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South Carolina Utility Regulators Mandate Duke Plan that Keeps Carbon Flat

On Tuesday, December 14, 2021, the South Carolina Public Service Commission held a business meeting where the Commissioners approved a directive to Duke Energy on its 2020 Integrated Resource Plans (Dockets 2019-224-E, 2019-225-E).

First, a Little History

Duke filed Integrated Resource Plans (IRPs) for its two utilities that both span North and South Carolina, Duke Energy Carolinas (DEC) and Duke Energy Progress (DEP), at the North Carolinas Utilities Commission (NCUC), the Commissions for both North and South Carolina, in September of 2020. The NCUC recently approved the short-term plans associated with these IRPs, but did not approve the full IRPs, in recognition that they would need to change in order to account for the Carbon Plan the NCUC must put together by December 31, 2022 to achieve a 70% reduction in carbon emissions from the state’s electricity generation by 2030. The South Carolina PSC previously required Duke to make changes to the IRPs it originally filed, and Duke filed a modified IRP with the SC PSC in August of 2021. The changes made in the modified IRPs included an increase to the amount of solar that can be added per year; a modeling of expanded solar tax credits and solar through power purchase agreements (PPAs); a revision to the forecast for battery storage costs; and revisions to the natural gas price forecast. Duke also had to tell the PSC which scenario was its preferred scenario.

Duke’s modified IRPs stated a preference for a scenario that included an accelerated coal retirement schedule with 15.5 GW of total solar and 2 GW of incremental storage, but also nearly 10 GW of incremental gas by 2035. That preferred scenario included some but not all of the update assumptions that were required by the SC PSC: it includes extended solar tax credits, increases annual solar cap, and includes solar PPAs; it does not include updated battery storage cost forecast or revisions to the natural gas price forecast.

And a Surprising Response from the PSC

In a twist, the SC PSC directive from Tuesday mandates that Duke use a different portfolio for its planing purposes. The portfolio that the PSC chose includes all the modified assumptions they directed Duke to use in their earlier Directive, but does not assume a carbon policy or an acceleration of coal retirements.

Results of select portfolios from Duke’s modified 2020 IRP filed with the South Carolina PSC in August 2021. “Modified” portfolios include all updated assumptions required by the SC PSC’s prior order. “Semi-modified” portfolios include updated solar assumptions but not updated battery storage and natural gas price forecast assumptions.

As seen in the table above and chart below, the scenario chosen by the SC PSC runs coal longer, includes the lowest build-out of new solar and storage among the modified scenarios, and has the highest projection of carbon emissions for the combined utilities. While we often hear of a trade off between running coal plants longer and building new gas, even this scenario that keeps coal plants running for longer includes 8 GW of new gas added to the system by 2035.

Annual CO2 emisson reductions relative to 2005 baseline as presented in Duke’s 2020 modified IRPs filed with the South Carolina PSC in August 2021. The SC PSC mandated Duke use portfolio A2, represented on this chart by the dotted purple line.

Set up for a Carolinas Showdown?

It is yet unclear what this means for the future of Duke’s system as it works with the NCUC and stakeholders in 2022 to develop a Carbon Plan as mandated by legislation recently passed in North Carolina. This, combined with a recent court decision, could complicate how or whether Duke’s utilities can recover costs associated with complying with the Carbon Plan from its customers located in South Carolina. However, this is a false choice, since we have known for a while that a carbon reduction electricity system can be lower cost and less risky than continuing with the system that is built today.

Duke Energy will not file a full IRP in either state until 2023, so we will have to wait and see what conspires between now and then, and how the utility will navigate these two state regulating bodies.

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