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July Giga-Thought: Why is an energy vision for North Carolina’s energy economy necessary now?

Posted By Emily Holmes, Thursday, July 14, 2016

By NCSEA's Ivan Urlaub & Diane Cherry

New energy technologies are becoming ever more affordable and changing our homes, how and where we work, and the infrastructure connecting and powering our communities. For several decades, energy consumers in North Carolina have relied on service from their energy utilities. When we only had five resources (coal, oil, natural gas, nuclear and hydropower) to meet our energy needs, the traditional utility business model was the preferable technological and economic approach.  Now, advancements in technologies, declining energy costs and the Internet of Things allow customers and service providers to manage their own energy consumption and control their utility.

Clean energy technologies such as solar power, wind power, and ways to use energy more efficiently, are outpacing additions in traditional energy sources like natural gas, nuclear and coal. The U.S. market for energy storage solutions will likely grow 100% per year, which will also continue to drive down the cost of electric vehicles, broadening the universe of control and choice for customers. But while these changes are beneficial for consumers, they are great challenges for utilities and the energy industry.

A vision must grapple with the following three forces:

1.     North Carolina’s globally competitive position in advanced technology sectors includes energy, but also the newer technology areas of smart grid, energy storage, intelligent and high performance buildings, electric vehicles, solar, bioenergy, wind energy, and smart transportation.

2.     The number of North Carolinians experiencing new energy options and control is growing each year as prices offered by non-utility companies continue to decline.

3.     The laws and rules governing our regulated utilities still exert a strong financial preference within the utility business model toward building traditional power plants (using the big five traditional resources), while limiting the utility’s options to cost-competitively offer customers newer technologies and services directly or as part of their regular service.

These forces are causing an important divergence between the utility, the energy industry, and the customers they serve. Every energy decision made today in North Carolina causes one to lose when another gains.  When the utility exercises its preference to build a profitable new power plant (necessary or not), they recover the cost from their customers. When the energy industry works with customers to deploy a newer technology with minimal utility involvement and using their own money, only the amount the utility pays for the electricity generated or the renewable energy certificates created can be recovered from all customers and no utility profit is allowed. To date, in North Carolina’s experience the first makes customers’ rates and bills go up but financially strengthens the utility, and the second causes a downward pressure on customers’ rates and bills, but financially weakens the utility. This is why North Carolina’s current and proposed clean energy laws are so controversial, because it is hard to see how using newer technologies has actually caused electric rates and your bills to go up less than if we had met our needs in the old way of only building traditional power plants and more power lines.

This divergence of interests will only intensify as new technology costs decline further and customers find new ways to affordably finance and use newer technologies without utilities earning a profit on customers’ investments.  As a result, all parties involved will continue making individual decisions that appear to be efficient and affordable, but in the big picture may not be. The sure fire way to guarantee electricity rates and bills will rise, is for all of us to continue allowing energy to be politicized and by failing to align around shared goals and a transparent planning process that ensures energy is inclusive of and beneficial for all customers, maintains financially strong and secure utilities, and ensures our competitive energy industry adds thousands more jobs annually for the next decade to North Carolina’s energy economy.

For all of these reasons, North Carolina must have a workforce development plan informed by a vision for our energy economy.

Originally published by the Institute for Emerging Issues. See the full version here

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