North Carolina Rejects Duke Energy's Gas Plant Expansion for Data Centers

In a decisive move that breaks with recent regulatory trends, North Carolina state officials have denied Duke Energy’s request to add a sixth natural gas turbine to the Sherwood H. Smith Energy Complex in Richmond County. The decision halts a project that was pitched as essential for powering the state's growing data center sector, but regulators argued that the company had not sufficiently proven the need for this specific infrastructure at this time.

The core of the dispute lies in the financial risk posed to everyday customers. While Duke Energy argued that the expansion was a low-cost way to meet future demand, the Utilities Commission concluded that approving the project now would force ratepayers to cover substantial construction costs before the actual energy needs were confirmed. This rejection is notable because state regulators rarely deny permits for major utility infrastructure projects.

Unverified data center demand drives the dispute

Duke Energy projected that the Eastern North Carolina grid would require over 25,000 new megawatts of generation capacity by 2035, largely driven by the energy-intensive operations of new data centers. To meet this forecast, the utility sought permission to add approximately 255 megawatts of capacity through the new turbine. However, state authorities have not yet completed an independent review of these demand models. The full vetting process is not scheduled to conclude until late 2026, yet Duke argued that waiting for this verification would cause significant delays and increase construction costs for a project targeted for completion in January 2030.

Regulators prioritize consumer protection over speed

The Utilities Commission, a five-member body overseeing state utilities, expressed concern that Duke Energy was overestimating the power requirements of future data centers. In their decision, commissioners stated that approving the expansion would substantially increase the costs borne by ratepayers and create a significant risk that new generation capacity would be installed before the actual need for it was determined. They emphasized the importance of ensuring that infrastructure builds align with verified demand rather than speculative projections.

Financial stakes and internal recommendations conflict

The expansion project carries a price tag of $584 million. Interestingly, the commission’s own Public Staff recommended approving the facility, arguing that Duke Energy was adding customers faster than it could build new power sources. However, even their own expert witnesses described the cost as staggering and noted that the utility was not getting much value for that amount of money. Despite this internal recommendation to proceed, the commissioners ultimately sided with consumer protection, noting that under current state law, existing customers would pay for the construction before the plant is even completed, regardless of whether the data centers actually come online.

Duke Energy has expressed disappointment in the ruling and is currently assessing its next steps. A company spokesperson maintained that the Smith turbine expansion represents the least-cost path to maintaining reliable service as demand grows. The utility remains committed to working with regulators to find a solution that meets future energy needs while keeping costs low, but the current regulatory stance indicates a stricter scrutiny of utility spending and demand forecasting in the state.