Duke Energy’s gas and coal power sources failed spectacularly
Renewable energy sources account for only a tiny fraction of the company’s production
The time has come to reconsider Duke Energy’s monopoly status
Last month on Christmas Eve, roughly half a million North Carolinians woke up without electricity. Most received no notice at all – the power just went out.
Duke Energy, North Carolina’s monopoly energy provider, initially said that customers would have power restored within 15 or 30 minutes. Yet for most customers, the blackout continued for far longer: up to 12 hours for some. The power failure had terrible knock-on effects as well: the town of Spring Hope lost water service for days, after the outage caused the town’s water system to trip and not restart.
This saga has rightly led many North Carolinians to wonder: what on earth is going on at Duke Energy? North Carolina’s monopoly utility is failing at its job, and the reasons why are revealing of how politically entrenched special interests are getting rich, and leaving North Carolinians holding the bag.
Background: What is Duke Energy?
Duke Energy is a private, shareholder-owned corporation that is traded on the New York Stock Exchange (symbol: DUK). Duke Energy and its subsidiaries operate all across the south, mid-Atlantic, and midwest; until 2016, the company also owned major power plants in Central and South America.
Like many utility companies around the country, Duke Energy enjoys a legal monopoly from the State of North Carolina. With very few exceptions, third-party electricity sales are simply not permitted under state law. Solar companies, for example, cannot sell their output directly, because Duke Energy wholly controls distribution and transmission infrastructure. Duke Energy, and it alone, may dictate the price at which it will buy their electricity, if it does at all.
The reason North Carolina, and many other states, have centralized monopoly utilities is because of how widespread electrification came into existence almost a century ago. Essentially, utility companies faced enormous up-front capital costs to generate power, and states granted them monopolies so they could recoup those costs and provide a reasonable profit margin. (This explainer piece provides fuller background.)
Today, Duke Energy is a highly profitable corporation. It had a banner year in 2021, generating $3.6 billion in profit. (The company will announce 2022 year-end numbers in February.) The company has also bought back $2.6 billion of its own stock just since 2020, and raised its quarterly dividend 6% in the same period. It is the single largest lobbying spender in the North Carolina’s state legislature, as well as its second-biggest campaign contributor.
Coal, Gas and Nuclear
Duke Energy is primarily in the business of generating electricity with coal, gas and nuclear plants. According to the company’s 2021 Annual Report, Duke Energy generated 61% of its power with fossil fuels in that year – 39% with gas and oil, and 22% with coal. Only 2% of its power generated was from hydroelectric, solar or wind.
Thus, it should come as no big surprise that it fossil fuel power sources – mostly fossil fuels – whose failure triggered North Carolina’s massive blackout. In their post-blackout reporting, Duke Energy executives admitted that gas and coal generating equipment buckled:
“Single-digit temperatures across the region froze instrumentation and sensing lines and caused other mechanical problems that reduced output at several of Duke Energy’s gas- and coal-powered plants.” (WFAE)
And there’s more:
Meanwhile, although solar energy was obviously not available overnight, it kicked in as the sun rose and performed as expected, with no outages, according to Duke Energy. In fact, Duke executives told regulators Tuesday that solar helped power the pumps needed to replenish the company’s South Carolina hydroelectric reservoirs. That helped avoid more blackouts on Christmas Day. (WFAE)
This graphical representation of the combined Duke Energy power generation by source lays the situation bare. And yet – somehow – it gets even worse.
Another major cause for the blackouts was that Duke Energy was relying on a third party company, called PJM, to supply it with reserve power capacity. The technical term for PJM is a “regional transmission organization,” or RTO, which manages wholesale electricity brokerages across 13 states. When Duke’s gas and coal generation capacity failed, it called up reserve power on PJM’s network, which it had paid to reserve.
But PJM’s own power – based overwhelmingly on gas and coal – also failed:
In addition to forced outages, ~6,000 MW of steam generation was called but was not on-line as expected per their time to start for the morning peak on Dec. 24. The vast majority of these resources were gas-fired resources. [Slide 12; bold added.]
In other words, gas and coal power sources failed in the cold weather, while nuclear and renewable sources were mostly fine.
In spite of all this, North Carolina’s right-wing critics have continued their ideological opposition to renewable energy regardless of the evidence. The Art Pope-John Locke Foundation – which is rumored to receive funding support from Duke Energy – fired from the hip, immediately blaming the blackouts on renewables. An executive from a Charlotte-area gas pipe manufacturer, without a hint of irony, insisted that “unreliable wind and solar energy” was to blame. Republican State Senator Paul Newton, Duke Energy’s former corporate State President for North Carolina, went on TV to blame solar energy for “destabilizing” the grid.
As they say – to a hammer, everything looks like a nail.
The future of North Carolina’s energy
Duke Energy plans to replace a large percentage of its coal generation capacity with natural gas over the next decade. The company and its political surrogates have been lobbying hard for increasing the company’s natural gas infrastructure.
In their long-awaited, end-of-year Carbon Plan, the North Carolina Utilities Commission, which provides oversight of regulated utilities including Duke Energy, largely green-lit the company’s natural gas expansion. In a disappointment to renewable energy advocates and environmentalists, the Commission mostly sided with Duke Energy’s own preferences. With the exception of gently directing the company to continue investigating North Carolina’s generous offshore wind potential, the Commission did little to push the company to expand its solar energy portfolio.
This was a disappointment not only for power customers who want reliable electricity, but also for North Carolina’s voters, who overwhelmingly say they want Duke Energy to convert more of its energy production:
North Carolina's energy policy offers a rare opportunity to link two popular causes: being serious about American energy independence, as well as a free-market approach to electric power.
"Energy independence" should mean that consumers are not held hostage by a capricious global market for gas, coal and oil. Whether these commodities are produced in Alberta, Texas, Venezuela or Saudi Arabia, they are a part of a global market, of which Americans are just one part. Growing power sources like solar and wind, as well as nuclear, would help decouple Americans from these commodities' wild price fluctuations, and their negative geopolitical consequences. (Note: most North Carolinians support expanding nuclear power.)
Moreover, a "free market" approach to power generation would mean ending Duke Energy's monopoly utility, and broader energy deregulation, to allow customers to buy power from whatever suppliers, and sources, they want. Most energy consumers want affordable, reliable, and renewable energy - and if Duke Energy cannot (or will not) make the investments to meet those needs, there is no reason why the State of North Carolina should continue to grant it privileged status.