Commentary by Steve Smith, former chair of the N.C. Environmental Management Commission
This summer, as the North Carolina Utilities Commission prepared to hear testimony from Duke Energy and other parties on the state carbon plan that the Commission must issue by the end of this year, something unexpected happened: After months of stonewalling, Sen. Joe Manchin (D-W.V.) agreed to a compromise on federal climate funding.
Soon after, on Aug. 16, President Joe Biden signed the Inflation Reduction Act (IRA), which will send an estimated $391 billion for climate and clean energy coursing through the economy over the next 10 years. The law is a game-changer that could not have been anticipated when Duke Energy proposed a plan to the Commission in May for reducing its carbon dioxide emissions 70% below 2005 levels by 2030 and achieving net zero CO2 emissions by 2050.
The federal government still needs to issue guidance on some IRA provisions and it is impossible to predict exactly what impact this surge of clean energy investment will have. But it will be significant and will further undermine Duke Energy’s contention that new fossil gas infrastructure should be part of the state’s carbon plan.
Numerous parties to the proceeding already argued that no new gas is needed and that renewables plus energy storage and energy-saving programs could achieve the goals at “least cost,” a criterion the Commission is obligated to meet.
The IRA could very well price new gas out of the carbon plan entirely. Here’s how:
- Duke argues gas is needed to back up solar and wind power but acknowledges that batteries and other types of energy storage serve the same purpose. The IRA offers a 30% tax credit not only for solar and wind projects but for storage as well, and the credit can climb as high as 70% for projects that meet other criteria. This dramatically lowers the cost of storage relative to gas.
- The IRA funnels $7 billion through state and local governments to enable zero-emission technologies in low-income communities. Duke could partner with installers, homeowners and property managers to install solar and batteries on low-income residences, providing those homes with power during outages and giving Duke a large inventory of batteries to supply power to the grid at periods of peak demand, reducing the need to burn gas.
- The IRA makes low-interest loans available for the closure of coal plants. Duke plans to close all of its coal plants by 2035 but could do so sooner and save customers money using these funds.
- Two IRA programs to be administered by state agencies offer grants and rebates for homeowners and businesses to install energy-efficient appliances and weatherize their buildings. During carbon plan proceedings, Duke argued that energy efficiency programs could reduce retail load by only 1%. Other parties and commissioners argued for higher levels, which the IRA makes more feasible than ever.
- The IRA phases in a fee on methane emissions between 2024 and 2026 that is likely to raise the price Duke will pay for fossil gas.
Wind and solar are already the cheapest forms of energy, and battery costs are rapidly declining. Everything in the IRA is designed to make those resources even more affordable.
Meanwhile, the cost of gas has spiked this year, sending our power bills through the roof. Duke’s increasing reliance on gas risks customers paying billions more than they need to, while making it harder to hit the carbon reduction targets required by law.
In announcing yet another alarming climate report in April, UN Secretary General António Guterres said: “Investing in new fossil fuels infrastructure is moral and economic madness.”
The Commission should not commit North Carolina to the madness of new gas in a climate-challenged world that is putting its money on renewables and efficiency.