New Ways to Power N.C.: As Utilities Plan Nuclear Reactors, the State Takes a Fresh Look at Alternative Sources of Energy

Apr 08 - The News & Observer

North Carolina's cheap electricity comes with a hidden cost.

Abundant supplies of cheap power mean there is little incentive to develop alternative energy to the extent seen in other states.

Less than 2 percent of North Carolina's electricity is produced from renewable sources. Nationwide, two dozen states require their utilities to generate or purchase as much as 30 percent of their electricity from solar, wind, hydroelectric and other renewables. The extra cost of this premium power is paid by utility customers through a surcharge on monthly bills. But in some states where electricity comes from burning high-cost natural gas, alternative-energy programs have even reduced electricity rates.

With North Carolina's two Fortune 500 utilities planning to license new nuclear reactors, the state is preparing to take a hard look at adopting a mandatory renewables program, also known as a Renewable Portfolio Standard. The projected cost and economic impact of a mandatory renewables program is a source of intense disagreement between environmentalists and utilities.

In an attempt to resolve the dispute, the N.C. Utilities Commission, which approves rates and reviews operations, is hiring a consultant to conduct a cost-benefit analysis that would determine what renewables would cost if they were required in the state.

"There is increasing momentum," said N.C. Utilities Commissioner Jim Kerr. "The technology is getting better and less expensive. That's why we think it's important [that] we thoughtfully study this."

This month, the utilities commission requested a separate report, due this summer, on a range of alternative energy solutions that some environmentalists would like to see adopted in North Carolina. The issues to be covered include public funds for zero-interest loans and other energy-efficiency programs, and a program to compensate utilities when customers reduce electricity use through conservation. The report will be prepared by a group comprising representatives of utilities, environmental groups and Public Staff, the utility commission's consumer advocacy arm.

"The environmental groups want ... to show that renewables will contribute on a net-positive basis to the economy of North Carolina," said Bob Koger, a former member of the N.C. Utilities Commission and president of Advanced Energy, a conservation consulting group in Raleigh. "However, the consultant will also have to look at how any rate increases associated with a renewable portfolio standard will affect existing industry, and the attraction of new industry."

Last year, a proposal that would have required that 10 percent of the state's electricity come from renewables died in the General Assembly. Progress Energy officials said the utility couldn't meet its energy needs if it relied on renewables. More than 95 percent of the state's electricity is generated by nuclear and coal power plants.

Utility officials argued that such a program could harm the state's economy. They estimated that the mandate would raise the average residential bill by 3.3 percent, or $36 a year. The proposal would raise the annual electricity bill of a bank branch by $288, a grocery store by $7,200 and a large industrial or manufacturing plant by $504,000, they said.

"Some people would be willing to double or triple rates," Koger said. "Others would not want any increases."

Environmental groups such as the N.C. Waste Awareness and Reduction Network and N.C. Sustainable Energy Association say the utility's numbers are exaggerated to discredit renewables. Compared with the cost and risk of building a new nuclear plant, they say, renewables are the surer and cheaper option.

Other environmentalists acknowledge that renewables could cost more in the short run, but they say the efforts are worth the investment. "Energy ought to be more expensive around here to pay for the ... [consequences] that wreak havoc on the environment," said William Schlesinger, dean of Duke University's Nicholas School of the Environment and Earth Sciences. "Low cost doesn't let alternatives gain a foothold."

North Carolina is hardly lacking in renewable resources. Energy experts agree that the state has excellent wind resources in the mountains and coastal areas, but no commercial operations have been built in the state. That's because wind turbines, which can exceed 200 feet in height, are prohibited in the mountains by state law and are too controversial for scenic coastlands.

Burning wood waste, farm-animal dung and flammable methane gases that seep from landfills is a largely untapped option. Some have even described North Carolina and the Southeast as the Saudi Arabia of biomass fuels. The state produces an abundance of hog and poultry waste but converting it to electricity is still considered too expensive for commercial purposes.

Landfill gas, known as methane, is used on a limited basis. The state has 131 landfills, only a dozen of which are tapped for flammable gas, said Larry Shirley, director of the N.C. State Energy Office. Utilities are also mixing wood chips with coal.

Progress Energy officials say turning wastes into fuels may be the best renewable option today.

"Some of this stuff with biomass and municipal incineration, those are making a contribution," chief executive Robert McGehee said. "They're equivalent to a good-sized power plant, probably all added together."

Solar energy is the most expensive of the renewables to generate. And while it might become cost competitive one day, it is still largely seen as a residential application for running water heaters and household appliances.

A typical residential solar setup costs about $15,000 for 2 kilowatts, enough to meet about 25 percent of a home's energy needs. Only an estimated 500 homes in North Carolina use solar panels to generate electricity, said Shawn Fitzpatrick, a solar engineer with the N.C. Solar Center.

That's why some put their faith in public benefits funds, which provide loans and training for businesses and homeowners to cut energy use. Some think that aggressive promotion of efficiency and conservation methods would level off Progress Energy and Duke Power's energy demand projections and offset the need for a new nuclear power plant.

"Energy efficiency is really the joker in the deck," Shirley said. "We think if we were very aggressive in the state, we could flatten out those growth curves."

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Distributed by Knight Ridder/Tribune Business News.