North Carolina is home to the least economic coal fleet in the country, costing customers billions of dollars. According to a report from the Rocky Mountain Institute, the costs of retiring the uneconomic coal units among the nation’s 236 GW of coal capacity and replacing them with solar, wind and storage, would yield savings of $10 billion per year.
Duke Energy needs to get on board with that in North Carolina now because it is a win-win for everyone - from the communities that are impacted by coal ash to ratepayers who pay higher rates each year that uneconomic coal units remain on the grid.
This article - the second of three on coal – outlines why Duke Energy’s coal plants are uneconomical and a continuing burden for ratepayers. The first article discussed the cost of cleaning up Duke's coal ash dumps and the reasons the utility should pay that bill, rather than expecting ratepayers to bear some or all of the cost.
The Sierra Club intervened as a party in the rate case. As part of our legal strategy, we hired an expert witness from Synapse Energy Economics, a research and consulting firm specializing in electricity industry regulation, to provide testimony about continued operation of coal plants in the Duke Energy rate case. The expert, Rachel Wilson, testified that Duke Energy failed to provide an economic assessment of continued coal operation, especially considering low gas prices and declining costs for renewable energy.
In the rate case, Duke Energy is seeking to recover three types of expenses associated with its coal-fired units: operating and maintenance expenses, ongoing capital expenditures, and previously incurred capital expenditures associated with unit maintenance and environmental projects.
All of the data, though, show that Duke Energy’s units from 2016-2018 had negative net value, which means that they cost more to run than another source that was available to Duke at the time. Duke Energy continued to make capital investments in these coal-fired units either without evaluating the economics of continuing to operate them, or despite the fact that it had negative value to ratepayers. Thus, the company did not show that coal investment is a prudent decision and provides ratepayer value.
Even more disturbing, Wilson noted, is the fact that coal units are likely to remain uneconomical through 2029. The negative values associated with the coal units means that ratepayers are paying - and will continue to pay - billions of dollars for the uneconomical operation of the coal fleet. Continued operation of coal plants is a losing proposition for ratepayers, especially in North Carolina, where we have an 18 percent persistent poverty rate and many residents who struggle to pay their power bill each month.
The Duke Energy rate case will wrap up in early October. A decision from the North Carolina Utilities Commission is not expected until December. We are also awaiting a ruling from the State Supreme Court on coal ash cost recovery that could affect the rate case.
In early January 2021, the North Carolina Utilities Commission will begin hearings on Duke’s Integrated Resource Plan, or IRP, which the utility released on Sept. 1. The IRP is a roadmap that identifies plans for Duke Energy to meet future demand and recommends a set of resources to meet that need.
In the IRP, Duke Energy proposes six scenarios. Five of the six scenarios include building a lot more gas plants and, in one scenario, Duke continues burning coal until 2049. Other scenarios include more investments in solar and wind, and one scenario retires Duke’ entire coal fleet by 2030.
Because Duke did not indicate a preferred scenario, the public will play a critical role in choosing the best path forward. Public comments to the North Carolina Utilities Commission will help shape the next two decades of energy policy in North Carolina. Will Duke continue burning more coal and building fracked gas plants, or will Duke pivot to more renewables and a cleaner, healthier, more affordable energy future for all?
A central question is how Duke Energy should pay for its coal plant retirements. In our next article, we'll explain a tool called securitization, which will allow Duke Energy to retire coal plants as quickly as possible.
