Climate 411

Creating a cleaner and more affordable power sector in North Carolina

For more than a year, dozens of advocates and stakeholders – including the electric utilities – have been working together on North Carolina’s Clean Energy Plan development process, which calls for creating a 21st century energy system that is clean, affordable, reliable and equitable. As discussions have progressed in ongoing working groups to explore policy pathways for climate action and systemic utility regulatory reform of North Carolina’s power sector, we recently learned that over the past several months, the major electric utilities across the southeast have been engaged in a separate dialogue on a proposal to create an automated market for trading among the utilities.

We must not let these conversations distract from real opportunities to achieve Governor Cooper’s ultimate goal of moving North Carolina to a clean energy future. The electric power sector is the largest source of climate-warming pollution in North Carolina, making up 35% of the state’s emissions. Gov Cooper has committed the state to doing its part to address pollution from this sector, and both the state and Duke Energy have set goals to achieve net zero carbon emission from the power sector by 2050.

What we know about the proposed Southeast Energy Exchange Market (SEEM)

According to Duke Energy, the proposed Southeast Energy Exchange Market (SEEM) will provide cost savings to customers, increase renewable penetration in the state, and would not limit the opportunity for more robust regulatory reform solutions. Details of this potential automated market remain vague. However, based on the limited information released to date, the SEEM proposal lacks any formal governance structure and appears to be focused primarily on the expansion and automation of a process already in place for these electric utilities to buy and sell electricity from each other. Therefore, it is unclear exactly what consumer benefits will be realized from the multi-million dollar investment in the SEEM and what oversight authority North Carolina regulators will have to ensure those benefits are delivered to North Carolina ratepayers. Absent a significant increase in transparency from the region’s electric utilities, the details, costs, and benefits associated with the SEEM proposal will likely remain unclear. What is already clear, however, is that SEEM alone will be insufficient to deliver the solutions being considered in NC’s ongoing stakeholder processes. 

Reform of the state’s more than 100-year-old electric power sector is sorely needed to accommodate the needs of today. Given the escalating costs associated with conventional, polluting energy sources like coal and gas, and the declining costs of renewables like solar, wind and energy storage, it is clear that new incentives for increased investment in and expanded use of clean energy sources must be a pillar of reform as well. Additionally, power sector reform should include incentives and requirements for pollution reductions that serve to drive dirty energy sources to retirement more quickly, while helping the state achieve its emissions reduction goals.

Joining a proven climate initiative

With North Carolina communities increasingly on the frontlines of extreme weather events including catastrophic flooding driven by climate change-fueled hurricanes, it’s time for the state to take concrete actions to limit carbon pollution. Even while state-led stakeholder work proceeds, there is a proven policy option for reducing emissions that North Carolina could implement now that would achieve many of the Clean Energy Plan goals, as well as the objectives Duke Energy has laid out in its climate commitment: North Carolina can put an enforceable limit on power sector carbon pollution and join the Regional Greenhouse Gas Initiative (RGGI). RGGI is a collaboration of ten Northeast and Mid-Atlantic states designed to reduce carbon pollution from the power sector by placing a declining cap on greenhouse gas emissions. New Jersey also joined the program in 2020, Virginia will be joining in 2021, and Pennsylvania is poised to initiate a regulatory process that – if completed – would facilitate its collaboration as well.

The RGGI model is rigorous enough to ensure North Carolina delivers crucial pollution reductions but flexible enough to facilitate the most effective ways to achieve them.

By requiring electric utilities to pay for the carbon pollution they emit with a price on carbon, RGGI incentivizes investment in low-carbon and carbon-free energy sources, while also creating financial incentives to remove polluting energy sources more quickly. Specifically, RGGI’s flexible “cap-and-invest” framework works by placing a cap on total power sector carbon emissions from participating states to limit pollution; that cap decreases over time to drive emission reductions at power plants in each participating state. Companies buy and sell allowances that let them emit a certain amount under the predetermined cap as supply and demand set the price of an allowance. This gives companies a strong incentive to save money by cutting emissions in the most cost-effective ways, which minimizes costs for consumers. And importantly, RGGI has proven compatible with a variety of approaches for electricity markets in its different states.

This framework has a track record of success. Since 2009, RGGI states have reduced power plant carbon emissions by 47%, which outpaces other states’ reductions over the same time. RGGI has also created significant health benefits by reducing co-pollutant emissions of particulate matter, air toxics, and ground level ozone, which all have adverse health impacts on the people of North Carolina. In fact, a recent study from the Columbia Center for Children’s Environmental Health found that between 2009 and 2014, air quality improvements from RGGI created an estimated $191 million and $350 million in cost savings.

As more states begin taking steps to join this alliance working together to reduce emissions, North Carolina should do the same, ensuring that as conversations continue to unfold regarding electric power sector reform, there is absolute clarity around the industry’s emission reduction trajectory. Such a framework will help ensure the delivery of a healthier, more affordable, cleaner energy system. Plus, polling shows that the majority of North Carolina voters support new policies to reduce climate pollution.

In the last century, policymakers crafted rules for an electric power sector that transformed our economy and improved the quality of life for countless North Carolinians. There is no question that our state’s energy markets need reform, and it’s up to us to ensure that any new model is designed in a way that serves the interests of North Carolinians – not just the utilities and their shareholders. Today, North Carolina has a similar opportunity – as we did in the last century – to reach for a better future. Let’s make sure that no matter what approach regulatory reform takes, North Carolina is not leaving pollution outcomes up to chance or leaving the most effective tool on the shelf.

Read more about the benefits of the Regional Greenhouse Gas Initiative (RGGI) in this fact sheet.

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