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Clean energy advocates say a plan approved by North Carolina utility regulators last month raises serious doubts about Duke Energy’s ability to achieve the first major milestone under the state’s 2021 climate law.
Under the statute, Duke Energy is required to reduce its carbon emissions 70% by 2030 on its way to net-zero carbon emissions by midcentury.
The North Carolina Utilities Commission in December approved much of Duke Energy’s initial plan for getting there. It includes adding 3.1 gigawatts of solar capacity over the next three years, well shy of what advocates had urged.
Solar energy is widely viewed as the cheapest, most readily available way to produce carbon-free electrons. Advocates say more is needed, quickly, to meet targets consistent with international climate agreements and avoid reliance on riskier sources like hydrogen and small nuclear reactors.
With the carbon plan due to be refreshed every two years, there’s still an opportunity for regulators to change course. But the clock is ticking.
“As to how we can meet the 2030 goal, we think that is primarily with renewables like solar,” said Cassie Gavin, policy director with the North Carolina Sustainable Energy Association. “So we need to get going.”
Whether and how North Carolina regulators switch gears in the next rewrite of the Carbon Plan, due to begin in September of this year, could have implications in other states racing to meet climate goals — especially those with investor-owned monopoly utilities.
In some ways, the state’s 2021 climate law gave clear guidance for how Duke, which controls transmission and distribution in the state, should work with independent solar companies. It declared that Duke would own 55% of all new solar, giving the company a profit motive to pursue the resource while preserving a role for private developers. It required that the carbon plan include a “least cost” mix of power sources, easing fears that ratepayers might be overcharged for renewables.
But the debate over the Carbon Plan’s development featured thornier points of contention about the transition to solar energy, including the pace of interconnections and the best approach to transmission upgrades. On these matters, the utilities commission largely deferred to Duke and dismissed evidence from an array of intervenors.
Fast enough to reach the 2030 deadline?
From the start, Duke’s proposal to limit near-term solar additions to about 1 gigawatt per year was a key point of contention.
Critics said that unlike its past moves to slow interconnections, the utility offered scant technical justification for the limit. Instead, testimony shows the company relied on “engineering judgement” and “transmission planning experience.” Meanwhile, Public Staff, the state-sanctioned customer advocate, acknowledged it hadn’t conducted its own review of Duke’s connection practices.
Numerous observers said the slow pace of connections would also make it impossible for Duke to reach the deadline of 70% reductions by 2030. The company’s own models showed it would need to add 2.3 gigawatts in a single year, 2029, to achieve the target. Analysis commissioned by the Clean Power Suppliers Association, a consortium of the state’s largest solar developers, estimated the gap at 3 gigawatts. Both figures are well above the rosiest predictions of what can be done in a year.
A coalition of environmental groups and clean energy industries thus urged the commission to direct Duke to pursue 5.2 gigawatts of solar by the start of 2029, calling it a “no regrets” action that would keep portfolios that relied more heavily on renewables in the running. They also recommended an independent committee that would study Duke’s rate of interconnections.
In adopting Duke’s recommendations, the commission made no mention of such a committee, nor the Clean Power Suppliers Association’s analysis. It did note the company’s argument that line outages necessary to connect new solar projects had to be balanced to ensure continued service.
“The need to develop solar generating capacity must be balanced against the cost to customers as well as the risks to the electric system,” regulators wrote. Solar, they said, “must be interconnected and integrated in a manner that poses no risk to the reliability of the system.”
Discouraging solar development?
The commission also followed Duke’s lead on transmission upgrades.
Today, there’s broad agreement on the need to proactively revamp lines and substations to make way for a host of new solar farms — rather than make improvements in a piecemeal fashion. Fourteen such upgrades have been identified by Duke to the tune of over half a billion dollars.
“Completion of [the 14 transmission upgrade] projects is a necessary first step to interconnect the solar volumes necessary to execute the Carbon Plan,” the commission wrote in its order, “both in terms of carbon dioxide emissions reductions and in terms of the timelines” the 2021 carbon law mandates.
But, in a portentous loss for the solar industry, the commission ruled last year that the cost of the upgrades must be allocated to the projects that depend on them. Relying heavily on Duke’s testimony, the Carbon Plan reinforced that decision for 2023.
The result, said Tyler Norris, a vice president at Cypress Creek Renewables, will likely be fewer bids for new solar projects in parts of the state most suited for them, and higher costs of solar overall.
“The order effectively discourages developers from pursuing projects in the exact zone that everyone agrees offers the most accessible and cost-competitive solar resource,” Norris said. “That means less supply of highly competitive solar projects. Less supply, higher costs.”
‘It’s premature to speculate’
Solar costs are critical, because at present the only way Duke can meet the 2030 deadline is if they come in lower than expected.
Under a “volume adjustment mechanism” approved for 2022, if prices are 10% below projections, procurement could increase up to 20%.
If similar adjustments were made in 2023 and 2024, Duke had testified, the company would need just 1,680 megawatts in one year to reach its own projections for meeting the 70% emissions reduction target — within the realm of possibility.
Regulators cited this testimony from the company and ordered it to prepare accordingly. “The commission directs Duke to design the future solar procurements to incorporate a [volume adjustment mechanism],” it wrote, that would allow for increased levels of solar energy.
In an email after the Carbon Plan’s release, Duke declined to share details of how and when it expects to achieve 70% emissions reductions.
“Since the plan will be updated every two years,” spokesperson Bill Norton said, “it’s premature to speculate on the amount of solar required to come online specifically in 2030 to meet the interim target.”