AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY (ACEEE)
Four Ways North Carolina Can Meet Growing Electric Loads Without Increasing Utility Bills

North Carolina could tackle rising electricity needs by scaling up efficiency improvements and demand flexibility. Expanding these resources in utility planning, tapping community-based power, and having data centers fund demand-side solutions can also help keep bills down.

Across the country, electric utilities and regulators face rising demand from data centers, manufacturers, and homes. North Carolina, a state with a fast-growing population and significant data center expansion, is wrestling with how to meet the new electricity demand without raising customer utility bills.

Electric bills in North Carolina could jump by almost $200 annually in the coming years. Building new power plants can cost billions of dollars, but a far lower-cost option is to meet growth by reducing energy waste in homes and buildings through efficiency improvements.

Policymakers, regulators, and utilities can take four steps to maximize low-cost demand-side resources:

1. Increase investment in efficiency and demand flexibility programs to meet near-term demand. Efficiency improvements free up existing capacity to meet future energy needs. Demand flexibility shifts electricity use away from peak times, helping avoid the need to build new power plants. Because these measures are the lowest-cost pathway to meet energy demand, making the most of the existing grid should be a priority before building new power generation.

North Carolina has many opportunities to reduce energy waste. For example, 73% of homes in the state use inefficient electric resistance water heaters that could be replaced with modern heat pump models that use less than half as much energy. And nearly a million North Carolina homes use inefficient electric resistance heating, according to 2020 federal Residential Energy Consumption Survey data.

2. Establish virtual power plants. Also known as community-based power, this approach combines resources like demand flexibility, solar, and batteries so they can operate together to meet energy needs at a lower cost than building new power plants.

Most community-based power capacity comes from demand flexibility programs that provide incentives to households and businesses to voluntarily shift when they use power. For example, this could mean shifting when an EV is charged, or "pre-cooling" a home to use energy before a time of peak demand.

Large demand flexibility programs can have capacity equivalent to multiple power plants. North Carolina already has such programs, but the demand flexibility is typically only used during reliability emergencies, like during peak summer load when the grid is nearing its maximum capacity. Deploying demand flexibility more often to strategically shift electricity demand could avoid the need for more expensive new power plants.

Next door in Virginia, Dominion Energy is implementing a 450 megawatt virtual power plant pilot to deliver greater grid reliability and affordability at a scale large enough to avoid a large gas power plant.

3. Enlist data centers to invest in efficiency upgrades that offset their power demand. Across the country, there is growing recognition that data center owners should pay the cost of the added electricity demand they create, rather than distributing those costs among all utility customers. Requiring data center operators to contribute to utility energy efficiency programs is a commonsense way to help meet the additional Funding efficiency and demand flexibility costs data centers less than paying for new power plants, and it lowers costs for the utility and all North Carolina electricity customers.

Utilities can incentivize data centers to fund community and household efficiency upgrades by offering them faster grid interconnection and a guaranteed supply of electricity in return. Similar options already exist for large corporate customers to directly cover the cost of procuring renewable energy. These mechanisms can be adapted to meet a significant portion of the power demand data centers require by funding demand-side resources to free up capacity on the grid.

4. Expand efficiency and demand flexibility in utilities' long-term resource planning. Utilities, regulators, and stakeholders should evaluate opportunities for increasing efficiency and demand flexibility, accounting for how much these resources can reduce both electricity use and peak demand. Giving efficiency and demand flexibility equal weight in utility long-term plans can help to identify lower-cost options that avoid or defer the need for charging utility customers for new power plants and grid infrastructure.

As North Carolina plans for rising electricity demand, efficiency and demand flexibility offer an opportunity to make better use of the grid the state already has. ACEEE research shows these resources can meet growing loads faster and at lower cost than new power plants. The four steps above can help North Carolina capture that potential while keeping costs down for customers.