In May 2023 the Environmental Protection Agency (EPA or the Agency) issued proposed emission standards (the Rules) for existing and new Fossil Fuel-Fired Electricity Generating units. Issued under EPA’s Section 111 authority wherein the Agency asserts the right under the Clean Air Act and subsequent court rulings to regulate greenhouse gas emissions, the new standards, if sustained, would accelerate retirements of coal plants. The Rules also impact utility plans to operate existing and to build new natural gas plants.

The new EPA standards could impact Duke Energy’s (Duke) Carbon Plan/Integrated Resource Plan (CPIRP, P-3 see Appendix 3), and by extension North Carolina’s economy. Duke Energy’s plan is required by NC House Bill 951, to reach an interim target of 70% carbon reduction and net-zero by 2050. Duke Energy’s initial plan was submitted in May 2022 to the North Carolina Utilities Commission (NCUC). The NCUC then issued an order in December 2022, in which it approved Duke Energy’s near-term action plan, and paid considerable attention to assuring that Duke’s CPIRP did not adversely impact power costs for consumers or the reliability of supplies to customers. The Rules, if sustained, potentially supersede and hinder North Carolina’s law and regulatory process. This in turn may cause major alterations of Duke’s plans. Accordingly, the Kenan-Flagler Energy Center at the University of North Carolina has undertaken to study the changes Duke Energy would have to make to comply with the Rules and what such changes may mean for the North Carolina economy.

The topic is potentially vast. Its scope could encompass the entirety of how EPA’s new standards competitively impact all 50 states. Rather than attempt something so complex, this White Paper focuses on four issues it can address in some detail:

1. If the Rules are finalized as issued, how viable for NC are the solutions proposed by the EPA?
2. Given these findings, how would Duke Energy likely comply with the Rules? How would compliance alter the emissions reductions targeted by Duke under House Bill 951?
3. What would Duke’s compliance plan mean for power reliability & cost in North Carolina?
4. How does Duke’s compliance plan and ability to execute impact the NC economic outlook?

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