The Union of Concerned Scientists estimates that state requirements for renewable energy usage, along with increased funding and government incentives, will boost renewable energy capacity in the U.S. by nearly 30,000 megawatts (MW) by 2017. With nearly $30 billion in new investments, this will provide enough power for 19 million homes and reduce carbon emissions by an amount equivalent to taking 11 million cars off the road.
The consensus of industry experts and lawmakers is that renewable energy will cause a change in the way America provides energy for its citizens and industries – a revolution akin to the way the transcontinental railroad created an explosion of productivity and technological innovation in the 1800s. The United States, along with Europe and Asia – driven by their increasing energy needs, the instability of oil supplies and the reality of limited fossil fuel reserves – are actively pursuing renewable energy as a way to ensure their energy futures.
With one of the most aggressive Renewables Portfolio Standards (RPS) in the country and a history of utilizing renewable energy for more than 20 years, Nevada is positioning itself to be at the forefront of this rapidly emerging industry.
Nevada’s national, state and local government officials, utilities, regulators, economic development agencies, gaming and mining industries, and renewable energy developers are anticipating a revolution in the way this country provides power to its citizens and industries, and they want Nevada to be the leader of an industry that promises not only cheaper energy, but high-paying jobs and a more diversified economy.
Though the state’s first RPS was developed in 1997, its renewable energy requirement was less than 1 percent. In June 2001 – largely in response to theCalifornia/Enron energy crisis that left Nevadans energy-strapped and paying higher prices – the Legislature upped that requirement to 15 percent by 2015.
At the time, Nevada was a net importer of energy, spending nearly $3 billion annually to provide enough power for its citizens and industries. During the 2001 legislative session, the lawmakers also created the Nevada Renewable Energy and Energy Conservation Task Force to coordinate the activities of federal, state and local agencies and officials involved with renewable energy, conservation and efficiency, and work with the State Office of Energy to develop and review the state’s comprehensive energy plan with regard to renewables. In 2005, the Legislature again increased the RPS, setting the mark at 20 percent by 2015 and added energy-efficiency measures, along with energy derived from geothermal, solar, wind and biomass.
The RPS sets incremental benchmarks that the utilities must meet or face penalties imposed by the Public Utilities Commission (PUC). The RPS bumps requirements up by 3 percent each year until the 20 percent is reached in 2015. For calendar years 2005/2006, Nevada’s regulated utilities must produce a minimum of 6 percent of their energy either from renewable sources or based on energy efficiency measures.
So far, the state’s regulated utility companies – Nevada Power and Sierra Pacific, held jointly as Sierra Pacific Resources – have failed to meet the RPS. According to Thomas Fair, Sierra Pacific Resources executive for renewable energy, that failure is due in large part to the severe financial difficulties the utilities experienced after the California energy crisis. Renewable energy projects require long-term investments, and the utilities’ rating was below investment grade. In addition, because Nevada has only two main consumers of energy, independent renewable energy developers could not get funding because the utilities could not enter into the long-term power purchase agreements necessary to prove the financial viability of a project.
The utilities also found, as with any emerging technology, that not everyone who brought projects to them could actually deliver what they promised. They saw contracts for several renewable energy facilities go uncompleted. According to Fair, Sierra Pacific Resources has refined its RFP (request-for-proposal) process, ensuring that more contracted projects will result in more projects on the ground. They have also instituted an accelerated procurement process to shorten the time between the RFP and getting signed contracts.
As the utilities pull out of their financial problems, they are redoubling their efforts to meet the state standards. “We’re estimating we will be spending more than $2 billion between now and 2015 for renewable energy. That is a huge amount of money and an awful lot of projects. We have to be able to not just procure from the marketplace, we have to go out and promote development and undertake development and co-develop with other developers to make sure the projects happen. We want good projects to happen because we need all that in order to meet the standard,” Fair said.
So far, according to Don Soderberg, chairman of the PUC, no fines or penalties have been assessed in recognition of the financial problems the utilities face and because the renewable energy industry is still maturing. “It’s one thing to set the goal, and it’s another thing to get there,” he noted. “It is clearly something that is in its infancy. The technology has always been there; there are always people promoting various technologies, but actually getting these things built and producing kilowatts is something that everyone is learning, and the learning curve has been quite steep.”
It’s Not Just About Energy
In addition to meeting the state’s energy needs, renewable energy is being looked at by many people as a way to diversify the state’s economy, by not only attracting energy developers, but also companies that manufacture and develop the components and technology used in the production of that energy. In the course of putting together Target 2010, the Economic Development Authority of Western Nevada (EDAWN) conducted a public survey and discovered that renewable energy is one of the most desirable industries to bring into the region. According to Jason Geddes, manager of government affairs for EDAWN, the industry is attractive because it creates high-tech, high-paying jobs and is a “green” technology.
And what makes Nevada attractive to the industry? Nevada itself. Not only does the state have an abundance of natural resources, it also offers low taxes, a good business regulatory environment and transportation networks for rail and air that make for easy access to California and the West Coast. The natural resources and good business environment make it possible for a company to put in wind farms or power plants and be close to production facilities with its R&D and design departments. Nevada also has world-class renewable energy research facilities at UNR, UNLV and the Desert Research Institute, a component of the University of Nevada system.
One renewable energy company that needs no additional proof of Nevada’s potential is ORMAT Technologies. The company has been producing power from Nevada’s geothermal resources since 1984 and currently produces 200 MW of power from its plants at Steamboat Springs, Soda Lake and the Brady Geothermal Project. Dan Schochet, vice president of market development for ORMAT, Inc., calls Nevada the most renewable-friendly state in the country, with support coming from the legislative as well as the regulatory levels.
The effort to make Nevada a hub for renewable energy development is occurring at the national level as well. In July, Senator Harry Reid introduced a bill to provide $90 million in zero-interest bonds for schools in Nevada and other western states to fund renewable energy projects. While helping schools lessen the impact of rising energy costs, the bill is also designed to spur the industry’s development, making it rank with gaming and mining as a significant contributor to the state’s economy. “It’s a continuation of my many years of work in bringing federal money to the state to promote renewable energy,” the senator said. “I think there’s a lot more we can do working together at all levels to realize the tremendous potential of our renewable energy resources and to build a related new and healthy world-class manufacturing base right here in Nevada.”
Congresswoman Shelley Berkley is also working within Congress to create a national RPS, using Nevada as a model. “The creation of a national renewable portfolio standard will encourage investment in energy from solar, wind, geothermal and other sources and will help provide a ready market for these kilowatts,” she said, adding that she has proposed legislation that would end subsidies to nuclear power plants and redirect those federal dollars to the development of alternative energies. “Tax incentives for the production of renewable energy will help level the playing field, which is now tilted in favor of coal, oil, gas and nuclear power,” she stated.
Tim Rubald, executive director of the Nevada Commission on Economic Development, said renewable energy is a priority for the state agency because of the tremendous advantages it provides, not only for the urban areas of the state, but for the rural areas as well. “It provides tremendous advantages as far as providing a tax base. About 93 percent of the state’s landmass is controlled by the federal government and not taxable. Alternative energy provides a tremendous shot in the arm for local governments because it adds significantly to the tax base,” Rubald said, adding that even with incentives and tax abatements, renewable energy projects can provide much-needed economic support for rural areas.
The Rural Resource: Land Many rural counties are looking at renewable energy as a way to help revive economies suffering from the downturn in mining, while relying on a traditional source of wealth, the land. White Pine County has found itself in a prime position to take advantage of the interest in renewable energy with the proposed development of the Frontier Line, a transmission line that will run from Twin Falls, Idaho to Las Vegas and provide capacity for transmitting energy produced from wind.
Karen Rajala, coordinator for the White Pine County Economic Diversification Council, said the county learned a lot about working with energy companies from a failed development project in the 1970s. That knowledge provided the basis for the county’s current efforts. Its major renewable resource is wind, and the county is currently working on the White Pine Energy Station proposed by LS Power. The project has a 200 MW wind energy component located in the Steptoe Valley in the Egan Mountain range.
Rajala said the development of renewable energy projects will contribute in many ways to the economic vitality of the region. Bringing in ancillary industrial development, such as wind turbine manufacturing, would not just create new jobs, but also facilitate the reinstatement of the region’s rail service. This should, in turn, allow for more industrial development. The tax benefit, Rajala said, outweighs the impact it will have on the county’s infrastructure because the increased revenue will allow the county to provide basic services that it is currently struggling to provide for its citizens.
Where We Are Now?
Historically, one of the barriers for wide-spread adoption of renewable energy has been its cost. With the exception of wind-generated power, renewable energy has been more expensive than either coal or natural gas. As technology improves, this is rapidly changing, and the price for renewable energy is expected to drop. Both geo-
thermal and solar from large-scale turbine plants cost approximately 8 cents per kilowatt hour in comparison to 5.2 cents per kilowatt hour for coal or natural gas. Many people acknowledge that the cost for fossil fuels has remained low because of subsidies and, were those subsidies to be removed, renewable energy would be highly competitive with fossil fuels.
The fact is, though, that renewable energy is becoming a more and more important resource for Nevada and the country as a whole. Sierra Pacific Resources currently generates almost 200 MW of power from renewable sources statewide, with additional plants in the works. The Solargenix project, Nevada Solar One – which broke ground earlier this year and will be the largest solar site built in over two decades worldwide – will produce 64 MW of energy for Nevada Power (1 MW of power is enough to provide electricity to 100 homes). It is expected to begin producing power early next year. The Department of Energy estimates that Nevada, because of its suitable land and solar resources, could produce more than 600,000 MW of power using solar technologies.
Geothermal, with its long history in the state, still has great deal of potential for energy production. The only states that produce geothermal energy are Nevada, California, Utah and Hawaii, and they currently produce 2,800 MW of power. “The amount of geothermal in Nevada that can be developed in the next 10 years with existing technology at competitive prices is another 1,400 MW, maybe 1,500 MW, which is roughly equal to the total amount of power generated and distributed by Sierra Pacific in the northern part of the state,” Schochet said. One of the major advantages of geothermal energy is that it is the only renewable source that can be used as baseload energy, something of primary concern for the utility companies. Baseload energy is available when the utilities need it and is not dependent upon certain conditions, such as sunshine or wind, to produce energy.
Wind energy has become a hot topic around the country, with Texas and Pennsylvania leading the charge. As yet, Nevada has no wind projects under construction, though there is a great deal of interest in wind. Powered by Renewables (PBR) is currently developing a 200 MW wind project for the eastern part of the state. According to Tim Carlson, CEO of PBR, they do not have a long-term purchase agreement in place with Nevada Power, but are hopeful the project will go through. In addition, PBR is looking at four additional sites along that same wind corridor.
One of the primary limitations wind energy has faced is getting energy from where it is produced to the customer. Nevada’s best wind resources lie along the eastern part of the state, a region that is sparsely populated and has limited infrastructure for energy transmission. In addition, the state is divided along north/south lines with no connection between Sierra Pacific and Nevada Power. To combat this, Sierra Pacific Resources is planning a north/south intertie project to link the two parts of the state, allowing transmission from the north and east, where energy sources are abundant, to the south, where energy demand is the highest. Dan Geary of the Renewables Task Force calls the proposed Frontier Line a “man-made Colorado River.”
In addition, the Frontier Line will allow developers along the way to tie into the transmission lines, giving wind power access to the Nevada market. This is an important step in renewable energy development for the rural areas, but it is still tied to fossil fuel production. “One of the critical factors we have found in linking the traditional coal-fired plant with the renewable is whether the coal-fired plant is large enough to support the development of the transmission capacity to get the energy out. The renewable projects may not be large enough to support the transmission lines needed to get the power to the market,” Rajala said.
Probably one of the most hopeful signs for the renewable energy industry is the interest of the gaming industry. Nevada’s casinos have a vested interest in supporting development of renewable energy – they require energy and large amounts of it – to keep the neon lights flashing and the visitors cool. According to Mark Russell, chairperson of the Nevada Task Force and vice president and general counsel for MGM Mirage, renewables are the way of the future and will provide financial benefits for all.
