Factor This

In North Carolina, a lesson on the pitfalls of the energy transition 
In North Carolina, a lesson on the pitfalls of the energy transition 

Tyler Norris of Cypress Creek Renewables and Steve Levitas of Pine Gate Renewables joined Episode 32 of the Factor This! podcast to discuss the Duke Energy Carbon Plan in North Carolina and what it means for the implementation of another historic climate law, the Inflation Reduction Act. Subscribe wherever you get your podcasts.

This episode of Factor This! is sponsored by Rolls Battery and Heila Technologies. Scroll down to learn more.

North Carolina Gov. Roy Cooper sat at a desk in mid-October 2021 flanked by smiling members of both political parties.

Elected officials had just done the unthinkable given the nation’s recent political environment. The GOP-controlled state legislature passed a bipartisan bill to slash carbon emissions by 70% by the end of the decade and reach carbon neutrality by 2050.

The law represented an unprecedented effort by a state to meaningfully address climate change in a bipartisan way. All while attempts at the federal level to pass incentives for clean energy deployment and climate change mitigation stalled.

"Making transformative change is often controversial and never easy, especially when there are different points of view on big, complex issues. But coming to the table to find common ground is how government should work," Cooper said as he signed House Bill 951, the Energy Solutions for North Carolina bill.

In Oct. 2021, North Carolina Gov. Roy Cooper signed into law a bipartisan mandate that will require the state to reduce carbon emissions by 70% by 2030 and reach carbon neutrality by 2050. (Courtesy: North Carolina Governor's Office)

HB 951 required the North Carolina Utilities Commission to take steps to deliver a 70% reduction in carbon emissions by 2030 and to carbon neutrality by 2050. Those steps directly impact the state's investor-owned utility, Duke Energy, and its subsidiaries.

The utility, clean energy developers, and regulators agreed that Duke Energy should draw up a plan to achieve the mandate.

The clashes that ensued between Duke Energy and clean energy developers showcase that enacting historic policy is only part of the equation. Implementation is just as important…and maybe even more challenging.

The pitfalls of the energy transition are on full display in North Carolina, and there are lessons to be learned here. The successful implementation of another historic climate law, the Inflation Reduction Act, depends on it.

Steve Levitas and Tyler Norris normally are competitors.

Their companies--Pine Gate Renewables and Cypress Creek Renewables--develop, own, and operate utility-scale solar and storage projects. While both firms have national footprints, they're based in North Carolina, and are highly invested in what happens there.

But today, Levitas and Norris are teammates of sorts. Their companies, along with Southern Current, a utility-scale developer in South Carolina, linked arms to form the Clean Power Suppliers Association.

The group invested significant resources to ensure that clean energy industry interests were included in Duke Energy's Carbon Plan, a framework for achieving H.B. 951’s mandate. The association even commissioned a study by the Brattle Group, one of the country's foremost energy consulting firms, to demonstrate the value to ratepayers provided by greater amounts of solar power on Duke Energy's system.

Ultimately, Duke Energy took a different direction. The utility submitted a three-year action that capped solar interconnections at 3,100 MW.

In turn, the North Carolina Utilities Commission accepted Duke Energy's plan with no major changes.

"There are very few departures from what Duke requested," Levitas said on the Factor This! podcast. "We put a lot of time and resources into (this) and hired arguably the most respected independent national energy consulting firm, and that analysis was not even (quoted) in the commission's order. So that was deeply disappointing."

Pine Gate Renewables' 81 MW Sugar Solar project in Yadkinville, North Carolina. Sugar was one of the projects awarded under Duke Energy’s Competitive Procurement of Renewable Energy program and is went online in early 2022.

Duke Energy blamed interconnection constraints for the low-ball threshold. Instead of allowing least-cost optimization in its resource modeling, Duke imposed a cap on annual solar additions based on the utility’s estimate of how much solar it can interconnect in future years, based on internal engineering judgement. Those caps put the 2030 carbon reduction target almost certainly out of reach, Norris said.

Brattle’s analysis found that ratepayers would save $860 million in system costs in 2030 alone by adding substantially more solar than proposed by Duke, assuming conservative solar costs and not accounting for Inflation Reduction Act incentives.

A volume adjustment mechanism in the Duke Energy plan could increase the solar procurement total, but only if costs decline, which is far from certain given industry headwinds. The industry is currently facing supply chain constraints and trade disputes that have pushed costs higher.

"Our view was you'll never know until you try (to interconnect more solar)," Norris said. "If you give up at the outset and say, 'This is all we can do,' then you're giving up on what you know to be the least-cost option without making any effort to achieve it."

Duke Energy must revisit its Carbon Plan every two years. Levitas and Norris said they are both hopeful that the solar procurement level will be significantly raised in future proceedings.

But what's happening in North Carolina should be a warning to the rest of the country, especially as the clean energy industry works to implement the Inflation Reduction Act over the next decade.

Execution is paramount. And the clock is ticking.

North Carolina's story is a reminder that policy alone isn't enough. Utilities and regulators still maintain substantial control over the power sector.

For all the Inflation Reduction Act does to incentivize domestic manufacturing and clean energy deployment, system gatekeepers determine what comes online, and when.

"This question of how can we improve the interconnection rate in some ways it is the biggest question regarding whether we can achieve our decarbonization targets at all," Norris said.

To many, the bill signing ceremony in October 2021 felt like a breakthrough. And so did the surprise news of the Inflation Reduction Act breakthrough nearly a year later.

Both policies could still live up to early expectations. But successful execution will be their toughest test.  

About the sponsors:

This episode of Factor This! is sponsored by Rolls Battery.

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This episode of Factor This! is sponsored by Heila Technologies, a Kohler company. Heila is changing the way complex microgrids are managed and operated with its EDGE control and optimization platform, which makes each asset in a system smarter while making the whole microgrid more efficient and resilient.

The EDGE helps EPCs and developers simplify microgrid deployment through a flexible approach that ensures systems operate reliably while unlocking new revenue streams.

Heila is a proud sponsor of the 2023 GridTech Connect Forum. Register now at www.gridtechconnect.com to learn more about Heila and the EDGE platform.