Affordable Energy Fosters Economic Growth

By John Hood

RALEIGH — As we compete with other states to attract companies, entrepreneurs, and families, North Carolina has many advantages. We have bountiful natural and human resources. Our tax and regulatory systems foster rather than impede investment and growth. In most cases, our infrastructure and public services compare favorably with those of our rivals.

One area of concern, however, is energy. According to a new American Legislative Exchange Council report, North Carolina had the 28th-lowest average retail price for electricity in the country last year. Our neighboring states of Virginia (14th), South Carolina (17th), Tennessee (18th), and Georgia (26th) all had better rankings.

The Tar Heel State fared better on another measure in the ALEC report: motor fuels. In 2025, the average price for a gallon of regular gasoline was $2.83, the 12th-lowest. Gas prices in South Carolina and Tennessee were lower. Virginia’s and Georgia’s were higher. When I used an American Automobile Association tool to find more-updated figures, I found that as of mid-May, the average price in North Carolina was $4.16 a gallon, vs. $4.04 in Georgia, $4.13 in South Carolina, $4.16 in Tennessee and $4.30 in Virginia.

Why are we better off on motor fuels than electricity? One explanation is North Carolina’s renewable-portfolio standard. Even after it was amended to (rightly) include nuclear power as a low-emission source of power, the regulation continues to obligate North Carolinians to pay more for electricity than do consumers in states with more reasonable targets (South Carolina, for example) or no targets at all (Georgia, Tennessee, and other competitors such as Kentucky and Texas).

That’s not only the only variable that matters, however. Florida and Alabama lack renewable-portfolio standards but have higher prices than North Carolina. Utah and Virginia have standards and lower prices. Other regulations, growth rates, economic structure, and proximity to sources of lower-cost fuels affect prices, too.

One potential explanation that has gained political traction in recent months is that demand from newly built data centers is driving up electricity prices. North Carolina isn’t the only state where some localities are trying to slow or halt the construction of data centers. But Thomas Pyle and Daniel Simmons of the Institute for Energy Research say that, so far at least, this explanation doesn’t square with the facts.

“There is no statistically significant correlation between the number of data centers in a state and its current electricity prices,” they concluded in a recent study. In fact, prices in the top 10 states for data centers “are virtually identical to the average across other states. Furthermore, there is no statistically significant relationship between data center concentration and faster increases in electricity rates.” Given the economic benefits of data centers, then, blocking their construction is unwise.

One of my John Locke Foundation colleagues, Jon Sanders, points out that when the General Assembly overrode Gov. Josh Stein’s veto last year to modify North Carolina’s clean-energy goals, it set up households and businesses to save as much as $13 billion on their electric bills. Future ALEC rankings may find our state improving dramatically while less-responsible states post higher prices.

Still, Sanders recommends formally converting North Carolina’s carbon goals from mandatory to aspirational while also requiring that any retirement of baseload generation — that is, power not reliant on intermittent sources such as sunshine and wind — be replaced with an equal or greater amount of new baseload generation. In practical terms, that would have power companies replace coal-fired plants with nuclear or natural-gas plants.

Sanders also favors an “Only Pay for What You Get” Act that would allow utilities to recover the costs of new plants only to the extent the electricity they generate is dependable regardless of weather conditions and time of day. Such a policy would “incentivize least-cost and reliable generation,” he wrote, reflecting the fact that “electricity is a basic human need.”

It is that, to be sure, but its affordability is also a critical factor in economic development. We can’t afford to get this wrong.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).