What kind of event could bring together Nevada’s governor, lieutenant governor, a congressman, two gubernatorial candidates and dozens of Assembly and state Senate members?
Far down the list of anyone’s guess would likely be the unveiling of NV Energy’s 2018 Integrated Resource Plan (IRP), a lengthy, data-heavy planning document the utility is required to submit to state regulators every three years detailing how it plans to meet future electric supply and demand.
But members of Nevada’s political elite crowded the Springs Preserve last week to hear utility CEO Paul Caudill unveil details of the utility’s 2018 IRP, including six proposed agreements to develop six new photovoltaic solar farms throughout the state and several major battery storage projects, doubling the state’s renewable energy production by 2023.
The star-studded unveiling, which also includes a contract for potentially the cheapest solar production price in the country, was somewhat unusual for the IRP process, which typically resides in the realm of energy policy wonks and other denizens who follow the normally dry regulatory proceedings.
Unmentioned during the event but clearly present throughout the utility’s IRP filing was the specter of Question 3, a proposed constitutional amendment that would end NV Energy’s monopoly control of the state’s electric market and require the state set up and switch to a competitive retail market by 2023.
NV Energy, which has donated millions of dollars to a PAC opposing the ballot question, states in the IRP application that the expansive planned move toward more renewable generation wouldn’t go forward if the ballot measure passes, as the amendment would prohibit the utility from owning generating stations or entering into power purchase contracts with outside firms.
Here’s what the IRP process entails, and what the future landscape of Nevada’s energy policy could look like over the next three years.
What is an IRP?
Under state law, an electric utility is required to file a “plan to increase its supply of electricity or decrease the demands made on its system by its customers” to the state’s Public Utilities Commission every three years, due on June 1.
That broad outline takes the form of a filing consisting of thousands of pages of applications, testimony and appendixes from the utility, a window into how it plans to manage electric demand and procurement of supply over a period stretching out over the next three decades.
From there, the PUC — which consists of three commissioners appointed by the governor — is required to hold hearings and take testimony from any interested parties on the application, and judge it based on several criteria including meeting reliability minimums, the state’s renewable portfolio standard and acquiring fuel sources judged on flexibility, diversity and reliability.
After receiving the application, the PUC has 135 days to approve the utility’s energy supply plan. This year, that’s Oct. 14. The PUC then has 210 days to approve the rest of the plan, which for 2018 falls on Dec. 28, fewer than six weeks before the Legislature convenes.
State lawmakers in 2017 approved a number of changes to the IRP process, including requiring the utility for the first time to file it jointly for its entities serving both Northern and Southern Nevada service territories.
In its 2018 application, NV Energy laid out its broad goals for its future energy supply and demand goals thusly:
“The overarching goal of this 2018 Joint IRP is to meet growth and shrink our exposure to natural gas prices by delivering more low-cost renewable energy to our customers, accelerating our transition to a cleaner energy future with near-term investments by our (power purchase agreements) counterparties to support new Nevada-based renewable energy resources, shoring up our transmission infrastructure, and increasing or investment in energy efficiency programs.”
Clean energy and Question 3
Clean energy advocates see this latest IRP as a shift for the utility, which had approached solar and energy storage projects more conservatively in the past. They also see it as the utility adjusting to the times, a reflection of the dramatic drop in solar and battery storage prices over the past few years, even with the recent tariffs on solar panels imposed by the Trump administration.
One of NV Energy’s proposed solar projects, Copper Mountain 5, would provide the cheapest solar energy in the country, according to Greentech Media, which is part of a research firm that tracks solar contract prices. That price could increase after the first year, but the other proposals are similarly low priced contracts, said Colin Smith, an analyst at Greentech Media Research.
“These projects are on par with some of the lowest [contract] prices to date,” he said.
The IRP could put more pressure on clean energy groups, many of which have stayed neutral on the Energy Choice Initiative, to decide whether they support the ballot measure or the utility’s continued regulated monopoly over the state’s energy portfolio. Robert Johnston, a senior attorney at Western Resource Advocates, said there is some concern that moving to an energy choice market might slow down progress on building out large-scale solar projects.
Johnston noted that there would likely be several transition years before Nevada has an open energy market. There is concern among some environmental groups, he said, that during the transition period, there will be a halt in the construction of new solar projects.
“We think it will be a long and complicated process,” he said. “And the question is: Who is going to be building new renewable projects during this interval where you could really have a cloud of legal and regulatory uncertainty hovering over the state? … What we’ve seen in Nevada is that developers won’t break ground on these projects until they have a long-term buyer under contract who is committed to buying energy out of that project for the next 20 to 25 years.”
Under the proposed plan, the state’s energy supply plan would rise from 14 percent renewable in 2017 to 32 percent renewable in 2023.
Jon Wellinghoff, a policy advisor for the ballot measure and former chairman of the Federal Energy Regulatory Commission dismissed these concerns. He argued that companies might invest in clean energy even during the transition period before a restructured market goes into effect.
He laid out a few hypotheticals in which that might be possible. A large company that owns several stores in the state, Wal-Mart for instance, could enter into a contract for a solar facility to serve its stores under energy choice. Or, Wellinghoff said, a casino giant such as MGM Resorts International could invest in solar to aggregate and then offer to its large employee base.
If the market is opened, Wellinghoff said, he expects solar and battery storage to be the predominant types of energy procured because of how competitive their pricing has become.
“There’s no question those are the primary things they’re going to invest in,” he said.
The Question 3 factor
NV Energy says in the filing that it will only move forward with all of the proposed solar projects if Question 3 fails in November. If not, the company would be required to sell off all of their power purchase agreements and power plants as part of the dismantling of the monopoly structure.
If the ballot question passes, the utility proposed going forward with only one of the six proposed renewable energy projects — a 300 solar megawatt power purchase agreement with 8minuteenergy at the Eagle Shadow Mountain Solar Farm. Its IRP filing states that doing so will help the utility’s Northern Nevada operations meet the minimum Renewable Portfolio Standard goal.
The utility is also asking for the approval of four major transmission system upgrades to help interconnect the newly planned renewable energy projects, in total worth $22.9 million and that the utility could later recover through an adjustment in rates. If Question 3 is approved by the voters, the utility is asking the PUC to approve only a $550,000 transmission upgrade.
NV Energy executive Shawn Elicegui wrote in testimony filed with the IRP that because the utility would only need to meet the needs of customers through 2023 if the ballot measure passed, it wouldn’t make sense to enter into several long-term solar power contracts that it would then need to turn around and sell almost immediately.
“NV Energy’s focus will shift from long-term, centralizing planning that focuses on energy supply to short-term planning,” Elicegui wrote in the filing. “Adding six long-term obligations, as well as battery storage to a list of assets that needs to be transferred and which add to the obligations backed by the full faith and credit of the State is not necessary to meet customers’ needs through 2023.”
Does NV Energy really need the proposed solar?
The IRP requires the utility to prepare two analyses, one that addresses supply and another that addresses demand. But the two are interconnected. Growing energy demand has typically been used to justify the need for procuring more supply or building more transmission lines.
For utilities across the country, power sales have flattened or increased at smaller rates, even as economies have grown. Part of this has to do with improvements in energy efficiency.
The same trend is true for NV Energy. In its filing, it forecasts its peak load — the maximum amount of energy required by its customers — to grow at about 0.7 percent in Southern Nevada and dip slightly in Northern Nevada between 2019 and 2029. The forecast is low, the company said, because it factors in the expiration of contracts and an ambitious energy efficiency plan (the IRP proposes cutting sales by more than 1.1 percent through energy efficiency).
Wellinghoff said that even with Valmy plant — the utility’s lone remaining coal-fired plant — coming offline in the near future, the utilities commission might punt on NV Energy’s plan because the utility could satisfy its customers’ needs without new solar farms.
“We’ll be well into the transition to energy choice by [the time they need that energy],” he said.
NV Energy argues that even though adding solar will bring more generation to the grid, it will lower costs over time because the utility will be less reliant on purchasing natural gas. Right now, the utility must choose whether to purchase power on the Western wholesale market or purchase natural gas as fuel for those power plants. The six solar energy projects would give the utility more flexibility to avoid those costs, which could fluctuate in the future.
In the filing, NV Energy said the plan would “shrink customers’ exposure to natural gas prices.”
The utility’s plan also called for extending out the planned lifespan for several of its existing power plants until around 2030 largely to provide capacity support during times of peak electric demand, as most of them are in good operating condition.
One of the highlights cited by Caudill and others in the presentation of the IRP is moving up the retirement date for one of the units of the Valmy coal-burning generation plants, the utility’s lone remaining coal-fired facility in the state.
Long a target for environmental groups, the utility initially planned on operating the rural Humboldt County-based plants through their expected retirement date of 2025, to help meet peak demand during hot summer months and because the utility considered coal to be a more reliable resource than large-scale solar.
The IRP filed by the utility calls for one of the two generating plants (which it co-owns with Idaho Power) to be retired by 2021, with the other staying operational through 2025.
But retirement of the Valmy plant is conditioned on several factors, including:
- the PUC approving all three Northern Nevada renewable energy projects and coming into operation before June 2022
- no unexpected increases in area electric demand that would create a larger energy load
- stable conditions in western energy markets
- avoiding increases in transmission area load
- the commission approving regulatory asset accounts, which would allow the utility to recover the cost of closing the plant early through changes in rates.
NV Energy said the conditions, like the approval of three new solar projects, are necessary to maintain a reliable grid in an area that serves Reno and mining customers near Elko.
Uncertainty over the retirement date is due to various unsolved factors in the utility’s electric supply mix over the next three years, Elicegui wrote in a filing submitted as part of the IRP, requiring a series of tests to ensure that retiring the plant early wouldn’t disrupt the utility’s ability to deliver electricity during peak demand times.
“While our current long-term reliability assessment indicates that we should be able to retire North Valmy Unit 1 in 2021 without compromising our fundamental directive – to safely and reliably deliver low-cost energy to customers – we need to confirm those findings with additional analysis as 2021 approaches,” Elicegui wrote in the filing.