Efficiency is the key to affordability as we transition to a carbon-free energy future. Rigorous cost-benefit analysis shows that efficiency investments cost less than building new power generation and can help accelerate the retirement of outdated and uneconomic fossil fuel power plants. Fortunately, North Carolina and Duke Energy have a solid foundation of energy efficiency policies on which to build as they push forward with decarbonization.

North Carolina’s 2007 Renewable Energy and Energy Efficiency Portfolio Standard (REPS) was the first of its kind in the Southeast – and today 40% of REPS targets can be met through energy efficiency savings. Utilities like Duke can also recoup their investment in efficiency programs and earn a performance incentive based on a share of the financial savings customers receive through their efficiency programs. Customer savings for efficiency measures installed in just the past five years are expected to total over $3.5 billion. Efficiency is also included in utility IRPs: in 2020, Duke’s two utilities in the Carolinas filed IRPs that included scenarios focused on decarbonization, coal retirements, and avoiding building new gas plants. However, energy efficiency was limited to just two prescribed levels that were hardwired into each of the modeling scenarios. This meant no analysis was conducted to determine optimal levels for each scenario.

The passage of HB 951 elevated the importance of decarbonization in Duke’s plans to meet future customer electricity demand. Duke has given assurances that it will alter its approach from past IRPs, which will hopefully lead to significant improvements in the treatment of energy efficiency and other demand-side strategies. In addition to being low cost and providing direct environmental benefits, energy efficiency, demand response, and battery storage also increase grid reliability and make it easier to integrate large quantities of intermittent renewable energy. And efficiency savings are cumulative over time, resulting in an ever-increasing reduction in carbon emissions. For all these reasons, the 2022 North Carolina carbon plans should feature a significant expansion of energy efficiency – followed by increased investment, savings, and annual performance tracking.

What about transmission planning?

Another key resource that appears to be at risk of being overlooked is transmission. Duke’s transmission system was built when larger and larger centralized generation power plants were the norm. That transmission system has not had a comprehensive overhaul to make it ready for the resources of the future: even utility-scale solar, wind, and storage are much more modular and distributed than large coal, nuclear, and gas plants.

The current way the transmission system is upgraded to integrate these new resources is not sustainable because it has the potential to limit how quickly and efficiently we can deploy these clean energy resources. Each time a developer proposes a new solar project, for example, it files an interconnection request with the utility. The utility then does a series of studies that model the impacts of that new project on the transmission system. This is called the interconnection process, and it is important because it makes sure that new resources aren’t going to overload grid infrastructure. Transmission lines and substations have limits. If the proposed project would cause an issue, a proposed solution or upgrade to infrastructure is proposed, and the cost of that upgrade is paid for by the developer. Sometimes those costs are so high that the developer does not move forward with the proposed project.

The result of the current process is that the transmission system gets piecemeal upgrades that likely cost customers more than it would cost the utility to perform a comprehensive review of transmission upgrades that would benefit the system and open up locations for developers, and then provide developers with that information. The issues, and ways to solve them, have been explored in publications like Disconnected: The Need for New Generator Interconnection Policy from the Americans for a Clean Energy Grid in 2021.

This issue was brought up by numerous stakeholders, particularly in the subgroup focused on interconnection, but Duke’s response has consistently been that the transmission planning process is the jurisdiction of the Federal Energy Regulatory Commission (FERC), and so is not relevant to the Carbon Plan. Despite that fact, it is clear that comprehensive transmission planning could result in a better Carbon Plan, and Duke Energy could work with stakeholders to leverage the FERC-jurisdictional transmission planning process to improve the Carbon Plan.

Consensus from everyone but Duke: let’s look at an RTO

It became clear toward the end of the second stakeholder meeting that stakeholders, with the exception of Duke Energy itself, were coalescing around a scenario that should be included in Duke’s Carbon Plan modeling: the consideration of forming or joining a Regional Transmission Organization (RTO). Study after study, such as these from the American Council on Renewable Energy and Energy Innovation, have shown that utilities in the Southeast could cut both costs and carbon emissions by joining a wholesale market. Such wholesale markets cover most of the country, and within them utilities compete with independent power producers in a marketplace that is run by an independent, non-profit entity (the RTO).

Joining or forming an RTO would be a fundamental change to the sector in North Carolina, but one that South Carolina is already seriously considering. The South Carolina legislature has commissioned a study of various market reforms to the state’s electricity sector, including joining or forming an RTO.

Duke did not sufficiently respond to the barrage of stakeholders asking for an RTO scenario in its draft Carbon Plan in the Zoom chat. It appears that the utility will not include such a scenario in its Carbon Plan unless expressly required to do so by the NCUC.

Stakeholder involvement is more important than ever

To summarize, Duke has so far refused transparency, signaled it will take advantage of loopholes but not low-cost resources like energy efficiency and transmission, and will not consider scenarios pushed by the vast majority of stakeholders. In light of Duke’s position, it is more important than ever that stakeholders remain engaged in the process. SACE will continue to push for transparency and cost-effective clean energy over accounting measures that do not reduce carbon emissions.

Sign up for our newsletter to get updates on the process, or sign up to participate in the stakeholder process directly by emailing [email protected], and look for more ways to get involved after Duke files its draft plan in mid-May.

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