Capital Goods - November 2009

Going green by degrees
By Scott Mooneyham

In 2002, supporters of what was deemed model clean-air legislation saw new requirements on the state’s power companies as something unimaginable a few years earlier. The big boys, Charlotte-based Duke Energy Corp. and Raleigh-based Progress Energy Inc., had agreed to the landmark Clean Smokestacks Act, requiring 75% reductions of some smog-producing pollutants. They got a few financial incentives for going along, including the ability to pass costs on to customers and avoiding an expected rate reduction. Environmental regulators in other states and even in Washington recognized the legislation as ground-breaking, going far beyond clean-air thresholds they had been able to establish. One group called it “the most significant piece of environmental legislation in North Carolina’s history.” At a rally celebrating the bill’s signing, one doctor proclaimed, “The Clean Smokestacks Act is the shot heard around the world.”

Seven years later, the legislation looks a bit like one loop in a long roller coaster ride. Duke and Progress are still hanging on, trying to find out whether the dips, rolls and plunges will ever end. The regulatory and economic landscapes continue to change, making long-term decisions about electricity generation in North Carolina and elsewhere more difficult than ever. The decisions, though, are coming — even if not as fast as environmentalists and renewable-energy advocates would like — and they will change how electricity is produced.

Duke, in fact, has met the Clean Smokestacks requirements, investing hundreds of millions of dollars in scrubbers at some coal-fired plants to reduce emissions of nitrogen oxide and sulfur dioxide. Progress officials say their recent decision to mothball a coal-fired plant near Goldsboro and replace it with a cleaner-burning natural-gas plant should allow them to meet the emissions targets as well. It won’t be the last such conversion, even after targets are met, spokesman Mike Hughes says. Investing hundreds of millions to make smaller, 50-year-old coal-fired plants burn more cleanly doesn’t make economic sense. Another strike against coal-fired plants is new scrutiny by regulators of coal-ash ponds after last year’s massive spill in eastern Tennessee. But the 2002 requirements could prove to be just the tip of the regulatory smokestack. In 2007, the General Assembly was back at it, this time requiring that the major electric utilities meet 12.5% of their needs with renewable energy or through energy-efficiency projects. North Carolina became the first Southeastern state to adopt a renewable-energy portfolio requirement, which is being phased in over 12 years, but companies must meet a 3% target by 2012. The response from businesses interested in supplying the utilities was overwhelming. That first year, Duke received 94 proposals from 26 companies. Fibrowatt LLC, which burns poultry litter to produce energy, announced plans to build three plants.

But after the initial hubbub of publicity, the reality on the ground slowed. Duke has received regulatory approval to go ahead with a $50 million project to install up to 400 mini-solar plants on buildings around the state, producing about 10 megawatts of electricity. By comparison, its Belews Creek coal-fired plant, north of Winston-Salem, generates 2,240 megawatts. Progress has invested in or agreed to six separate solar projects, the latest a pact with a solar farm planned for Laurinburg.

Otherwise, not a lot has happened. Power companies haven’t seemed eager to jump into agreements with green suppliers ready to do business. Ivan Urlaub says the utilities may be waiting to see how proposals for a nationwide requirement of 20% renewable energy fare before Congress. Urlaub is executive director of the North Carolina Sustainable Energy Association, whose members include companies in renewable energy. He speculates that Duke, investing huge sums in wind and solar power in the Midwest, might want to develop its own sources rather than buying electricity from startups. Without supply agreements, he says, many of them can’t get financing to build.

Hughes says Progress would like more certainty, whether with regulation or with changing energy technology. “It’s a big issue and a big quandary,” he says. But the requirements for producing power in new, more environmentally friendly ways aren’t going away. They might become more stringent. Over the next decade, North Carolinians are going to see plants that burn agricultural waste or tap methane from landfills. They will see solar-collection farms and wind turbines emerge from coastal waters. Coal, nuclear and natural-gas plants will be around for a long time. They’ll just have some funny-looking new cousins.

Scott Mooneyham is the editor of The Insider,