North Carolina regulators reject the dirty assumptions in Duke’s latest plan

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Large monopoly utilities in the U.S. South often wield a high degree of political power in state governments. Georgia Power is referred to as the “fourth branch of government” in the state that it serves, and in North Carolina, the power of Duke – which serves 7.4 million retail customers in six states and brings in $24 billion in revenue including its power plant business – is hard to over-state.

But across the South, state legislators and regulators are increasingly standing up to these power companies, and North Carolina is no exception. On Tuesday the North Carolina Utilities Commission (NCUC) ordered Duke to make significant changes to how it models resources in the post-2020 period for its two utilities in the state – even while accepting Duke’s 15-year Integrated Resource Plan (IRP) for Duke Energy Progress (DEP) and Duke Energy Carolinas (DEC).

In the commission’s words:

The Commission does not accept some of the underlying assumptions upon which DEC’s and DEP’s IRPs are based, the sufficiency or adequacy of the models employed, or the resource needs identified and scheduled in the IRPs beyond 2020.

The 97-page order requires that Duke consider three main things in its models for future planning:

  1. The potential retirement of its coal plants and their replacement with other resources
  2. 60-70% emissions reductions by 2030 in line with state greenhouse gas reduction targets
  3. The potential inclusion of battery storage

Additionally, the utility must debate with intervenors its use of a 17% winter reserve margin, instead of the 16% margin that some witnesses have argued is more appropriate.

 

Coal plants must compete

Many of you reading this may be asking if you read this correctly: that the big change is that Duke must consider retiring uneconomic coal plants. You did. According to Sierra Club, Duke has assumed in its IRPs that it will run its seven coal plants in the state regardless of whether or not doing so is more expensive than alternatives until they have been fully depreciated; in other words Duke plans to shut them down when it is in the interest of the utilities to do so, not their ratepayers.

And for some plants, this could mean decades. “The simple answer is that they are never fully depreciated, because they are always having to spend money to maintain them,” notes Dave Rogers, the southeast director for Sierra Club’s Beyond Coal campaign.

Rogers says that while Duke is planning to close one coal plant in 2024 to comply with a legal agreement, that the next one is not scheduled to retire until 2028, and that according to the latest schedule Duke was planning to run some plants until 2048. This is despite falling capacity factors for some plants – which like coal plants in other parts of the nation simply can’t compete.

In this portion of the order, regulators are clear that Duke must “remove any assumption” that these units will run, and consider whether or not it can reduce costs by replacing these with supply- or demand-side solutions.

 

CO2 reduction: 40%? 60-70%?

CPUC is also calling on Duke to plan to meet state goals for greenhouse gas reductions, which implies that until now Duke has simply been ignoring these.

The numbers in this portion of the order are conflicting. In the conclusion (p. 86-92) section of the order the Commission cites Governor Roy Cooper’s (D) executive order calling for 40% emission reductions by 2025, however it then states that Duke should model plans for its two utilities that result in a 40% reduction by 2030 – five years later.

To add to the confusion, in Appendix A the Commission orders Duke to model carbon reduction goals based on the state’s Draft Clean Energy Plan. However, likely due to the relative difficulty of decarbonizing transit in the state, these call for the electricity sector to do the heavy lifting, and achieve 60-70% emissions reductions by 2030.

“It’s very confusingly written,” notes Sierra Club’s Rogers. But either way, once these are modeled, Duke will then be required to compare the costs associated with these new resource portfolios versus Duke’s current plan. Additionally, NCUC has ordering Duke to factor in the cost of disposing of the coal ash that it is making by continuing to run its coal plants, and of course the anticipated cost savings of replacing these.

It is notable here that solar is well poised to meet the state’s goals. When Governor Cooper announced Executive Order #80, pv magazine concluded that replacing the state’s coal fleet with 25 GWdc of solar would be a straightforward path to meeting the 40% target.

 

Holding feet to the fire

The Commission has also noted that Duke did not model the incorporation of energy storage as part of its supply side resources, and is ordering Duke to go provide “a more complete and thorough assessment” of battery storage in both future IRPs and IRP updates. This includes the “full value” that was proposed by the North Carolina Sustainable Energy Association (NCSEA).

All told, this is a shift of course for NCUC. Sierra Club expressed gratitude that the Commission did not “rubber stamp” Duke’s plans, and the reason for this may lie in who is running the Commission. Under the previous administration NCUC was chaired by a lawyer who had worked for utility companies, but Governor Roy Cooper conducted a clean sweep of Commission seats, and Sierra Club statements suggest that this removed a bias towards utilities.

“The new Commission is more balanced in terms of the concerns of all intervenors,” Rogers told pv magazine.

However, the matters raised by NCUC are still far from resolved, and Duke is proceeding with its current plan, based on coal-friendly assumptions, for the remainder of 2019 and 2020. There is also the question of how the details will come out in Duke’s modeling of shutting down its coal plants and reducing emissions, both things which the company clearly does not want to do.

Regardless, Sierra Club is calling this a win. “It’s way past time for Duke to get serious about resource planning that isn’t centered on several more decades of burning dirty, climate disrupting fossil fuels,” stated Rogers. “We’re confident a thorough analysis will show what we already know: cheap, clean resources like solar, paired with robust investments in energy efficiency and battery storage, will beat out the dirty fuels of the past every time.”