S3E2: Chris Carmody of Carolinas Clean Energy Business Association speaks to the economic disadvantage states face with monopoly barriers to entry for low-cost clean energy

Chris Carmody, executive director at Carolinas Clean Energy Business Association, says energy-intensive electricity customers will leave or not relocate to the Carolinas because of the difficulties they face buying their energy needs from the resource mix they prefer. There's "no tolerance for anything that resembles competition. And that really is to the detriment of economic development in the Carolinas," he said.

While North Carolina has a carbon-reduction plan in place, Carmody said it essentially cements Duke's monopoly into the future, and the utility's clean-energy investment plans rely on untested technologies, like small modular nuclear reactors, rather than the least-cost renewable energy options in the market. Rather than a threat to the utility's bottom line, "I think they really see [the carbon-reduction plan] as an opportunity to make a lot of money," he said.

Carmody sees South Carolina differently, describing the state's political atmosphere as leaning toward opening up wholesale power market competition by joining a regional transmission organization. "I think in terms of potential market development and discussion the Carolinas will be one of the most interesting places to watch over the next few years," he said.

Transcript

EMP S3E2: Chris Carmody, Carolinas Clean Energy Business Council 
(edited for clarity)

EMP: Welcome to the Energy Markets Podcast. Our conversation today is with Chris Carmody, Executive Director at Carolina's Clean Energy Business Association. Chris, welcome.

CC: Thanks for having me.

EMP: So tell me what is the Carolinas Clean Energy Business Association, who are its members, and that sort of thing?

CC: Sure, we're a 501(c)(6) trade association that represents independent power producers, clean-tech companies and buyers. So basically companies that want to be able to buy clean energy on the market. We've got about 60 companies and they range from Carolinas-based to international interests. And we work both in North Carolina and South Carolina, at the legislatures and the regulatory agencies.

EMP: How are monopoly protections for utilities like Duke affecting market entry by your members or their ability to buy clean power?

CC: Well, for the buyers, it's terrible. And I was at a conference recently with a colleague from the other CEBA, the Clean Energy Buyers Association, which used to be REBA and she said, look, you know, a lot of our members are simply never going to come to the Southeast. They're never going to expand here, locate here, bring jobs here if they're very energy-dependent, because in an RTO, or an ISO, you can get the energy that you want and need, even in large volumes in about the same time you could buy a house – six-to-eight weeks. But in the Carolinas, it's so restrictive for, quote/unquote, customers, that it's very problematic for buyers. It's also problematic for power producers. And the states are very different. North Carolina last year – well technically it was 2021 now – House Bill 951 was passed and signed into law. And it's a carbon reduction bill, which makes it sort of unusual for this far south. But it does a great deal to put monopoly ownership into long-term law. So there is some competition allowed for utility-scale solar and solar-plus-storage. But the law really goes out of its way to monopolize the ownership of new technologies for Duke Energy. In South Carolina, those legislators really, I think, tend to be more market-oriented. It's not that they're particularly concerned about renewables or any given technology one way or another. But I think Duke is sort of a medium-sized fish there. They're not the only, you know, largest political funder in the state. And, you know, the South Carolina decision-makers have really been burned by V.C. Summer which was a multibillion-dollar white elephant for which South Carolina ratepayers will be paying for generations.

EMP: That's quite an indictment from my viewpoint on the monopoly regulatory model. You know, I mean, Georgia, they went ahead with their nuclear plant and the cost for that more than doubled. And I don't, I don't think we've seen the end of it.

CC: And it’s still going.

EMP: Yeah.

CC: It's still going. It's still not built. 

EMP: I think they're getting close. I think they might start putting some electrons on the grid this year. So Duke has nuclear, correct?

CC: Yes. Duke has existing nuclear and, and like every other utility of its ilk, it has now great aspirations to build new nuclear. And this also, I mean, this has a lot to do with competition, because if you, you know, we don't have a position against nuclear energy. If someone has a product that is actually cost-effective, and there's actually a design for it, and it's not, you know, 12- or 14- or 20- times as much as least-cost energy that's on the market now. We’d probably have members from nuclear organizations. But right now, you're talking about the highest-cost possible energy for a technology that doesn't really exist in the way that they talk about it. 

EMP: Are they talking about building the 1950s technology boiling water reactor that's, we're talking about with the one that got scrapped in South Carolina and the one they're building in Georgia, or are they looking at the small modular reactor technologies?

CC: It's all about small modular, and again, we don't have anything against the technology in particular, but we do believe in markets. And right now, I think utilities like Duke are trying to, I mean, the incentive for the monopolies is to build the most expensive gold-plated stuff possible. And to ignore or push aside or, you know, catch-and-kill the least expensive technologies. It's a government license to print money. And really, to a degree it's, it's a government license that legalizes, if not theft, then the bilking of ratepayers and taxpayers.

EMP: Don't hold back, Chris, tell us how you feel. 

CC: Okay. 

EMP: Is coal-fired power the mainstay of their portfolio still?

CC: It's substantial, although it is diminishing. This carbon plan that came out of the North Carolina legislation sort of phases out coal, I think by the late 2030s. It's, of course, economically not competitive now. Duke has a much bigger gas portfolio than it had even 20 years ago, and I think Duke sees its future in two ways. The first is that it is trying to move entirely to regulated markets and to get out of any deregulated or competitive market. You know, so that it can come you know, pursue its competitive advantages, which are accounting and lawyering, basically, and lobbying. You know, those three. And so as they think about where they're going to make the most profit for the longest period of time and have people locked into, you know, expensive assets, it's transmission, it's nuclear, and, you know, it's for a little while, it's gas that they'll try to get some more mileage out of that. And it's all stuff that's incredibly expensive for people in the Carolinas.

EMP: So they need to invest in renewables, right, because they've got this carbon emissions-reduction mandate?

CC: Yeah, so, their answer is the mandate isn't really a mandate. And eventually, we'll get to that with nuclear. We'll have two nuclear plants built, two small nuclear plants built by 2028 or 2032, latest. And I would bet the exec team there a very nice steak dinner that that will not happen. Their sort of key portfolio that they proposed was to build 21 nuclear modular reactors across the state of North Carolina. And even if that technology existed today, even if it was lowest cost, even if they could get the fuel from Russia, which seems increasingly problematic, there's also really a sighting issue. Because I have a feeling that an awful lot of people are not going to want a small nuclear reactor next to, you know, their hospital and their school district and their neighborhoods. And that's the whole direction behind SMRs. It's like, well, we'll avoid building transmission because we'll put these right next to communities. So I think, yes, they should be building some renewables. They'll be building some. They'll be procuring some that will be independently owned. But I think that the effort always is to marginalize the amount of renewables. And it's a very different approach from a company like NextEra, you know, which has a lot of monopolies but it is aggressively moving into renewables and has formulated, you know, a very big renewables portfolio. Duke is actually going to sell its deregulated renewable farm.

EMP: NextEra is an interesting company. Wall Street sees them as the green energy investment for the future and they do build a lot of large-scale renewable projects, where they can get the return on the investment that their shareholders require. But when it comes to rooftop solar, you know, they're like, Duke, a junkyard dog in trying to prevent it. 

CC: Oh, yeah. 

EMP: You know, I was really intrigued. A few years ago, there was a story I'm sure you're familiar with. A church in North Carolina, installed some rooftop solar and, and Duke just slapped that down as a, we got a monopoly you can't do that. And so they had to remove them, right?

CC: Yeah, they did. And you know, recently Fort Bragg filed against Duke because Duke has interfered with Fort Bragg's efforts to become energy independent, which they want to do among other things for security purposes. They don't want to be reliant on Duke’s grid if it goes down. Yeah, no, I think junkyard dog is an absolutely apt description and there is no, no tolerance for anything that resembles competition. And that really is to the detriment of economic development in the Carolinas. I think it's hard to see now because I think, you know, the Southeast is a popular retirement destination. And you trip over a ribbon cutting every week in North Carolina because the development is driven by the universities here and technology. But any company that has significant electricity needs, where electricity is a significant part of their expense, is going to get out of here. And they're going to go to places or they're not going to locate here in the first place. And they're going go to places where they can buy what they want on a market.

EMP: Well, you know, I recently came across a June 2021 article in Energy News Network about a group called Big Tech Power Grab. And the article suggested that the group was funded by Duke Energy. I’ll take them at their word. But this Big Tech Power Grab has a website where they're attacking regional transmission organizations, they call them really terrible . . .

CC: I’m familiar with it. Yeah.

EMP: Really terrible option. That's right, RTO.

CC: Yeah.

EMP: You know, and I found that not only to be hilarious, but intriguing in terms of what it might say about the political threat that the utility faces in the Carolinas in terms of an RTO mandate, from you know, I guess you're saying it's more of a threat from South Carolina than North Carolina, but there's a significant tech presence in North Carolina in the Research Triangle Area, so am I on the right track here?

CC: You are. I mean, of all the things that were fought over in the 951 legislative discussion in 2021, even having – even supporting a study or even being neutral on a study of a wholesale competitive market was anathema to do. It was the red line where they simply wouldn't accept any, any compromise whatsoever – just a study. And this had already been pushed through and was beginning in South Carolina and that will come out, actually, in the next two-to-three weeks. At least the data by the Brattle group. And there was a study in 2019 that the Brattle Group did out of North Carolina that said that, if North Carolinians had been in PJM, they would be saving $580 million a year. And that's exactly why Duke doesn't want any discussion of wholesale competition because it hurts profits.

EMP: Yeah, well, I mean, we saw something similar to that in Louisiana with Entergy, they had this really convoluted scheme for cost sharing and paying for this expensive nuclear plant that they'd acquired. And they eventually finally joined an RTO and all of a sudden they're bragging about the cost savings for their customers. It was quite an about face. What are the threats circling around Duke right now? You've got this clean energy mandate. You've got RTOs. And they're doing the typical utility tactic in terms of net energy metering for rooftop solar. Tell us how they feel threatened.

CC: Yeah, I don't think they feel threatened by the North Carolina carbon plan. I think they really see it as an opportunity to make a lot of money. And it's a great out for them. It gives them an opportunity probably to be paid for retiring some weak assets. And it gives them an opportunity to build a lot of transmission, which of course will have a very, very long shelf life and depreciation life. As well as, I think, they hope, green hydrogen, small nuclear, whatever it is advanced nuclear, imaginary nuclear, and then also to monopolize offshore wind. And, and so I think the carbon plan, you know, I think that the CEO would absolutely say and has said that it's a boon to the company and to its long-term rate of return. I mean, I think the threats are twofold, I think one is simply the cost to customers, or ratepayers, whether those are residential or large buyers. And you know, the other is sort of comparison. And so you know, Duke just had 500,000 people without power in North Carolina for several days starting right before Christmas Eve. And in the Q&A they did with the North Carolina Utilities Commission last week, they kind of tried to point fingers at PJM. They said, well, we had firm contracts with them. And you know, we didn't get that energy and that's why – that's one of the reasons why it's such a problem other than their gas wells or their gas plants freezing. And, you know, there's a simple answer to that and that is, you know, PJM which did not have blackouts, and does cover a small part of North Carolina would have prioritized you if you were a member. And so, instead, you know, Duke’s sort of rallying cry will be, reward us for failure. You pay us through the compact to never have the lights go on even though it's more expensive for businesses and residents, but reward us for failure. Pay us to upgrade our software. Let us increase our reserve margins dramatically. Let's build some new natural gas that we hadn't anticipated because obviously we don't have enough – even though it was natural gas that failed over the holidays. So I mean, that's sort of the consistent angle. But I think, again, economically, when a business can choose to go to PJM and get what they want or to go to Texas, or other places where they can buy the energy they want on the open market, those are going to be employers and jobs that simply don't come to the Carolinas right now.

EMP: Yeah, so I hear you saying that, you know, Duke likes renewable energy as long as it’s an untested technology and a huge investment that they can put on the backs of captive ratepayers. 

CC: Yeah.

EMP: And collect even if even if this risky investment fails, they're covered. They don't have any fallout from that.

CC: That's right. I mean, a government-sponsored monopoly is the worst of both worlds. It has the profit incentives of the private sector. But then it has the sort of bureaucracy of government. It's sort of an interesting conundrum, or should be for conservatives. And when I talk about conservatives, I mean, small “C” fiscal conservatives. What these monopolies are is kind of akin to Chinese state-sponsored companies. 

EMP: They’re socialists.

CC: I mean, it is. It's sort of a socialist setup. There's no competition by law. There's no competition in purchasing either. So not only a monopoly, it's a monopsony. They're the only buyer out there. And then, you know, you have basically legislators who need to be reelected and Duke has spent millions and millions of dollars both in an obvious public way through direct contributions and through dark money to do things like attack legislators who have supported, you know, even a study bill. And then you have regulatory bodies that no matter how good they are, and no matter how working they are, they’re simply overmatched. You know, I don't I think the people on our on the North Carolina commission are very bright people. But I don't know that any of them would say that they're really well situated to judge the merits of a nuclear power or green hydrogen that doesn't exist yet. And, so what you have is you have a legislative and a regulatory environment that is captured even if it's not, through a lack of ethics, but simply by, you know, being subjected to a kind of shock and awe from lawyers and lobbyists constantly.

EMP: You mentioned dark money groups. You know, I had brought up this Big Tech Power Grab. What are some of the other groups that they're sponsoring?

CC: Well, I mean, that's the challenge with dark money. But you know, for instance, you have a whole slew of these quote/unquote, free-market think tanks and they're market think tanks that hate markets. Right? So the John Locke foundation is one here, and they're sort of funded through, you know, my guess would be you would see money from the Edison Electric Institute. You certainly have some petroleum money in there, and it wouldn't surprise me if you had nuclear. And frequently Duke Energy has been a funder of John Locke and a number of other organizations like it. And, you know, again, they sit there and they talk about free markets. Well. they like free markets for maybe school districts, but they can't see it when it comes to the utility that's writing them a check. That's a sample. And then, of course, they have strongly aligned folks in the Legislature and our new senate majority leader was the state chair of North Carolina for Duke Energy. And his entire career, basically, was, as a general counsel in one area or another for Duke Energy. And he's very emotional about things that are going to limit Duke’s profits. And that would be technologies he doesn't like. So whether it's, you know, whether it's folks who are aligned politically or it's these kinds of astroturf organizations. You can see it and you can predict the script immediately and, you know, so with Christmas – the Duke Christmas blackouts in 2022 – you could start to see on Christmas Eve day and on Christmas all of these proxies came out. Now, Duke never said anything about renewables, right, because it's sort of on the record. It's got to file these things with FERC and they knew they're going to have to testify. But you have all these other people coming out of the woodwork saying, oh, it's solar’s fault, it’s solar’s fault. It's renewables and they've destabilized the grid and, and it sounds just like Texas, right? The nonsense in Texas. And of course, it turns out that, no, renewables had nothing whatsoever to do with it and were consistent just as they pretty much were in Texas in 2021.

EMP: Excuse me. Chris. Don't let the facts get in the way of a good story.

CC: That's right. Yeah, that's exactly right. And, you know, within 48 hours, you had a Wall Street Journal article. That wasn't just about the Carolinas, but you know, it was sort of suggesting that, oh, well renewables will make this future state – it could make it so much worse. And, you know, and that's what they're selling. But the fact is that half a million North Carolinians, didn't have power, didn't know how long that was. For some people that I know and know of, it was 18 or 24 hours while they're hosting their parents, you know, from wherever for Christmas. And that's why they have the monopoly. I mean, that is the compact that they're going to be overpaid in order to quote keep the lights on. I did privatization in the city of Cleveland in the ‘90s. And as you would imagine, a lot of people really didn't like that. But we had civil service which makes it very hard to get rid of, you know, problematic employees and we had labor unions. And when you put that together, you basically have a workforce that you can't really manage. So, that's a bit like what we have with the monopolies, you know, they sort of say, oh, well, it'll be you know, it'll be unreliable if we don't run out, you know, everything and yet, they've shown that they can't keep the lights on when it comes down to it.

EMP: As you noted, we saw this theme emerge after the Winter Storm Uri outage, a terrible deadly outage with a big plunge of polar weather into Texas. And, you know, right away the mayor of Austin came out and blamed the market for it and we had other interests’ stalking horses blaming renewables. And clearly it was just it was the gas plants froze up. The wellheads froze up. The pipelines froze up. And, but you know, this seems to be the talking points that they're working from now. You know, we had this past summer, very warm weather – hot weather, stressing the grid with demand and you saw a lot of grid operators putting out advisories, please cut back your power so that we don't have to black you out and you saw this same theme. Oh, it's the competitive markets, its renewables. It totally ignores the fact that all of these problems that we're seeing are because of climate change-induced stresses on the grid, which is inherently a very fragile system. It's just wires on poles and transformers exposed to the cold. And they want to protect their investments in the type of resources that are contributing to the problem that’s stressing the grid. 

CC: Yeah, I mean, you know, there's an interesting question about whether there are natural monopolies. And so I'm not a big believer in natural monopolies. But I do tend to think that utilities, or ISOs, or RTOs, are probably more practical for managing transmission than having a whole bunch of companies. It's not really a mom-and-pop operation. And that's a pretty big responsibility. And one does get the sense, I mean, Duke spokespeople said last week to the Commission, we were on the verge of taking down the entire eastern grid. It makes me think that (A) they should be a lot more transparent since they have a monopoly they have no competitors. So it's not like there are any trade secrets that they need to keep somebody next door from, you know, stealing from them. And (B), that they ought to focus on sort of the core function, because generation is not a monopoly. I mean, there are lots and lots of different kinds of technology which can generate energy and now save energy. So they even can take the place of some what, you know, Duke would call baseload. You know, we don't the federal government isn't the sole builder of spaceships, anymore. There was a point where only the federal government could do it. Now you have competition there. And when I was a kid, AT&T, I remember being broken up and AT&T said, oh, it's going to be terrible, phone service is going to be a disaster. And now like every person on the planet, basically, or at least in North America, has a phone that has several times the amount of computational power that Apollo 11 had. And I, you know, I don't I don't think that monopoly is totally ideal for transmission either. But I do think there is there's a centralized role there, but there certainly is not for generation. And, you know, transmission, I think, it does need to be more transparent. I think there could be competitive elements to it, in terms of the building. I mean, I think kind of no-bid what I would call no-bid contracts, which wouldn't be allowed in government, but you know, I think, are allowed frequently with monopoly utilities, should not be allowed for anything that they build.

EMP: A lot of people point to the competition in telecom and the incredible wave of innovation that occurred as something that we could have here in the electric industry, if we would only get the monopoly out of the way. There's all kinds of behind-the-meter technology and both in terms of distributed energy, but also demand response. Would you agree with that viewpoint? 

CC: Well, I don't know if we're losing it, I think some regions of the country will lose it. So along with paying a great deal more in the Southeast than we need to be paying for energy, you know, competitive wholesale markets and other areas that you know, allow innovation, they will have that innovation. And they will have lower prices, they'll have cleaner air, and if you look at sort of how RTOs and ISOs perform, versus government-regulated monopolies, they have lower costs, which we know because, for instance, in the Western EIM, they post it, all the numbers are there. They have a much, much higher deployment of renewables and clean energy, even though it's a competitive process. And they reduce a lot more carbon. And so that innovation is happening but it's just not going to come to those parts of the country that stifle it, and you know, that means sort of more expensive dirty energy and dirtier energy for a longer time in the Southeast, which will suffer from that.

EMP: A main theme of this podcast is climate change is real. It's happening now. We're seeing it on the news every day. I mean, look at what's happening in California right now. It's astonishing. So climate change is real, we have to act. And so we want to explore with this podcast, what are the best policies that will allow us to transition to a clean-energy grid, a clean-energy economy, at least cost to consumers? And I think what I'm hearing from you is, you're seeing the monopoly model as a really – as a strong barrier to that sort of thing.

CC: Yeah, and I mean, our organization doesn't. I mean, we have on our board – our board comprises people who voted for Hillary Clinton and voted for Donald Trump. And we have what I would describe as a lot of McCain Republicans on our board. So we have a pretty diverse crowd of businesspeople. And, and we, we make we just make the economic argument. There are a lot of organizations out there, as you know, like Sierra Club or NRDC, that do a lot of analysis on the climate side and related to fuels and obviously, we are a clean-energy organization. So, you know, that I think, kind of speaks for itself. But the I think the premise of the monopolies is, if we're going to go clean, it's going to be really expensive for you. It's going to be really expensive, understand that. There'll be all this new transmission that we weren't going to spend any money on. You know, it's all these other things, and it'll be unstable unless we control everything. And the truth is that they're simply not allowing the market to work. It hurts economies, it hurts pocketbooks and wallets – it also hurts the environment. The issue that we talked about was with so-called advanced nuclear. I mean, I hope it is a lowest-cost functional technology. I think it could be very important. But it's not an excuse today or for the next 10 years for not building the lowest-cost, best clean energy that you can right now. And that is utility-scale solar, onshore wind with energy storage. Offshore wind won't be too far behind that. And unfortunately, that's what you know, that's what both I think the monopolies and some of the nuclear industry are sort of pushing is – it's a zero-sum game. We've got to sort of stave off what works today and what is least-cost today so that we can make a lot of money tomorrow.

EMP: I liked what you said about these so-called conservative groups, you know, advancing markets, but when it comes to electricity, they're very pro-utility. You know, I saw that here in Washington with the Competitive Enterprise Institute. They were very pro-electricity competition in the ‘90s until they ran into a funding issue, and the utilities bailed them out. And all of a sudden, they had a different tune. 

CC: Yeah. 

EMP: And as you described, this is all over the country happening. So when there are conservative groups, there's a Conservative Energy Network. I hope to have them on the podcast soon, who are taking an unvarnished view of clean energy. 

CC: That bailing out that you describe is another really important tool. And there are a number of entities that are responsible for getting electricity to their own territories. And they get in over their heads, and then a monopoly will come in and basically sort of buy out their problem, but that also kind of buys their independence. I do think I would just close by saying, I think in terms of potential market development and discussion the Carolinas will be one of the most interesting places to watch over the next few years. I think it's, you know, here in North Carolina, I think the utilities, that Duke really have sort of this very aggressive lockdown of wholesale competition. But in South Carolina, those legislators have kind of seen a lot of these movies before. And they are technology neutral. They do want to draw companies to their state and they know that they are losing some companies because those companies can't get the type of energy they want. And you know, and I think a lot of the South Carolina majority is really, they’re pro-market. And, so Duke has said essentially, if South Carolina were to make a market move, like to join PJM or something, somehow we would split the company in half because we'll never give that up. And I think it'll be really interesting. It'd be interesting to see if FERC allows that, you know, I don't know, you know, and I don't know all of the federal bodies not to mention the state one’s that would have to approve that kind of split, but it'd be interesting to see if that could actually happen. But South Carolina will have, you know, data out in two-to-three weeks from the Brattle group, and they'll have a discussion about that. And, you know, you mentioned the Vogtle plant. I mean, it’s good that it'll finally put very expensive electrons online but it's not really a great example to have when you're thinking about costs to your to your state taxpayers and ratepayers.

EMP: I see that as an indictment of the monopoly regulatory model. Well, Chris, I wish you good luck in all of your activities there. And I thank you very much for participating. Chris Carmody, Carolinas Clean Energy Business Association. Thank you.

CC: Thanks for having me. Take care.

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