NORTH CAROLINA — The state’s monopoly utility cites surging demand from data centers in North Carolina as a top reason for its multi-billion investment in new gas plants and pipelines projected to spike ratepayer bills in coming years. But a new Duke University study casts doubt on the need for expansive new infrastructure to fuel the AI-boom.
READ MORE: Utilities Commission approves Duke’s carbon plan ahead of schedule
ALSO: Critics argue Duke’s carbon plan benefits shareholders above ratepayers
The Utilities Commission approved Duke Energy’s plan to invest billions in new natural gas, solar, and nuclear power infrastructure throughout North Carolina in November. The utility announced last week it plans to spend $83 billion on new infrastructure over the next five years. Ratepayers will cover the costs with an average monthly bill increase of more than $50 by 2033 and $80 by 2038.
Duke argues its proposed carbon plan is the optimal path to achieving North Carolina’s carbon reduction goals while meeting surging energy demand and maintaining affordable rates. The Institute for Energy Economics and Financial Analysis published a report last month finding the primary driver of southeastern utilities’ investments in new natural gas is the expansion of data centers powering artificial intelligence.
“There is a significant risk of Southeast utilities overbuilding power plants and pipelines in response to projected data center energy demand,” Kathy Kunkel, an energy consultant and lead author of the study, wrote. “Utilities already are financially incentivized to overbuild infrastructure.”
IEEFA noted there is significant uncertainty regarding how much electricity new commercial data centers will require. Trump announced the $50-billion Stargate AI project last month to build new data centers with private sector partners OpenAI, Oracle, and SoftBank. But China’s Deepseek AI model was released the day of Trump’s inauguration, rattling the data center market; it requires significantly less energy than other AI providers, such as OpenAI’s ChatGPT and Microsoft’s Copilot.
OpenAI announced last month it is considering North Carolina as the potential site of an enormous new Stargate data center complex. North Carolina has around 70 data centers — most of which are centered near Raleigh or Charlotte — but some of the state’s burgeoning data center growth is happening locally.
Brunswick County commissioners approved a Unified Development Ordinance text amendment to permit new data centers by-right in the county’s industrial zone in October 2023. The decision came months after commissioners approved the development of two small-scale data container facilities for Brunswick County schools.
Leland planning board member Robert Lazaro emailed commissioners ahead of the vote urging them to wait until further consideration with stakeholders. He added he was not opposed to developing advanced data storage facilities in the county, but argued more time was necessary to examine the novel technology’s impact on local energy consumption and the environment.
Duke University’s Nicholas Institute for Energy, Environment, and Sustainability published a study last week finding utilities across the country could provide power to new data center customers without building new gas infrastructure.
This could be achieved by curtailing power usage during times of peak demand to lower stress on the grid, according to its authors. The study estimates roughly 100 gigawatts — the equivalent of $2 trillion in data center investments — could be connected to power grids across the United States without new infrastructure upgrades.
Duke’s carbon plan includes building 3.6 gigawatts of natural gas capacity in North Carolina by 2035, much of which is designed to serve as reserve capacity for extreme load events. The Nicholas Institute study found Duke Energy Progress could gain 1.3 GW of capacity to power data centers if the facilities could withdraw 0.5% of power usage during periods of peak system stress. If data centers could curtail their use more during rare peak demand events — such as extremely cold weather — the grid could provide progressively more capacity.
“Our study demonstrates that existing U.S. power system capacity — intentionally designed to handle extreme peak demand swings — could accommodate significant load additions with modest flexibility measures,” lead author Tyler Norris said in a statement. “Overall, the findings suggest that load flexibility offers a promising near-term strategy for regulators and market participants to more quickly integrate new loads, reduce the cost of capacity expansion and enable greater focus on the highest-value investments in the electric power system.”
Duke’s carbon plan
Gov. Josh Stein repeatedly intervened in Utilities Commission proceedings during his time as attorney general to challenge Duke’s proposed rate hikes and proposed natural gas build-out. Energy consultant Edward Burgess served as Stein’s expert witness in Utilities Commission hearings last year.
Burgess asserted some energy expansion would be necessary but questioned Duke’s new energy requirement estimates for data centers. He noted Google found it could alleviate its new data center’s energy demand by shifting non-urgent tasks to off-peak times.
“It is difficult to validate the accuracy of the company’s load forecast given the novelty of the sectors driving the load growth,” Burgess wrote in a May 2024 testimony, “as well as the proprietary nature of the customer requests.”
A broad range of environmentalist groups — including the Southern Alliance for Clean Energy, Sierra Club, Natural Resources Defense Council, and North Carolina Sustainable Energy Association — similarly questioned the utility’s projected demand increase in testimonies to the Utilities Commission.
Burgess and other expert witnesses argued Duke is incentivized to anticipate high energy demand in order to justify expensive new gas and nuclear infrastructure rather than cheaper alternatives. North Carolina’s regulatory model guarantees the investor-owned monopoly utility around 10% in profit in addition to reimbursing the capital invested in its projects.
“Under rate-of-return regulation, there is an inherent tendency for investor-owned utilities (such as Duke) to increase the size of their investments in order to maximize profits,” Burgess wrote. “All else being equal, the more capital intensive a capacity resource is, the more attractive it should be to shareholders.”
A controversial law enacted last year, S.B. 382, reduces the attorney general’s ability to intervene in issues involving the Utilities Commission, the agency charged with oversight of Duke’s proposed rate hikes and energy investments. Under the new law, AG Jeff Jackson will need to file a petition to intervene in Utilities Commission cases that commissioners can reject. The attorney general’s office was previously authorized to automatically intervene and access proprietary information from the agency.
S.B. 382 also removed the governor’s majority appointment authority of the Utilities Commission. The governor previously appointed the majority of the Utilities Commission, including its chair, for years. S.B. 382 shifted the Utilities Commission from a seven-member entity to a five-member body with two governor appointments, two General Assembly appointments, and an appointment by the state treasurer.
State Treasurer Brad Briner told Port City Daily last month he will select a new appointment to the Utilities Commission in May. He said he will pick an energy expert with the primary objective of achieving low energy prices for consumers rather than prioritize specific energy sources.
“We have heard from a lot of advocates,” Briner said. “From the furthest left to the furthest right, our ears are open to all of them because we want to be informed by all perspectives.”
Duke is required to reach carbon neutrality by 2050 and reduce carbon dioxide emissions to 2005 levels by 2030 under H.B. 951, a 2021 state law. The Utilities Commission made a final order on Duke’s proposed carbon plan in November after over a year of input and debate from the utility, the public, and expert witnesses. The approved plan allows Duke to delay its retirement of coal plants and waive its 2030 goal.
Unlike earlier earnings releases, Duke did not include a reference to emission reduction goals in its fourth-quarter release last week. Duke senior vice president Jessica Bednarcik sent a coalition letter to recently-appointed EPA administrator Lee Zeldin last month requesting the Trump administration roll back natural gas emissions and coal ash clean up rules enacted by the Biden administration.
Duke pleaded guilty to criminal violations of the Clean Water Act for widespread coal ash contamination in North Carolina in 2015. Duke University scientists published a 2019 study finding the utility released multiple unreported coal ash spills in Wilmington’s Sutton Lake for years.
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
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