A Primer on the NC Carbon Plan

HB 951 calls for the creation of an NC Carbon Plan. What does that mean?

by Joel Porter

With the passage of House Bill 951, the NC General Assembly reshaped North Carolina’s electricity market; the law created a ‘cap’ on how much carbon dioxide can be emitted by the regulated electric power generation sector (i.e. our electricity market now values carbon reduction). Or, to put it another way, HB951 is a price on carbon.

The new law is far from perfect, with plenty of troubling give-aways and potential program flaws. It does, however, require the state to slash CO2 emissions over the following years and decades, offering North Carolina a chance to take major climate action. How the state will accomplish these deep emissions cuts, however, is largely left unsaid. The law instead directs the N.C. Utilities Commission (NCUC) to work out the details by the end of this year, in a plan being called the “North Carolina Carbon Plan.”

The development of the NC Carbon Plan is an opportunity for North Carolinians to reimagine how we produce and consume electricity. According to HB 951, the Plan must reduce electric sector CO2 emissions 70% by 2030 (compared to 2005 levels), and achieve “carbon neutrality” in the electric sector by 2050. Will this happen by retiring coal-fired power plants or by ramping up our public investment in clean energy sources? What about the role of allowances or carbon offsets? And crucially, who will ultimately pay for the cost of reducing emissions?

These are the questions the NCUC will weigh over the next few months. Of course, it won’t be answering them in a vacuum. The NCUC has scheduled a series of stakeholder meetings to solicit public input as it develops the Carbon Plan. But this poses a hidden risk: without strong involvement from everyday households, ratepayers, and communities, these meetings will be dominated by industry insiders. And the loudest voice in the room will belong to the state’s largest energy utility, Duke Energy. 

Fortunately, we have the power to make our voices heard as well. Duke Energy is counting on everyday people to stay out of these meetings, leaving them to effectively set their own rules. Let’s not let them.

Stakeholder Meeting #2

Wednesday, February 23

Stakeholder Meeting #3

Tuesday, March 22

The Cost of Carbon Reduction

House Bill 951 set parameters for carbon costs which legislators called, “guardrails”. Guardrails or not, there are costs to reducing emissions. Emissions are essentially waste; it’s an externality, something we don’t want. The easiest way to get rid of something you don’t want is to charge for it. Put a direct price (i.e., a tax) on the externality. Instead, the guardrails set by HB 951 mean that resource planning must be least-cost. That means that the cheapest form of fuel, generation, transmission, and distribution wins the day. It’s the bare minimum Duke Energy must do year over year to limit their waste.

In addition to the least-cost guardrail, the law imposes additional stipulations; among them, HB 951 requires: 

  • “Offsets” (things like planting trees, or purchasing ‘renewable energy credits’) that must be verifiable can be used in achieving carbon reduction goals up to 5%
  • 45% of the total MW of any solar generation is supplied by third parties through power purchase agreements
    • Leaving 55% to be owned by the regulated utility (aka, Duke Energy)
  • Duke Energy “shall” (read: must) submit a performance-based regulation (PBR) that includes a decoupling rate-making mechanism for residential customers, one (or more) performance incentive mechanisms (PIM), and a multi-year rate plan (MYRP).

Our friends at the Southern Alliance for Clean Energy have a good breakdown of the law here and the NC Sustainable Energy Association has a comprehensive explainer of the law here).

Joining RGGI Could Shield NC Ratepayers From Costs

In the Petition for Rulemaking that was passed by the state’s Environmental Management Commission (and is now under development by the Department of Environmental Quality) to have North Carolina participate in the Regional Greenhouse Gas Initiative (RGGI), “emitters must purchase all of the allowances they need for compliance through the RGGI market” – or, in other words, the polluters will have to pay for their pollution. 

RGGI is a market-based mechanism that puts that direct price on the externality. It requires electric generators to purchase allowances for the carbon pollution they emit. The added cost of allowances drives up the overall price of fossil fuels, and since the NCUC must abide by least-cost requirements, clean energy sources such as solar power gain a larger share of the state’s generation mix. Analysis has shown that RGGI with pro-growth reinvestment of revenue is the least-cost way to ensure our state reduces its carbon emissions from the utility sector. 

Since the RGGI rulemaking is a state administrative action, it is on a slightly different regulatory path than the NC Carbon Plan. However, it could be possible to incorporate carbon markets into the NCUC’s process.

Take Action

Tell Governor Cooper to Make Polluters Pay

Creating a Carbon Plan That Works for All North Carolinians

The NC Carbon Plan’s stakeholder sessions were kicked off with a seven-hour meeting on January 25th. Prior to its launch, CleanAIRE NC submitted a letter to the NC Utilities Commission requesting the Carbon Plan process be opened up for additional participation beyond those of us in the advocacy and business communities. Specifically, we hope to ensure that all communities in our extremely diverse state exercise their voice in this complex regulatory process.

If not structured correctly, the energy transition can come with enormous opportunities or painful costs. That is why CleanAIRE NC and our partners created a set of principles that, if followed, we believe will curb emissions in our communities in a way that is economically and environmentally beneficial for all Carolinians.

One of the key principles outlined in the site above is to “Establish comprehensive metrics for success” as well as outline a method of accounting for the Carbon Dioxide Equivalent of all six of the greenhouse gasses. Sadly, in the first stakeholder session Duke Energy already decided they are going their own way, and will ignore this principle by only focusing on reducing carbon emissions (an important goal, but not comprehensive in addressing the problem). This is a prime example of why it is important to hear from the communities that have been impacted by the by-products of fossil fuel combustion and the various pollutants (in addition to carbon) that have impacted their health and environment over the years. Those voices need to be a part of this process.

Following the submission of our letter, the NCUC responded shortly thereafter here. Between our organization and our partners, expect to see numerous communications in the coming days, weeks, and months about this topic – we will attempt to supply educational information, provide opportunities to engage, and in the end, hopefully we can help ensure that North Carolina is on a path to cut greenhouse gasses quickly, equitably, and in a way that will create additional prosperity across our state.