North Carolina’s Current Energy Environment

North Carolina has a highly regulated monopoly-controlled electricity market where investor-owned utilities (IOUs) make most of the decisions about where our power comes from. North Carolina does not have a free market where energy technologies can enter and compete on price and quality. Third parties then cannot sell energy in North Carolina directly to businesses and consumers unless it is within a small window of opportunity made available in the energy statutes. There has been some movement to restructure North Carolina’s energy market, but no changes have been made yet. A bill was proposed in early 2021 to create a study on the impacts of wholesale electricity market reform, but died in the NC House.

North Carolina’s military installations operate within this statewide structure and focus their energy initiatives in accordance with the state regulatory environment.  Any energy projects – including renewable energy projects – are coordinated between the military, the state, and developers to ensure they do not conflict or interfere with the military missions.

North Carolina’s energy mix includes nuclear energy (31 percent), natural gas (33 percent), coal (21 percent) and renewables (15 percent) based on 2021 data from the U.S. Energy Information Administration. These numbers are influenced by economic change and actions at the state level. For example: coal usage has declined five percent in the past four years, and will only continue to fall in the near future. Current coal-fired generation is rapidly becoming uneconomical – not to mention climate unfriendly – in the face of cost-effective resources. In addition, new coal-fired capacity is much more expensive to build and more difficult to site and permit than natural gas or renewable facilities. Coal’s decline in NC was cemented with the signing of House Bill 951 in October 2021 (see more below). This law now mandates closing most of NC IOU’s coal-fired power plants by 2030. North Carolina has two critical pieces of energy legislation that have primarily framed its regulatory climate:

• The 2007 Renewable Energy & Energy Efficiency Portfolio Standard or SB 3, the first portfolio standard in the Southeast to require utilities to purchase renewable energy sources; and,
• The 2018 Competitive Energy Solutions for North Carolina or HB 589, which updated and expanded North Carolina’s energy landscape. HB 589 has provisions for solar leasing, a solar rebate program, a community solar program, and the creation of a program for large businesses, universities, and the military to directly procure renewable energy (the Green Source Advantage program). Finally, HB 589 requires Duke Energy to procure 2,660 MW of renewable energy through its Competitive Procurement of Renewable Energy program (CPRE) over a 45-month window.

As of 2021, CPRE procurement requirements have not been completed, falling about 1,100 MW short of HB 589’s goal. NC’s major utility, Duke Energy, states its intention to complete this initial procurement, but details are still up in the air. Newer legislation (see HB 951 below) includes a CPRE program, but it will only be enacted if the North Carolina Utilities Commission (NCUC) chooses to pursue solar in the energy mix. At that point, Duke Energy will fund the program at 55 percent, with independent power producers covering the remaining 45 percent. The HB 589’s Green Source Advantage program has completely come to a close, having allocated all of its reserved MW. HB 951 has no such carveout for military installations or other large entities.

House Bill 951 is the result of a process that began when Governor Cooper signed Executive Order 80 in 2018.The Executive Order outlined North Carolina’s commitment to address climate change and transition to a clean energy economy. As a result of the order, the N.C. Department of Environmental Quality (DEQ) developed a Clean Energy Plan. This Plan aims to reduce electric power sector greenhouse gas emissions by 70 percent below 2005 levels by 2030, and attain carbon neutrality by 2050. The N.C. Department of Transportation also published a North Carolina Zero Emission Vehicle (ZEV) Plan to support the Executive Order’s target of at least 80,000 zero emission vehicles (ZEVs) on the road by 2025.

House Bill 951 was signed into law in October of 2021. This law is the result of months-long closed-door negotiations between Duke Energy, the Governor’s office, the NC General Assembly, and various stakeholders in the energy and environment space. Its key components are as follows:

• The bill directs the NCUC to develop and implement a carbon plan that will reduce emissions by 70 percent by 2030 from 2005 levels and achieve carbon neutrality by 2050. This is in line with the state’s Clean Energy Plan.
• The NCUC must select North Carolina’s fuel and resource mix using a “least-cost” principle, which will likely direct energy development toward natural gas and renewables. Under the current monopoly utility structure, Duke Energy will own all new generation (or in the case of solar, a 55/45 percent split between Duke Energy and independent power producers).
• “Subcritical coal facilities” will be retired, but the NCUC will securitize 50 percent of the costs of retirement. Ratepayers will therefore be responsible for helping Duke recover lost costs.
• The bill allows multi-year rate planning and performance-based ratemaking. Multi-year rate planning allows utilities to charge customers for projected future costs, rather than looking backward at costs incurred. Performance-based ratemaking allows regulators to evaluate utilities’ progress toward meeting policy goals and penalize or incentivize based on performance.
• DEQ must develop a plan to address solar decommissioning costs at panels’ end-of-life.

This compromise deal has met mixed reviews. The law’s commitment to carbon reduction is a win for our climate future. However, many worry that other provisions will drive unwieldy customer costs. The law also makes no mention of market reform,and does not continue carvouts for programs (such as Green Source Advantage) from HB 589. Nevertheless, HB 951 is a landmark deal for the state’s energy future.

Through North Carolina’s commitment to creating a cleaner economy, the state is now home to nearly 113,000 clean energy jobs, ranking number nine in the nation. The clean energy field has also seen 5.2 percent job growth since 2017, a rate 40 percent faster than overall statewide employment. As of 2019, clean energy employed ten times the amount of workers in the fossil industry.

There are several other important facts in North Carolina’s energy landscape:

• Through the second quarter of 2021, North Carolina ranked fourth nationally in the total amount of installed solar power on the grid, primarily with utility scale solar facilities
• North Carolina has the Southeast’s largest wind facility, which has 104 tall high-tech wind turbines in the northeastern corner of the state; and,
• Several North Carolina municipalities and counties have announced 100 percent renewable energy goals such as the Cities of Durham, Asheville, Charlotte, and Wake County.

North Carolina’s prominence as a solar state includes national caliber solar developers and a varied supply chain including module and array manufacturers.  The state is also home to a smart grid sector with over 1,000 jobs, micro-grid demonstration, advanced training programs, and highly regarded product manufacturing and research entities.  North Carolina has a prominent building efficiency sector with over 11,000 jobs, many LEED certified buildings, and strong growth potential.

The N.C. Department of Commerce, Board of Science, Technology, and Innovation launched an Offshore Wind Supply Chain Registry database that serves as a platform to promote companies offering offshore wind products, services and training. This will also help provide offshore wind developers and OEMs easy access to the North Carolina supply chain. Companies may join this publicly available supply chain registry by entering business information through the brief survey at the following link: htt://public.nccommerce.com/OSWRegistry.

North Carolina finalized its Offshore Wind Study  to characterize the wind opportunity for the state; assess the advantages the state has in its existing assets and business potential; review and identify business incentives and policy gaps; and finally, look at the state infrastructure including North Carolina’s ports. The study,completed in early 2021 by consulting firm BVG Associates, revealed NC to have more offshore wind potential than any other Atlantic state. Avangrid Renewables is currently developing the Kitty Hawk project (one of the three best sites for offshore wind energy in North Carolina) at what is the first offshore wind lease area to be secured off North Carolina for a capacity of 2 GW but there are more opportunities for offshore wind leases. There has been concern about how the military and wind energy coexist but the NCMBC will actively engage in discussions on this topic.