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Duke could cut emissions 74% by 2030 under NC bill if it avoids gas – report

Under mandates included in proposed North Carolina energy legislation, Duke Energy Corp. could reduce its greenhouse gas emissions by 74% by 2030 compared to 2005 levels, but it would have to avoid adding more gas generation to its fleet, economists said in a report released Aug. 31.

The Brattle Group Inc. conducted the analysis and report for Cypress Creek Renewables LLC, which owns dozens of solar plants — including in North Carolina — operates in 25 states and has 1.6 GW in total operating assets. The study examined generation costs and emissions impacts of a future resource mix for Duke Energy that achieves requirements outlined in the legislation while minimizing additional natural gas capacity. The North Carolina House of Representatives voted 57-49 shortly after midnight July 15 to advance H.B. 951 to the state Senate, where it currently resides.

The bill could provide an easier pathway for Duke Energy to shape its future energy portfolio and includes multiyear rate plans and other regulatory mechanisms to help ensure cost recovery. The legislation is expected to reduce carbon emissions in the state by 61% by 2030 from 2005 levels primarily by phasing out North Carolina coal plants and replacing them with natural gas, along with nuclear and other cleaner energy generation.

The report from Brattle and Cypress Creek concluded that if Duke Energy shifted its resource mix away from coal and gas to renewables and battery storage, it could reach 74% emissions reduction by 2030 relative to 2005 levels. That goal is achievable within the framework of H.B. 951, the economists said, based on a combination of the legislation's designated procurement of renewable energy and energy storage, alongside further cost-effective additions directed by the North Carolina Utilities Commission in the future.

If Duke Energy avoided new natural gas generation, specifically by dropping plans to retire and replace the 2,462-MW Roxboro coal plant with gas, the massive utility could significantly boost emissions reductions by instead establishing additional renewables, the report found. The legislation as it stands with the House, however, appears to propose natural gas in place of Roxboro, not renewable generation.

Shifting Duke Energy resources away from coal and gas and toward renewables could also "decrease 2030 generation costs by $590 million and 2035 costs by $1.2 billion" under the assumptions used in the analysis, the report reads. New renewable and storage resources, net of federal tax credits, are lower costs to build than operating existing gas and coal resources and building new gas plants, the report reads.

"With the continued decline of solar and battery storage costs, Duke Energy and other utilities across the U.S. will be able to replace retiring coal plants with a mix of renewable energy and battery storage resources in a cost-effective way and achieve greater reductions in [greenhouse gas] emissions," said Michael Hagerty, senior associate for Brattle and study co-author.

The study compared two scenarios for timing Duke Energy coal plant retirements and new resources to replace the lost coal generation: a "base case" scenario that reflects generation additions and retirements in Duke Energy's 2020 integrated resource plan base case with carbon policy and a "policy case" scenario with accelerated coal plant retirements and additional renewables and battery storage capacity based on H.B. 951, but with replacement of power from Roxboro through renewables.

The second scenario would aim to limit new Duke Energy gas capacity to a single new 900-MW gas plant specified in the legislation.

Critics of the legislation have argued H.B. 951 doesn't call for fast enough coal retirements, would make the state too dependent on natural gas and doesn't support enough renewables. Duke Energy Chairman, President and CEO Lynn Good has signaled on investor calls a willingness to compromise and adapt as the bill makes its way through the state legislature.

"We understand that the dynamics of the legislation is changing, day to day," Hagerty acknowledged during a call ahead of the report's release. "This should give a sense of one potential approach to reach that level of emission reductions that ... if that is required, isn't necessarily far off."