The Indy Explains: Why NV Energy is pushing for a $2 billion statewide transmission upgrade
In the midst of an unexpected recession and staggering job losses across the country, NV Energy has proposed a massive new transmission infrastructure project that it says will create jobs, boost the economy and help promote renewable energy development.
If that line sounds familiar, that’s because it’s happened before. In 2009, the state’s primary electric utility made many of those same arguments about economic recovery and renewable energy in its pitch to build a 235-mile, 500 megawatt “One Nevada Transmission Line” linking Southern and Northern Nevada for the first time.
Now, more than a decade later, the utility has proposed another major transmission line upgrade. Dubbed “Greenlink Nevada,” the estimated $2 billion transmission project would upgrade existing lines between Ely and western Nevada (centered in Yerington) and a new line between Las Vegas and Yerington, forming a transmission line triangle inside the state.
But what has changed since the “game changer” original statewide transmission line was completed in 2014, and why is the utility pushing for a major transmission expansion now?
NV Energy CEO Doug Cannon says the proposal — which still must be approved by state energy regulators at the Public Utilities Commission (PUC) — is meant to proactively address several issues that the utility expects to deal with over the next decade; transmission capacity in a rapidly growing Northern Nevada; and complying with higher renewable energy mandates including a 50 percent Renewable Portfolio Standard by 2030 that was passed by the Legislature.
“We're not asking for any tax breaks,” Cannon said in an interview last week. “We're not asking for any special treatment. We're ready to make this investment in the state and drive economic development in the state.”
The proposed transmission plan, which was announced last Monday, is composed of two main phases. The first is a 235-mile long, 525 kilovolt transmission line linking substations in Ely to Yerington, with plans to build out additional lines linking to the Reno and Tahoe Regional Industrial Center areas.
The second phase of the plan is a 351-mile, 525 kilovolt line stretching from Las Vegas to Yerington, running somewhat parallel to the state’s western border. The plan also calls for some substation upgrades and construction — notably a full buildout of a substation at Fort Churchill, where the utility operates a natural gas-fired power plant.
NV Energy is also asking for PUC approval for three new solar and battery storage projects in Southern Nevada, including one owned by the utility, that would add 478 megawatts of solar generation and 338 megawatts of battery storage.
All in all, the utility — which filed the planned transmission upgrade as part of a lengthy amendment to its 2018 Integrated Resource Plan — is bullish on how the infrastructure upgrades could benefit the state.
The company commissioned a report from well-known analytics firm Applied Analysis, which estimated that the project would generate $781 million in economic activity while employing or supporting more than 4,000 jobs over the 11-year construction period.
Once completed, the project will have a smaller economic footprint; Applied Analysis estimates that it will average $2.1 million in “annual economic activity,” and support around 9 jobs with $822,000 in wages for management and maintenance of the new lines.
But Cannon said the transmission upgrades will not exist in a vacuum; outside of the construction and materials that will go into building power lines through hundreds of miles of Nevada desert, the upgraded capacity will open the door for new development of solar plants in previously inaccessible areas, and in theory allow Nevada to stop being the “hole in the donut” among other Western states.
Still, NV Energy will need to prove to the PUC that the proposed infrastructure upgrades and other related projects are worth the $2 billion price tag that ratepayers and customers of the utility will ultimately need to pay.
“This infrastructure doesn't get put in overnight,” Cannon said. “These are long-term processes, long-term projects to put in, with having to permit federal land, and all the parties involved. And so we need to start that long term conversation now.”
Building a triangle
Although NV Energy has provided electric service to most of the populated areas of the state since the Northern Nevada-based Sierra Pacific Power and Las Vegas’ Nevada Power merged in 1998, Nevada’s two largest urban areas continued to operate as unconnected islands in the state’s power grid until 2014.
That changed after construction of the 235-mile One Nevada Transmission Line between Las Vegas and an Ely substation completed construction. The line was originally proposed as a way to link a proposed coal-fired plant near Ely that was ultimately never built.
Cannon said that the 2014 transmission line has been successful, but that the company has now fully maximized capacity on that line, which limits the utility’s ability to “dispatch our system in the most cost-effective way.” Creation of the transmission triangle would also serve as an important redundancy, in case of a natural disaster or other interruption on the existing transmission line.
“Having this triangle around the state allows us to build those renewable resources in the most efficient location, and then move those efficient resources to wherever the load is,” he said. “Whether that's in Las Vegas or Reno or Elko, wherever the load might be, we can move the energy on this triangle to the most efficient location. So we're not trying to force a solar project into Northern Nevada, when it doesn't really make sense.”
Outside of new development in the state, NV Energy said in its application with the PUC that expanded transmission capacity in the state would also help move the state away from being the transmission “hole in the donut” between neighboring Western states.
An enhanced transmission system would allow the state to potentially “become an energy highway for transfers to and from Southern California and Arizona,” the company said in the application, adding that planned construction of third-party and other transmission systems would make the state the “path of least resistance between the hydro-rich Pacific Northwest and the high-capacity winds within the central plains of the United States.”
Beyond the potential financial benefit of having more electricity from other states flow through Nevada, the company also wrote in its application that it didn’t believe it could achieve a cost-effective pathway to net zero carbon emissions — a nonbinding goal set in state law after the 2019 Legislature — without substantial import of wind and other renewable energy from other states.
While more attention has been paid to a successful push in the 2019 Legislature requiring NV Energy to reach a 50 percent Renewable Portfolio Standard by 2030 (which the company supported), the utility is also looking at the possibility of reaching zero carbon emissions by 2050.
But getting to that point won’t be easy. As part of its application, the utility commissioned a report from an energy consulting firm that found “solar and PV energy storage alone cannot accomplish the aggressive renewable goals established for the state.”
The report by Energy+Environmental Economics found that in order to hit those decarbonization goals, NV Energy would need to exponentially increase its share of solar power and storage capacity. Because solar is an intermittent resource — the sun only shines for part of the day and doesn’t match up with peak hours of energy use in the evening — the cost of switching to such a solar-heavy fuel fix would likely drive the average price of a megawatt-hour (the standard measurement for power plant generation) up nearly four times the current cost.
The report recommended that resource diversity — such as wind or hydroelectric power — would benefit the company and lower the cost of reaching the zero-carbon goal. But reaching those resources in a desert state such as Nevada would require enhanced transmission capacity, the company said.
“The only way to gain access to diverse renewable resources is through an interconnected western grid,” NV Energy wrote in its application. “Nevada’s geographic location provides the opportunity to be a key player in the development of that grid and a key renewable energy provider in the west. At this point, the missing piece is the lack of transmission infrastructure in Nevada.”
Cannon said while the company could possibly meet its renewable energy requirements and goals set in state law without a massive transmission system upgrade, it would be “very challenging” to ensure system reliability and efficiency “because you're trying to balance that renewable energy with just batteries.”
Cannon did not outright dismiss the idea that the upgraded transmission lines could lead the state into joining a multi-state wholesale energy market, also called a Regional Transmission Organization (RTO).
For everyday electric customers or ratepayers, talk of an RTO wouldn’t affect day-to-day operations or how one uses electricity. But on a macro level, the effect of Nevada joining a wholesale energy market could affect not only the price of electricity over the coming decade, but also the availability of renewable energy in the state.
So what is a wholesale energy market, or RTO?
Traditionally, the energy industry has been vertically integrated with generation, transmission and final sales to customers done all under the same roof by a single utility company. But as energy markets have become increasingly decentralized, many states have set up RTOs (also called Independent System Operators, or ISOs) that function as central clearing houses for managing the electric grid in certain geographic areas.
There are nine ISO/RTO organizations operating in North America; the closest to Nevada is the California ISO (CAISO).
Cannon said in an interview that while the utility has made no decisions about joining or creating an ISO, the company believes that it will better achieve carbon reduction and renewable energy goals if “we take a regional view.” He added that Nevada’s participation in the Western Energy Imbalance Market (run by CAISO) in 2015 — a bulk power market that allows short-term buying and selling of electricity among 8 states — had been beneficial for the company by allowing it to purchase excess solar produced in California at cheaper prices.
“If there is a structure that we think makes sense for Nevada's interests, we certainly would look at exploring that path,” he said.
But in order to participate fully in a future Western states RTO, NV Energy argued in its application that Nevada would likely need an upgraded transmission system including redundancies on the existing state-stretching line between Ely and Las Vegas in order to participate.
“Greenlink West eliminates this single contingency impact and creates the essential connections for both the northern and southern systems to become key players in a western interconnected grid,” the utility said in its application.
Northern Nevada needs
When filing to leave NV Energy’s service last year, the Atlantis Casino Resort Spa quickly ran into a problem; the utility said it would run out of transmission capacity in Northern Nevada if the casino company opted to buy electricity from another source.
Although the timing of the utility’s announcement was questioned at the time, continued growth in the Reno area as well as the Tahoe-Reno Industrial Park in Storey County has put additional strain on the electric grid in Northern Nevada.
In its application, the utility wrote it expected Northern Nevada to use all of its committed transmission capacity by 2023 and begin to exceed current reservations by 2024 — meaning it either needs new power generation, or increased out-of-area transmission to meet business and other ratepayer needs.
“It is not in the interest of the state to have the lack of utility infrastructure cause delay in economic development and job creation,” the application stated.
The planned transmission upgrade would increase Northern Nevada import capacity by approximately 1,025 megawatts — well above the 700 megawatts in expected load growth over the next decade.
Cannon said that the utility could in the short term continue to service Northern Nevada without issue, but the number of new businesses and overall growth in the Reno area meant that even the utility’s “internal capacity starts to get tight.”
“We do get to the situation there that if we don't approve transmission construction in Northern Nevada, the system will get constrained to the point where we could not support ongoing growth on the system,” he said. “We do not believe that's in anybody's interest. That's certainly not where we want to be.”
Cost to the customer
NV Energy’s promotion of the new transmission line is heavy on details on projected financial impacts, jobs numbers, expected taxable sales and other benefits it expects the state to see if the PUC approves the project.
But the $2 billion price tag attached to the project does not come from a magic pot of money; the utility will eventually recoup the cost of its investment from the rates that it charges to its customers.
Cannon said that the company has not yet attempted an assessment of what effect the new transmission lines may have on rates or monthly power bills of its customers. For one, the company is essentially “fronting” the cost of construction and build-out of the transmission lines, and would seek to recover the rates through what’s called a General Rate Case (filed by the company every three years with the PUC that sets rates for all customer classes) sometime in the mid-2020s.
But he said there were other factors that might drive that price point down; the second phase of the transmission line between Las Vegas and Yerington will open access to otherwise remote areas of the state well-suited for utility scale solar production. If the current price of solar remains low, Cannon said that will help lower the utility’s fuel costs and thus balance out the eventual price tags owed by ratepayers.
“Ultimately, the cost for customers will be influenced by how much we can offset energy costs, because now all of a sudden, we have this new infrastructure available to us that wasn't historically there,” he said.
The entire $2 billion price tag also won’t all come at once; utilities including NV Energy often amortize and spread out the costs of any large project or infrastructure over a period of many years, so ratepayers can avoid a sudden upswing in their power bills.
Cannon also said that the rate recovery will be different than how the utility managed the 2014 One Nevada transmission line, which was developed and partially leased with a private company. Cannon said the utility planned to own the new transmission infrastructure outright, which would give the company more flexibility to spread the ownership cost over a longer period of time.
But in what could be a hint at the future cost, the company wrote in its application that moving toward enhanced renewable energy capacity would require a shift for traditional, lowest-cost favored style of ratemaking.
“The Companies fully support these state of Nevada goals and requirements, but they and industry stakeholders also need to shift from the past practices of ‘just in time’ resource and transmission planning and narrow focusing on immediate needs and benefits,” NV Energy wrote in its application.
In addition to the transmission line, NV Energy also announced plans for three new “solar plus storage projects,” with a combined generation capacity of 478 megawatts of solar generation and 338 megawatts of battery storage — an amount the utility company said could power more than 107,000 homes.
The projects, which would all be based in Southern Nevada, include a direct, NV Energy-owned 150 megawatt solar project with an attached 100 megawatt battery storage capability. The Dry Lake Solar Project, which would be located about 20 miles northeast of Las Vegas on leased Bureau of Land Management land designated as a “Solar Energy Zone.”
It’s a departure from the utility company’s more recent strategy of entering into long-term power purchase agreements; where the company agrees to an exclusive, decades-long agreement with a private company that runs and operates a separate electric generation facility guaranteed a certain sale price for their production of power.
Cannon said that the Dry Lake project, which is located on federally leased Bureau of Land Management land designated as a “Solar Energy Zone,” signals a shift in utility strategy around procurement of generation facilities.
He said that while the power purchase agreement model has provided the utility with extremely competitive electric prices, the structure of the deals meant that the utility would only contract with the developed solar field for a set period of time (normally 20 to 25 years) before the developer could start selling the solar-generated electricity on an open market.
Solar fields usually have a three to four decade long lifespan, so the independent developers on the other side of the “PPA” can essentially sell at a pure profit after NV Energy customers essentially helped pay to build their facilities.
“There's no reason to profit on our customers that way,” he said. “If our customers pay for a facility, let's let them benefit from that facility for the entire life of plants.”
The other proposed solar projects include:
- A 128 megawatt solar array, including a 58 megawatt battery storage system, called Boulder Solar III. It’ll be built south of Boulder City and is developed by 174 PowerGlobal and KOMIPO America, Inc.
- The Chuckwalla Solar Project, a 200 megawatt solar generating facility with a 180 megawatt battery storage system. It’s proposed to be developed by EDF Renewables North America and will be placed about 25 miles northeast of Las Vegas on Moapa River Indian Reservation land.
In its application, the utility company said that at least two of the projects would be essentially earmarked for Google, which signed an energy supply agreement with the utility to offset 100 percent of the search engine’s electric output with clean energy.
It’s also planning the first quasi-community solar project at Mojave High School in Las Vegas, a 0.35 megawatt solar facility expected to cost $1.56 million an come online by the end of 2021.
It also wrote that the company wanted to get started early on large-scale solar projects given the looming expiration of the federal investment tax credit for solar projects and as a hedge against any potential disruptions in the development and construction of already-approved solar plants amid supply chain and other disruptions caused by the COVID-19 pandemic.
“The risk, however, is likely more challenging for projects with commercial operation dates in 2020 and 2021, since they are now in various stages of receiving or procuring major equipment such as solar panels, inverters and transformers,” the application states.
The proposed projects would also add a cumulative 338 megawatts of battery storage capacity to the utility’s fleet, which combined with other previously approved battery storage projects exceeds a 1,000 megawatt of storage by 2030 target set by the PUC.