MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
February 22, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Thursday, February 22, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Ann O’Connell, Vice Chairman
Senator Dean A. Rhoads
Senator Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Gayle Nadeau, Committee Secretary
OTHERS PRESENT:
Rory J. Reid, Lobbyist, PG&E National Energy Group
Eric Eisenman, Director, Government Affairs, PG&E National Energy Group
Michael A. Pitlock, Lobbyist, Shell Energy Services Company
Thomas Kinnane, Lobbyist, Shell Energy LLC
Robert E. Campbell, Lobbyist, Duke Energy
Jon B. Wellinghoff, Lobbyist, Vulcan Power
Rose E. McKinney-James, Lobbyist
Ron Burch, President and CEO, Far West Capital
Alan D. Caldwell, Lobbyist, President, Sierra Concepts
Alfredo Alonso, Lobbyist, representing BP Solar
M. Todd Foley, Director, External Affairs and Business Development, BP Solar
Joseph L. Johnson, Lobbyist, Toiyabe Chapter, Sierra Club
Jeffrey Hanson P.E., Manager of Regulatory Affairs, Avistar, Incorporated, and AXON Field Solutions
Senator Townsend began:
This morning we’re going to talk, specifically, about some of our independent power producers, and we have a number of them here. . . . Is there anyone here whose background, expertise, or insight [is] into biomass? This is an area we cannot forget because it’s also part of our NRS-defined [Nevada Revised Statutes-defined] renewables with, apparently, a large amount of potential capacity in the Incline [Village] area, as well as Lincoln County. So, we don’t want to preclude anyone else. A gentleman sent me a fax that, apparently, he’d read some things in the press that we had left out photovoltaic technology. Well, we’re not going to preclude anybody . . . sometimes we don’t include it all only because we didn’t touch on it, not because we are ignoring it.
Rory J. Reid, Lobbyist, PG&E National Energy Group, said:
I am an attorney with the firm of Lionel Sawyer and Collins. I am here today on behalf of PG&E’s National Energy Group. Before I introduce the principals of the company, I wanted to congratulate this committee for their foresightedness and for their political courage to confront these very complicated issues head-on. Today, we wanted to tell you a little bit more about the company. Maybe you don’t know everything . . . about the project they are developing in southern Nevada.
Also, we wanted to address some ways, maybe, you can expedite the siting of power plants in the state. I think you believe as we do, when you distill this energy crisis in the West to its essence, it’s a supply problem, principally. We wanted to talk about how you can help us get more supply on the grid as quickly as possible.
PG&E National Energy Group is not the utility you are reading so much about. It’s an affiliate company. They are the proponents of the Meadow Valley generating project, which is a 1000-megawatt facility near Moapa in southern Nevada. They are ready, willing, and able to address the supply problem because they have three principal lines of business. They are a leading power producer in the country. They have 30 power plants they own and operate in 10 states throughout the country. Their current generating portfolio is 8500 megawatts. They currently have an additional 10,000 megawatts in development, much of that in the western United States in the states of California, Arizona, and Nevada.
They [PG&E National Energy Group] are also one of the largest transporters of Canadian natural gas in the world. They have the capacity to transport 2.7 billion cubic feet per day with interconnections in six states, including the Tuscarora pipeline here in Nevada. They also operate one of the leading energy trading groups in the country. We believe there is a supply problem. We want to supply generation to this state, and we know there has been a lot of talk about that from this committee. Senator Titus [Senator Alice Costandina (Dina) Titus, Clark County Senatorial District No. 7], as well, is going to introduce a bill that goes to siting. We wanted to talk about our project, but specifically, about how you can help us get these plants built quickly. . . .
Eric Eisenman, Director, Government Affairs, PG&E National Energy Group, said:
I appreciate the opportunity to appear before the committee today to discuss the siting of new power plants in Nevada. It is very wise of the committee to consider what the state needs to do to encourage new, reliable electric supplies that will benefit all consumers in the state. [I would like to tell you] a little bit more about the plant we’re developing in the Moapa area, about forty‑five miles northeast of Las Vegas. It will be approximately 1000 megawatts. It will be natural-gas fired. The Kern River pipeline runs adjacent to the site we’re developing. It’s a merchant plant. As a merchant plant, the electricity will be sold in Nevada and possibly to other markets. But, a merchant plant’s status eliminates utility customers from bearing the initial cost associated with new plant construction and provides an opportunity to meet growing energy needs with new, clean technology.
The state should encourage a diverse mix of clean, efficient [and] cost-effective generation. Many states in which the PG&E National Energy Group does business, we permitted a lot of plants, or are permitting a lot of plants. In a lot of states, the siting process is real lengthy and real cumbersome. I am pleased to say in Nevada, generally, the siting process works pretty well. However, I do have a few recommendations that will help streamline the permitting process and ensure adequate supplies for the state as quickly as possible.
Mr. Eisenman continued:
The first matter I want to discuss is the Utility Environmental Protection Act, sometimes known by its acronym UEPA. This act says any person or any company has to obtain a permit from the Nevada PUC [Public Utilities Commission of Nevada (PUCN)] before commencing construction of a utility facility. It defines the term “utility facility” to include electric generating plants and their associated facilities (and, I want to emphasize the term “associated facilities.” I’ll get back to that in a moment), other than plants and their associated facilities that are located in counties whose population is 100,000 or more, which includes Clark County where we are developing the Meadow Valley Project. Also, the term “utility facility” in the statute includes electric transmission lines and transmission substations, gas transmission lines, storage plants, compressor stations and their associated facilities, and also, the water infrastructure that could be needed for a new power plant.
Now, Clark County [and] the counties in Nevada that have a population of more than 100,000 are required to create and maintain comprehensive land-use plans. These counties have rigorous processes in place to review applications for conditional use permits, special use permits, zone change applications, and so on. So, review by the PUCN of potential facilities in these counties, is duplicative and unnecessarily increases development and construction costs. In 1997, the Legislature amended the NRS to exclude electric generating plants and associated facilities in Clark and Washoe counties from the definition of a utility facility.
However, nowhere in the statute is the term “associated facilities” defined. And failure to define that phrase is creating some uncertainty for us, and I suspect for some of the other developers here in the state as we plan and develop those facilities. The concern is when we see the other parts of the statute define “utility facility” to include gas transmission lines, electric transmission lines, facilities we need to build as part of the whole plant (the gas line will come to the plant, the electric transmission line will be built to connect with [the] Nevada Power [Company] system), it seems like we have to get this permit; not for the actual generating facility, but for the connecting facilities.
Yet, we also have to go to Clark County to permit those same facilities. So, we suggest the legislature should define the phrase “electric generating plants” and their associated facilities to include: electric transmission lines and transmission substations; gas transmission lines; and water storage transmission and treatment facilities; including, without limitation, supply and waste stream facilities built to support or service electric generating facilities, including, without limitation, electric and transmission laterals. To kind of sum up, in the counties with more than 100,000 people, we have to get a conditional use permit, a special use permit, or a zone change. So, under the circumstances the UEPA process at the PUCN seems to be duplicative, and there should be a change there.
Senator O'Connell asked, “Eric [Mr. Eisenman], can you tell me, in the other areas you are located, do you have to go through their comparable PUCN for any permitting? We know Texas does not require this.”
Mr. Eisenman responded:
Well, every state is different. Many states have a kind of a central siting agency to permit new power plants. That is certainly true in neighboring California where you have to go to the California Energy Commission to get a license to build. They have, kind of, the overall authority. We don’t have that here in Nevada; we don’t believe it’s necessary. The point I’m trying to make, it’s certainly appropriate one has to go to a government entity to get a permit for a particular facility. We just don’t want to have to go to two different government entities for the exact same facilities.
Senator O'Connell said, “Well, that’s what I’m trying to figure out. What public good is served by this, if any?”
Mr. Eisenman replied:
By going to two, it’s one too many. We understand we have to meet the county rules, the county regulations, and we want to be a good neighbor in the community. If there are environmental regulations and zoning regulations, we understand we need to comply. But, we only want to comply with it once, not twice. I think that’s the point. Clark County does a very comprehensive review of all these types of facilities, and we feel that’s more than adequate.
Senator O'Connell asked, “Are the timelines adequate (the same) with both the county and the state?”
Mr. Eisenman answered, “You know, I don’t know.” [Mr. Eisenman turned around to ask someone in attendance, and then replied, “They’re both a fairly short period of time, so that’s not so much the issue.”]
Senator O'Connell asked, “We’re not comparing that to California this time?”
Mr. Eisenman interjected, “No, please, please.”
Senator O'Connell continued, “It’s just a very short time?”
Mr. Eisenman responded, “Yes.”
Mr. Reid stated, “Senator O'Connell, we believe Nevada, in terms of siting, does a good job. We’re not here to criticize any local [entity].”
Senator O'Connell interjected, “We think we can do a better job.”
Mr. Reid continued, “We’re just suggesting, if a few things can be done to fine-tune the process . . .”
Mr. Eisenman clarified:
It’s also important to recognize in order to operate efficiently energy markets require a balance of generation and transmission capacity, as well as sources of fuel supply, that is, the natural gas pipelines. In that regard, steps can be taken to expedite the construction of utility-owned electric and gas transmission facilities. PUCN regulations require the utilities to provide cost information for electric transmission utility facilities, and cost and siting information for some gas transmission facilities.
But, FERC [Federal Energy Regulatory Commission] has many of those responsibilities, not the state. While this doesn’t affect us directly as the applicant, Nevada Power [Company] and Sierra Pacific [Power Company] may have to upgrade their systems. They should only have to provide information to the state, formally, that the state has jurisdiction over, and they should only have to provide information to FERC that FERC has jurisdiction over. And right now, there’s a little bit of an overlap there we feel should be corrected and would help expedite the permitting of transmission facilities in the state.
The next area I’d like to speak about, briefly, is cooperation between federal, state, and local agencies. In many instances, development of electric generation facilities entails review and approval, or participation of federal agencies. Here in Nevada, the [U.S.] Bureau of Land Management [BLM] will issue right-of-way grants for electric transmission, gas, and waterlines on BLM-administered lines. Receiving these grants from BLM can be the most time-consuming approval to bring new power supplies to the market place. That is probably the most time-critical item we are dealing with in developing the Meadow Valley Project.
In this regard, I would suggest the
state request President Bush to direct all relevant federal agencies to
expedite federal permit review and decision procedures with respect to the
siting and operation of power plants in Nevada. Namely, there’s got to be adequate resources at relevant federal
agencies. And, I would note, earlier
this month the state of California requested that from President Bush. So, I am not coming up here with anything
new and creative. And, [request] the
President issue a memorandum within a week to federal agencies to do everything
they can to expedite the federal permit reviews.
Development of electric generating facilities also entails review and approval of local and municipal bodies, as well as cooperation between such bodies and state executive agencies. In this regard, a joint resolution asking the Governor to direct state executive agencies to allocate resources in a matter that facilitates the coordination of local review and approval processes where state participation is necessary. Continuing on the theme of state, local, and municipal agencies, certainly the development of more generation in the state is essential to the stability and reliability of energy markets in Nevada.
Mr. Eisenman continued:
Consistency and certainty are [of] considerable importance to entities like us that develop new generating facilities. We hear in many states, from permitting agencies, they just don’t have adequate resources to process permit requests quickly. State [and] local agencies in Nevada should be encouraged to allocate resources in a manner that facilitates the expeditious review of applications for construction and operation permits. More importantly, these agencies should endeavor to improve or complete review processes within the timelines established by agency regulations. And, generally speaking, these timelines are adequate.
But, we know a lot of these agencies have a lot of permits on their desks to process, and it’s just extremely important they have adequate resources to do this as quickly as possible. These agencies should be encouraged to prioritize applications for permits, approvals, or licenses related to the development of generating facilities. These agencies also have significant discretion in determining whether to hold an evidentiary hearing. Hearings should only be held when mandated by federal or state law. And when these agencies do have to conduct hearings, the hearings should receive priority treatment and preferential hearing days, rather than going to the bottom of the queue and having to wait too long.
All of that will slow down the development of new supply. The legislature should review statutes creating state and local agencies to determine whether such agencies have the authority to engage, at the expense of the applicant, independent contractors to assist the agency in evaluating applications for permits, licenses, or applications relating to generating facilities.
Mr. Eisenman continued:
Where the agencies lack such authority, the legislature should adopt legislation enabling the agencies to engage independent contractors, at the expense of the applicant. What we’re getting to here is, again, a resource issue. We recognize some state or local agencies just may not have the resources, in the short-term, to do this. We are comfortable with, at least, discussing paying for them to go to an outside consulting firm. We’re willing and open to paying for that, and we have done that in other states where we have developed projects. Agencies should be encouraged to conduct completeness reviews of applications relating to generating facilities in an expeditious manner and well within existing timelines. If an application has deficiencies, it is crucial the applicant be informed as quickly as possible so those deficiencies can be corrected.
Let me talk very briefly about balancing the use of Nevada’s natural resources. Both electricity and water are important to the continued growth and stability of Nevada’s economy. The production of electricity requires, as an input, water. Likewise, the pumping and delivery of water often require, as an input, electricity. Development decisions involve weighing and balancing a number of variables and circumstances, including the availability and cost of water, access to and cost of sewage facilities, a climate of a particular project site; and the quantity of air emissions resulting from power generation are unique to each specific project.
State [and] local bodies and officers, when participating in or conducting proceedings relating to the review and approval of generating facilities, should be mindful of that balance. In this regard, state and local bodies and their officers should weigh and consider the unique circumstances of each project without giving preference to any particular type of project or technology.
Senator Townsend responded:
That was an extremely cogent presentation with regard to the issues we’re concerned about in helping all the parties who are interested in building here. I appreciate, particularly, your reference to the various jurisdictions and, more importantly, your emphasis on transmission. We tend to forget, and it’s an easy thing to do, if you just build a whole bunch of megawatts then you [are OK, but,] “Oh, by the way, we’ve got to get them somewhere. I guess we need a little transmission.”
Mr. Eisenman replied:
I would just note we visited with Nevada Power as recently as yesterday to talk about our transmission interconnect; and with respect to gas, we have had a number of discussions with Kern River [officials] about expanding their pipeline from the Rocky Mountain gas supply areas. We believe Kern River [officials] will be filing an application at FERC later this year to expand its system to support new generation in southern Nevada. And, [as] Rory [Rory J. Reid, Lobbyist, PG&E National Energy Group] mentioned, very briefly, we own a gas pipeline that brings gas from Canada to the West Coast; and we will be filing an application at FERC this spring to expand that line to bring more gas to the Northwest, California, and northern Nevada. Most of that expansion, maybe even all of it, will be to serve generation facilities all over the West.
Senator Townsend asked, “If you have time, can you provide us with the list [Exhibit C] you think is important for us to address?” Mr. Eisenman replied, “Yes. We’ll get it to you.”
Senator Townsend commented:
Particularly, if you could make two focuses: One, those things over which we do not have control, [e.g.,] all the FERC issues; and, the other over which we have control, statutorily, and those things that can be done simply by Executive Order.
Michael A. Pitlock, Lobbyist, Shell Energy Services Company, testified:
You should have in front of you two documents. One is an outline of Shell’s Energy Stabilization and Choice Plan [Exhibit D] I’ll be reviewing for you; the other document [Exhibit E] is a summary of some economic development benefits that have been realized in the state of Pennsylvania upon the restructuring of their markets.
I’m not going to talk about the problem; everyone here knows the problem. What we’re hoping to do today is provide the committee with a framework for a solution to the problem. A solution we believe will allow restructuring to move forward in the state of Nevada, [and] allow for the systematic, but gradual, development of competitive markets in the state of Nevada. And, at the same time, provide price stability to the customers, which is very important. Also, provide security of supply, another very critical issue here in Nevada.
The plan, basically, calls for the Public Utilities Commission [of Nevada] to issue a request for proposals (RFP) from competitive providers to provide “provider of last resort” [PLR] service. The key to making sure this RFP process works adequately is flexibility. The commission should be instructed to develop a RFP that is as flexible as possible that would solicit bids from alternative providers that could be submitted in a lot of different ways. You could have bids submitted by customer class; you could have bids submitted by geographic region, given some of the unique needs of the different geographic regions within the state; or, you could have all-encompassing bids that would reflect service to all customers. The key is all customers would be covered under the plan; all customers would have the availability of these alternative suppliers. The other thing we want to provide is some level of security beyond the February 2003 date we’ve heard about with respect to the buyback agreements.
So, the bids that come in from the alternative suppliers should be of a minimum term that extends, at least, through the end of 2003. We want to make sure we have stability of rates beyond February 2003 date. We believe that’s important to the state. Therefore, these alternative suppliers, in order to be a successful bidder in the state, must be willing to make a commitment beyond that February 2003, and possibly even longer than the end of 2003. But, at a minimum, we should see bids coming in that will give stable prices to consumers through the entirety of 2003.
The bids would be under the control of the PUCN. We heard discussion yesterday, when we were talking about the divestiture issues, about the feeling we would be losing control over the generation. Through our proposal, the PUCN would still remain in control of the process. They [PUCN] would have control over the RFP as they design it. They would have control over who gets awarded the PLR service. They would also have control over the providers, themselves, through their consumer protection regulations already in place and [control over] their licensing requirements. So, our plan would not envision any loss of control by the state.
Mr. Pitlock continued:
It is important, also, these bids cover the full cost of service. We want to make sure the competitive market is designed in a way where the alternative suppliers, who wish to come in and provide service to the state, accept the full risk of providing service and, along with that, accept the full responsibility and obligation to serve. What we would see is a shift from the statutory obligation to serve, which we now see with the incumbent utilities, to a contractual obligation to serve. That obligation would be just as strong and still under the control of the PUCN.
As the alternative suppliers are selected by the PUCN, they would be afforded the opportunity to receive an allocated share of the buyback contracts. This way we’re sure all citizens receive the benefit of those contracts. Also, we have had discussions before this committee in this session, and in prior sessions, about the QF [qualifying facility] contracts. We firmly believe those contracts need to be honored. Again, the successful bidder in this process should be allocated a proportionate share of those qualifying facility contracts, as well. We certainly don’t want to see any contracts abrogated as a result of this process.
The PUCN would also be the one who would be in control of allocating the load to the successful bidder. This way, we have control to make sure the PUCN is given the ability to allocate the load in a manner that is the most beneficial to the citizens of the state. This way, we assure availability of service to all citizens, and not just a single geographic area of the state. We’ve also had discussions about, what I’ll generally characterize as public purpose programs, whether they are low-income assistance, weatherization, or energy-conservation programs.
The successful bidder in this process, obviously, would have to comply with whatever standards, whatever programs are adopted by this Legislature dealing with low-income assistance, weatherization, energy conservation, or any renewable portfolio standard that might be established, to make sure we are doing our part to induce the development of more renewable resources indigenous to the state of Nevada. In order to implement our ideas as they are outlined in our proposal, there are very little legislative modifications that need to be made.
Mr. Pitlock continued:
The fact is, over the last two sessions, this legislature has already established a very good framework for the development of competition. We just need to make a few modifications, as they’re outlined in our proposal, dealing with the selection process for provider of last resort. These changes would be consistent with the recommendations adopted by the parties to the global settlement [“Agreement and Stipulation,” dated, Final 07/27/00, 2000 (Exhibit F. Original submitted as Exhibit D in Senate Committee on Commerce and Labor minutes dated, February 6, 2001].
Real briefly, I want to talk about some of the benefits we see coming from a proposal like this. Obviously, as the name implies, we see stabilization and choice as two significant benefits from this process, but the benefits extend well beyond that. We believe there are significant benefits for the two incumbent utilities in the state. We’ve heard testimony about, and we all know, their financial problems at this point in time. We believe alternative suppliers such as Shell [Shell Energy Services Company, Limited Liability Company], if they are given an opportunity to come into the state, can actually assist the utilities in dealing with their financial problems.
We would be in a position to share with them the risk associated with the riskiest part of their business, and that is the securing of the energy itself. That will allow these entities to concentrate on their new core business of being the best wires provider they can be. Any alternative supplier that wants to come into the state of Nevada needs to rely on a financially strong utility. Without a strong distribution system, without a strong transmission system, no alternative supplier is going to be able to come into the state and provide quality service, which is something we all want.
Mr. Pitlock continued:
So, there’s a benefit to the incumbent utilities. There are also benefits to the consumers. Through the RFP process, we would be soliciting bids that would provide for stable prices over a significant period of time and also allow for, under that umbrella for the PLR service, the development of competitive markets in a gradual, systematic manner given the supply situation in the West.
We have in front of us, right now, a window of opportunity. The buyback agreements the company has negotiated gives us that window of opportunity. We should take advantage of that opportunity to put into place a RFP process that will result in alternative sellers coming to the state to offer the benefits we’ve outlined. We believe with appropriate direction from the legislature, the PUCN ought to be able to implement such a plan by adopting regulations and designing the RFP process this summer and, hopefully, have bids being submitted to the state so a decision could be made in the fall.
This is the same time frame Mr. Higgins [Walt Higgins, Lobbyist, Chairman, President and Chief Executive Officer of Sierra Pacific Resources] indicated to the energy panel would be required in order to accommodate the signing up of long-term supplies for next summer. We want to make sure we have a plan in place that will provide the stability and security we are looking for in time for the peak season in southern Nevada next summer.
Mr. Kinnane [Thomas Kinnane, Lobbyist, Shell Energy, LLC] and I are here to answer any questions you may have. And, we look forward to working with, not only the committee, but with all the other parties who have been involved in this issue. We believe the plan we have in front of you, right now, is so flexible it can accommodate, and does not prejudge, any of the other issues you’ll be having in front of you. It does not prejudge divestiture. It can work if divestiture goes forward. It can still work if divestiture does not go forward. It can work under just about any scheme for aggregation, whether you want to have municipal aggregation, or other forms of aggregation of residential customers. It works under that, as well. It would also work under a system where you allowed some customer classes, some of the large customer classes, to shop in the market, as well. It is flexible. It is open and we think it addresses the concerns that have been expressed by all the parties.
Senator Townsend asked:
Mr. Pitlock, you’re familiar with not
only this committee, but also the committee on taxation of [sic] which, I
believe, five of us sit. You possess a
unique combination of background, expertise and interest in the fact you sat as
a former director of the tax division.
So, you’re kind of uniquely positioned to provide certain views. Let me ask this first. [In regard to the testimony of] the previous
speakers, and what we seem to have been hearing, do you agree with them the
issue facing Nevada is a supply issue?
Mr. Pitlock answered, “I would agree one of the critical issues, not only facing Nevada but the West in general, is one of supply.”
Senator Townsend said:
Senator O'Connell chairs a number of things. Obviously, [she chairs] the standing committee on [Senate] government affairs, and she has sat on tax [the Senate taxation committee] for many years. One of the things becoming a question as we move forward to make sure people have service is the issue of taxation. . . .
I don’t know whether you had a chance to testify in front of any of these committees (there was an interim committee on this issue), but as we move forward and encourage the development of [a] mechanism of providing transmission, and all of the things with which you’re probably as familiar as anyone because of your background at the PUCN, are there pitfalls ahead we should be working with our tax committee on relative to the issue of centrally assessed value, and [with] our rural communities, who, as you know better than anyone, find themselves in economic risk due to a number of changes in the world? Do you have any sense of that?
Mr. Pitlock responded:
There is a significant issue as we move into a restructured industry dealing with central assessment of utility plants. Back when A.B. 366 [Assembly Bill 366 of the Sixty-ninth Session] was crafted, I was the Executive Director of the Nevada Department of Taxation. That issue came up at that point in time. I provided testimony about the potential impact to, particularly, some of the rural counties if we had [a] utility plant currently centrally assessed and whose value was spread among all the different counties and taxing districts that receive service from those utilities to assist them where those properties would be locally assessed. And, only the taxing district in which the generating plant, for instance, was sited would get the benefit, if you go to a scenario where there’s divestiture and individual ownership of power plants, rather than a vertically integrated utility.
ASSEMBLY BILL 366 OF THE SIXTY-NINTH SESSION: Reorganizes public service commission of Nevada and makes various changes concerning regulation of utilities and governmental administration. (BDR 58-1390)
What we attempted to do in A.B. 366 [of the Sixty-ninth Session] was, basically, put language in saying, “If two or more entities combine together to provide utility service (or electric service) that they would be treated, for tax purposes, as if they were a single entity.” What that does is it basically preserves central assessment of that plant regardless of who owns it. So, if PG&E National [Energy Group] builds a power plant in Moapa, and they’re interconnected with Nevada Power, they would be centrally assessed just like Nevada Power. If an entity was building a power plant in northern Nevada and it was interconnected with Sierra Pacific, it would be centrally assessed just like Sierra Pacific. In the years since that language has been put into the statute, I believe some significant concerns have been raised about whether or not the state, legally, can comply with that statute.
Mr. Pitlock continued:
One of the problems, and the reason it becomes an issue, particularly for merchant plants who would prefer not to be centrally assessed, is we, basically, have a different methodology of assessment. When you compare a central assessment of property with [a] local assessment of property, there’s different methodologies that are used. And those different methodologies result in different taxable values being assigned to that plant. So, most of the merchant plants would much rather prefer to be locally assessed. I think the concerns can be eased if we can narrow that gap between the methodologies used for local assessment and the methodologies used for central assessment. We can ease those concerns by [sic] the merchant plants because it won’t matter to them any more whether they’re locally assessed or centrally assessed, because their tax bill will be the same.
And that’s what they want. They want the same treatment if they’re centrally assessed as they would get if they were locally assessed. Then all we as a state have to worry about is the distribution of that tax revenue. As long as the tax to the taxpayer is the same under either scenario, the taxpayer should be happy. Then within the state government, through the distribution of the taxes, we can take care of making sure the rural counties get their adequate share of the distribution of those taxes, and they don’t go all to one single taxing district. I hope that’s responsive to your concern.
Senator O'Connell said:
Mike [Mr. Pitlock], you probably know the special commission the Governor appointed to kind of look at this, as far as a policy issue goes, they’ve turned over the issue of taxation to the 253 [Senate Bill (S.B.) 253 of the Sixty-ninth Session] committee, of which, Mike [Michael A. Pitlock], at one time, played a very important part. There are a number of taxes we have, as far as utilities are concerned. One of the prime issues of my concern, as we start to look at this (and we know it’s going to take a number of years for the very issue that the Chairman has brought out), is the financial condition of some of our counties.
If we allowed a public utility to buy Nevada Power or be the supplier, my concern is the impact this will have on the taxes, because would we then be kind of cutting off our nose to spite our face because if a government owns a utility like this then, of course, that does away with the taxes the counties would be receiving? And, I think schools are involved, [as are] library districts, hospital districts, right on down the list. So, it’s a major concern [for] exactly what kind of a taxing impact that would have on counties, especially the facilities that those taxes currently support.
SENATE BILL 253 OF THE SIXTY-NINTH SESSION: Creates legislative committee to study distribution among local governments of revenue from state and local taxes. (BDR 17-193)
Mr. Pitlock stated:
Senator, that’s a very legitimate concern. As you know, the utility industry, in general, is one of the top taxpayers, if you will, particularly in the area of property taxes. They also provide a significant amount of sales tax, which is the other major tax a lot of the local governments rely on to fund the provision of their services. If we were to move to a scenario where there were a lot of municipalization of the utility systems, you would run into the problem where tax revenues could be eroded.
One possible solution to that [is] a couple [of] sessions back, there was legislation put in dealing with sales tax that basically said if a local government engaged in a business enterprise that, basically, competed with private industry (we have golf courses, we have ski resorts owned by governmental entities, but provide basically an enterprise in competition with the private sector), we fashioned a bill that basically said, “If you’re in one of those businesses, then you’ve got to act like you’re the private sector. You’ve got to collect sales tax, for example, on sales from your pro shop if you own a golf course.”
I think you might be able to do something along those same lines, not only in the sales tax arena, but possibly in the property tax arena, as well, that basically says, “If you’re a governmental entity that is in competition with private enterprise, then we’re going to treat you like you’re private enterprise.” It accomplishes two things. It stabilizes the tax revenue, but it also equalizes the competitive advantage a local government may have with private industry.
Senator O'Connell said, “I just happen to have a bill.”
Senator Townsend said:
. . . There are issues coming before Senator O'Connell’s government affairs committee that also tap into it. We may want to have Barbara Campbell come as chairman [Barbara Smith Campbell, Chairman, Nevada Tax Commission], Mr. Purcell [David Purcell, Executive Director, Nevada Department of Taxation], yourself [Mr. Pitlock], and have a briefing on that. I don’t think we’re going to want to do it twice, but whether we do it in tax or we do it here, it’s important to understand that implication, because we also want to be sensitive to the fact while we come up with public policy and work through this, we haven’t forgotten that issue and suddenly we pass something and, all of a sudden, we’re back in a special session merging three counties because they don’t have enough money to pay the school district, or whatever.
That is absolutely crucial to this debate, because our largest revenue-producing county [Clark County], as much revenue as they generate, it’s fair to assume they are not going to want to write checks to the rurals [rural counties] because we restructured our tax situation in a manner that damages the financial health of these rural communities. So, we are going to have to think through that in a manner that’s flexible so, as the market changes and as things occur in the marketplace over time, we haven’t driven a stake through the heart of somebody out there. I mean, that’s something we just have to make sure we are sensitive to.
Mr. Pitlock interjected:
Senator, again, as you recall, A.B. 366 [of the Sixty-ninth Session] required the Executive Director of the Department of Taxation to provide a report to this committee on the tax implications of restructuring. Actually, one of the last duties I performed as Executive Director was to present that report to this commission [sic]. It was a little awkward at the time because I had prepared the report as the Executive Director, but I presented it as a commissioner from the PUCN at the time. Possibly, [we should be] looking at updating that report, given some of the changes in the market we’ve seen since two years ago when that report was put together, which might provide this committee and the tax committee with some useful information.
Thomas Kinnane, Lobbyist, Shell Energy LLC, said:
In Pennsylvania, a competitive market has worked in dramatically better fashion than California, they had equal concerns about the effect on tax revenues, not necessarily from government control of utilities, but from the deregulation of the industry itself. And, if you have an opportunity to review the summary [Exhibit E] we passed out, you’ll see the increases in population [and] the increases in jobs have actually produced significant increases in tax revenue.
They do have still [sic] an RNR [revenue neutral reconciliation] charge, which is a (sort of a) tax surcharge . . . to ensure the impact of deregulation was revenue-neutral on tax revenues. They’re phasing that out ahead of schedule. I don’t know exactly when, but the other benefits competition and the opportunity to bring some competitive benefits to the state have created have filled the gaps. Where some tax revenues have dropped off in particular areas, they have now increased in others, and that’s a significant benefit.
Robert E. Campbell, Lobbyist, Duke Energy, testified:
Our Duke [Energy] people came in a couple [of] weeks ago and testified, and I won’t be repetitive on what they said. I would, maybe, add one additional perspective on the permitting issue. We’re, of course, going through the process both in northern Nevada and southern Nevada [with] the plant in Clark County and the plant in Washoe County. We, too, have found the issues involving federal lands have probably been the most lengthy and difficult to work through. We do believe in the past few weeks we’ve noticed an improvement in assistance from the federal land agencies in working through some of those issues. We hope that’s a harbinger of the future activities.
The only other point I would make on permitting [is] one of the things we think would be helpful in the permitting process, particularly through some of these agencies, [is to simplify the process]. There’s the normal process these projects [must go through], as you well know, [which] are very difficult to permit and very complex. And, the way it generally works is you have a huge batch of documents dealing with one permitting issue and you take those to one agency, spend weeks or months getting through that agency, then pick up your big batch of documents and trundle off to the next agency for your next permit, and you go through that.
We think if that process could be done on a parallel basis, wherein in the beginning of the process you simply put together your six big packets of information, or . . . [and] submitted them to all agencies at the same time, and then had, in essence, a parallel permitting process where the different permits are being processed at the same time, that would save a tremendous amount of time. I don’t think there’s a wish on the part of Duke, and probably not on the part of the other IPPs [independent power producers] to particularly try to avoid or ignore the environmental issues that are involved in permitting these. We realize those are significant. They are important, and we certainly work through them. But, if there were some way we could have permitting going on in several different agencies at the same time, it would be helpful.
Senator Rhoads stated:
You know, we had the director [Robert V. Abbey, State Director, Nevada, Bureau of Land Management Nevada State Office, Bureau of Land Management, U.S. Department of the Interior] before my committee earlier in the session. . . . We asked him about this. He didn’t think it was a problem, and if there was a problem, he wanted to know about it. . . . So, I think you should talk to Bob Abbey.
Mr. Campbell replied:
We have been in contact [with] and are working with all those agencies. I just indicated some of the problems we were having a number of months ago, before the issue rose to the level of concern it has now, [and] we believe [the problems] are being corrected now. We feel very good about our relationships with the federal agencies now.
Senator Townsend said:
If we could ask you and your client, Mr. Campbell, along with Mr. Reid and his client, and anyone else who is looking at this issue (and we’re glad to find you a room and places to sit down and we’d even provide a staff person to be helpful), we need a comprehensive, without it being laborious, list of the things (and I’ve already asked Mr. Eisenman to prepare something), but if you could work together so we have the same page coming from all the people who are currently applying for permits to construct of the things that are important over the next few days, [and] maybe have them back here when we convene on Monday to talk about transmission issues. That would be very helpful. I know there’re people here representing all providers, [but] a laundry list could be helpful of the things the federal government has to do, state legislature, executive order, those kinds of things.
Mr. Campbell replied, “We would be happy to participate, Senator.”
Jon B. Wellinghoff, Lobbyist, Vulcan Power, said:
I intend to, very briefly, give an overview on renewables in the state of Nevada for the committee. Then we will have, what I think is really a preeminent Nevada panel on renewables. The people we have here assembled are people who have done, or are doing, renewables in Nevada, and know how to do it. So, you really have a real group of experts who are on the ground here doing things in renewables in all areas. [Mr. Wellinghoff went on to introduce his panel of experts on renewables.] What I wanted to do today is go over the potential, with respect to each one of the technologies, and I actually have thrown in some biomass.
The first map [a slide on Mr. Wellinghoff’s Microsoft PowerPoint presentation, Exhibit G] you have here (these maps are done by the National Renewable Energy Laboratory) is of solar potential in Nevada. The legend at the left-hand side of the slide [Exhibit G] shows the density of solar energy within the western United States. As you can see the top one being the darkest brown at 8 to 9 kilowatt hours per square meter per day, there’s a few spots of that, and they happen to be in Nevada. The next densest, which is the 7 to 8 [kilowatt hours], the darker yellow also, mostly, is in southern Nevada and parts of Arizona.
So, we’ve been touted as having more solar than practically any other place in the country, as we can see from this map. The target numbers I put up here are numbers that I’ve simply developed through my background and expertise, and there may be others who have different numbers, but I think it’s quite doable to look at 500 to 1000 megawatts of solar in this state by 2010. I think that can be done, and the only reason that number is as low as it is, I think the resource potential is much higher, but I think it is just a matter of production capacity and gearing up for the manufacturing plants to actually get the solar panels out and on the roofs and distributed across our great state. I think there’s great opportunity for distributed solar, and I’m sure Ms. McKinney-James [Rose E. McKinney-James, Lobbyist] will tell you much more about that.
Mr. Wellinghoff continued:
We do have a great potential for solar, primarily a peaking resource that can be used to meet those summer peaks down in Las Vegas that cause us all our problems and causes us our high costs with respect to electrical energy in Las Vegas. The next chart [Power Point slide, Exhibit G] is one of wind potential. The reason I showed you the whole United States with respect to wind potential, I think it’s important to know there are a number of states very aggressively doing things to move wind forward. One, of course, is the state of Texas. The state of Texas put in a renewable portfolio standard that is ultimately going to get them 2000 megawatts worth of wind.
However, if you look again at the legend on the left, the highest wind area is wind area 6, which is in the red. The next one is in the dark purple. You can see, from a relative standpoint, Nevada has more red and dark purple, certainly, than Texas does. So, we potentially have more wind potential than Texas, but again, we need to really look at developing it and developing it significantly. I think a reasonable target for wind in Nevada is somewhere between 2000 and 3000 megawatts by 2010, perhaps even more. We already have a 200-megawatt project at the test site. There’s been an announcement at Table Mountain [there] may be another 100 to 200 megawatts.
So, we have upwards of 400 megawatts already planned in the state. I was just at the Bonneville Dam yesterday with [U.S.] Senator Gordon [H.] Smith from Oregon. They [Pacificorp] were going to put in 300 megawatts on the Oregon/Washington border, and they’re going to use the dam system there, in essence, as a battery for the wind, because wind is an intermittent resource, of course. It generates electricity when the wind blows, so you can’t necessarily have it for peaking or baseload, but it certainly is a reliable resource that we need to develop in this state.
Senator Schneider asked, “What are the lime green lines, especially over Oklahoma, [also] up in the Dakotas, and some in Arizona?”
Mr. Wellinghoff answered:
I have no idea what the lime green lines are. [They] may be Indian reservations, I believe. It is a possibility that those outlines of the lime green are the location of Indian reservations, because this map is from the, again, the National Renewable Energy Laboratory, and they had an overlay of Indian reservations there, which a lot of renewable resources are on Indian reservations.
Senator Townsend said:
As you know, the chairman of the Nevada Indian Commission is here and, perhaps, Mr. Harjo [Richard Harjo], when we’re done, you can look at this and find out if those green lines, as you see a lot [of] in Arizona, some in New Mexico . . .
Mr. Wellinghoff interjected, “And a lot in Oklahoma. I believe that’s what they are.”
Senator Townsend continued, “Oh, okay, Mr. Young [Scott Young, Committee Policy Analyst] just said the legend . . . does say that [Indian Land Boundaries.”
Mr. Wellinghoff continued:
Here’s one without a legend. This is biomass and, again, it shows from a relative color standpoint the darker green, being the more intense potential for biomass . . . and, as you can see there’s apparently very little opportunity for biomass in Nevada. However, my understanding is (in talking to some folks who have done some work in this area) around the Lake Tahoe area, there may be a tremendous amount of opportunity for forest thinning that could ultimately be put into wood chipping and biomass.
And, I actually met with a rancher this morning who has lands up in northern California and northwestern Nevada in the Black Rock area that he actually is doing some biomass with mesquite, and there may be a tremendous opportunity across Nevada that’s not even represented on this map. So, again, I’ve got sort of a low target here, 200 to 500 megawatts of potential biomass, but I think there is definitely potential there. And, of course, biomass is a baseload resource that can provide power across the board for our [state].
Senator Townsend said:
If I could stop you there, because the numbers you’re giving us seem almost to be isolated, and we have to give it some perspective. The baseload in the state of Nevada is approximately (in the wintertime) 2700 megawatts, as I remember. Now, that changes dramatically in the summer; we buy 50 percent of it on the open market.
Mr. Wellinghoff interjected, “It more than doubles in the summer.”
Senator Townsend continued:
Exactly. So, when we’re talking about numbers like 200 to 500 [megawatts], or the previous solar one [500 to 1000 megawatts of solar in this state by 2010], we’re talking about making a significant impact on that baseload and that peak load.
Mr. Wellinghoff acknowledged, “That’s correct.”
Senator Townsend continued:
And, these can’t be taken in independent context. They have to be taken in context, particularly when you look at the 2010 and you look at the potential growth in the state of Nevada, particularly in southern Nevada, the kind of impact it can have. And, that’s why those numbers are important. Not just, “Ah, it’s 500 megawatts.” I mean, it’s relative to the baseload, as well as the peak.
Mr. Wellinghoff continued:
And, of course, developing these resources in Nevada doesn’t, necessarily, mean we are going to use them all in Nevada. And, a lot of it may potentially be exportable. We hope there is a way we can maintain a substantial portion of these resources for use in Nevada to diversify our portfolio, stabilize our rates and do other things we want to make sure can benefit Nevada citizens. Here’s my final map [Microsoft PowerPoint slide, Exhibit G], which I think we’ve seen before (maybe a little different color), but on geothermal. As you can see, geothermal is centered in Nevada. I mean, it sort of swirls around Nevada, but the central portion of geothermal really is in Nevada.
I estimate, again from rough numbers I’ve seen from various locations, we might be able to get as much as 2000 to 3000 megawatts of geothermal in Nevada by 2010, with some aggressive development. Again, that is geothermal that would be used for electric production in the very darkest colors here. The lighter color is direct heat, district heating, and even lighter color across the whole country, of course, geothermal heat pumps, or something you can essentially do anywhere [Exhibit G, slide titled “Geothermal Potential”].
So, there are various stages of geothermal beyond just electric possible to do. If we put this in perspective and add this up, we have up to a total of 7500 megawatts, potentially, by 2010 as a target. That is something that could be developed under the right circumstances in the state of Nevada. The green portions, that does show the Indian reservations. . . . Although, that does not have all the transmission lines in Nevada; again, this is an NREL [National Renewable Energy Laboratory] map.
Senator Townsend said, “So, going back to that, the potential is anywhere from 4700 to 7500 megawatts by 2010.”
Mr. Wellinghoff continued:
Right. If we look at some of the reasons to do this, of course, those of you familiar with the Governor’s committee, I understand the Governor’s coming out with a statement very soon with respect to energy policy. One of their policy statements was, since the use of Nevada’s renewable energy resources is beneficial to the environment and enhances Nevada’s economic development, Nevada should continue to develop such resources.
That committee made a number of recommendations, and I don’t mean to preempt what the committee said. In fact, Mr. Burch [Ron Burch, President and CEO, Far West Capital], here, was a member of that committee. And, Ms. McKinney-James testified extensively before the committee, so they can give you their views on the committee. But, at looking at some legislative policy considerations overall . . . the first one [to consider] is supporting renewables contracts.
I think Senator Schneider has a very legitimate question to [for] Mr. Munson [Steve M. Munson, Lobbyist, Chief Executive Officer, Vulcan Power Company] that is, “If it’s competitive, let’s just get it on the grid, and let’s go ahead with it.” Well, I think a lot of these developers would like to do that. They are price-competitive, but they’re not financial-balance-sheet competitive, unfortunately, with the gas people. And, as such, they are not able to put out merchant plants and build these merchant plants. They do need contracts. Also, contracts . . . will help you get lower prices. If you have contracts, the longer the contract, obviously, the better the price. If we have a 10-year contract, you’ll have one price. If you have a 20-year contract, you’ll have another price.
Mr. Wellinghoff continued:
So, the longer we can go out to contract, the better. One concern, though, I have with respect to contracts is, right now in the state of Nevada, we have nobody to contract with, literally. And, at the same time that’s happening, we have the state of California, literally, entering into tens of thousands of megawatts of contracts for new energy, both renewables and conventional fossil fuel. In fact, I was at the California Legislature on Tuesday talking to the staff of the speaker pro tem who is really driving a lot of this. It’s moving very quickly there, and I hope Nevada can get in the same position where they have someone who can enter into long-term contracts.
And, I think that’s why Mr. Kinnane’s statements before the committee this morning were very timely, because we do need to decide who’s going to be the provider of last resort, so we can move on with getting contracts both from the fossil fuel side and the renewable side. But, some of the things the Legislature is already doing, and I want to commend our good Senator O'Connell, the chairman of the government affairs committee, who heard S.B. 22, and she’s really doing yeoman’s work hearing these things twice, and I really do appreciate it very much, but S.B. 22 does allow for state entities to use some savings from energy efficiency and to purchase renewables. That’s one opportunity.
SENATE BILL 22: Revises provisions relating to retrofitting of governmental buildings for energy efficiency. (BDR 28-288)
Of course, we have the Commission on Economic Development. The suggestions Chairman Townsend made to Mr. Shriver [Robert E. Shriver, Executive Director, Division of Economic Development, Commission on Economic Development] the other day, I think, were very appropriate and, hopefully, can be explored, further. And, of course, we have the renewable portfolio standard in Nevada that currently exists under NRS 704.989, “Renewable energy resources: Portfolio standards; report; exceptions.”], and I hope [it] can be expanded; in fact, I understand there is legislation being drafted now to expand. [It’s] not yet been introduced.
Mr. Wellinghoff continued:
Under supporting tax incentives, on the federal side, I hope we can get a resolution out of the Nevada Legislature to the Congress supporting the expansion of the federal production tax credit for geothermal, biomass, and solar [energy]. It [the tax credit] currently exists; there is a federal production tax credit today for wind. It will expire this year, however, so the wind people are interested in getting it extended. We’re interested in getting it not only extended for wind, but also expand it for these others. [U.S.] Senator Reid, to his credit, has introduced a bill that would do this. [U.S.] Senator McCowsky also has, in his omnibus energy bill, a provision that would do this, as well.
So, we have bipartisan support in this, and so we just need to extract this out of all the other issues with respect to energy at the federal level and get this fast-tracked through the Congress. Another, I believe, there’s a bill on sales tax exemption for renewables. I haven’t seen the bill. . . . And, of course, the other idea of supporting accelerated permitting, which you’ve heard on the fossil fuel side, is something that we, obviously, would like to see on the renewable side, as well, because many of these plants are also on federal lands, on BLM lands, and especially the geothermal plants, specifically. So, it’s something else we’d like to look at.
Rose E. McKinney-James, Lobbyist, testified:
I am delighted to have an opportunity to present some information to you regarding the status of solar [power] in the state of Nevada. And, certainly, Mr. Wellinghoff has provided you with a great framework for my brief comments. I have taken the liberty of drafting a few comments and notes [Exhibit H] so you can review those at your convenience. But, I’d like to ask you to take a look at a visual [Exhibit I] that I have. My caveat is the numbers are not exactly current, but I think the visual is an important one. This [Exhibit I] was developed for CSTRR [Corporation for Solar Technology and Renewable Resources] by the National Renewable Energy Laboratory.
For the benefit of those who don’t have a copy of this, it asks the question on the front page, “How much sunshine does it take to energize America?” And, as you open it, it has a map of the United States with the state of Nevada prominently illuminated. It indicates the bright spot covers a circle of Nevada desert about 100 miles across, if covered with modern solar arrays, would satisfy America’s entire electricity demand. I think that’s a rather amazing statistic, but one I think is of great value.
Ms. McKinney-James continued:
If you turn to the back of the document [Exhibit I], you’ll note there’s a reference to the other renewables extremely abundant in our state: wind, geothermal, and, frankly, from the standpoint of pricing, photovoltaics, and solar is still moving in the right direction, but both geothermal and wind are clearly more competitive on a commercial basis at this juncture.
So, I think there is tremendous potential. One of the reasons I find myself willing to participate in this discussion is because I believe so strongly in environmental stewardship. And, I believe these resources provide Nevada with a unique opportunity to both focus on sustainability, the ability to take advantage of an economic development opportunity. And, I think, as Mr. Wellinghoff pointed out, there is a tremendous opportunity from the standpoint of export potential. I appeared before you in 1997 as the president and CEO of CSTRR to ask for your support with an amendment to A.B. 366 [of the Sixty-ninth Session], which resulted in the renewable energy portfolio standard, which is now before the Public Utility Commission [of Nevada] for the promulgation of regulation.
I am very grateful to Mr. Wellinghoff for sharing his expertise and his legal wisdom. He provided the support in issuing a petition to the commission [PUCN] to expedite the review of the portfolio standard. It was certainly my view that standard provided a placeholder for renewables in the restructuring debate, and it is my view an opportunity to increase that standard, given our current circumstances, would be of great value to the state. I think CSTRR was, sort of, the ultimate experiment. We were successful in many ways in identifying barriers to the commercial application to renewables. We provided, what I think, for the state is an important framework and infrastructure for an important dialogue.
Ms. McKinney-James continued:
Now, as you know, I have left CSTRR. The corporation has been transitioned to the University of Nevada, Las Vegas, College of Engineering, and there will be an ongoing emphasis on commercial applications, as well as an emphasis on asking the federal government to offer some ongoing leadership in this regard. So, there would be a focus on federal facilities. And . . . CSTRR was funded through the U.S. Department of Energy. I think solar, of course, is an extraordinarily valuable asset to Nevada’s energy resource mix.
But, like all renewables, it has certain limitations. It is an intermittent resource. The sun does not shine 24-hours a day. And, moreover, I think we should note current technology related to storage lags behind conventional mechanisms. With that in mind, the most common method, which is the use of batteries, tends to offer a fairly expensive alternative. The construction of large-scale, central plant facilities can be both costly and time-consuming; though, I think there is substantial opportunity for us with solar, as Mr. Wellinghoff indicated, for large-scale plants here, with the right regulatory and public policy framework.
I’m not sure that central plant, immediately, is the most responsive answer to our current issues; but, I think, solar has enormous value when it’s used to shave peak loads. I think it is also valuable in distributed applications. I’m sure you are all familiar with the rooftop installations that have become very popular. A trip to New York [City] takes you to Times Square where there is a fabulous building that demonstrates the business community recognizes the value of solar. And, I think the top four floors of that major skyscraper is a demonstration of the wonders of solar in play. Small ground-mounted systems and off-grid lighting (remote power applications) can be quite cost-effective.
So, solar can be effective when blended with other renewable resources, and also with natural gas. Solar power plants can produce electricity during peak use, while reducing dependence on fossil fuels. And, again, this speaks to my concern about environmental stewardship. Solar photovoltaic [PV] generating capacity can be installed in small quantities, ranging from a few watts to 100 kilowatts to large-scale to the level of megawatts. However, much of the United States PV production, which totaled about 65 megawatts in 1999, is used in high-value, off-grid applications, or it is shipped to stronger, overseas markets where, regrettably, some of the policies are a little more user-friendly when it comes to solar renewables.
Ms. McKinney-James continued:
I think utility restructuring has provided some opportunities in the form of customer choice, green pricing, the use of renewable energy portfolio standards, and the potential for system benefits charge. In general, I think, public acceptance of these environmentally-benign technologies is strong, stronger than ever. I’d ask you to recognize as we face the current [state] of supply it would appear, with respect to at least a partial answer to our issues, all roads lead to renewable energy. In the presentation, I’ve taken my first shot at using a [Microsoft] PowerPoint structure, and these are my talking points [Exhibit H].
As I travel the United States, and I am frequently asked to make presentations on solar. It is my privilege to represent Nevada as a member of the Western Interstate Energy Board, which is the energy arm of the Western Governor’s Association. I also serve on the Board of Directors of the Energy Foundation. Our view is renewable energy, combined with energy efficiency and conservation, can indeed be a partial cure to the growing problems we face here. I think, energy efficiency is probably the best hope for avoiding any blackouts or problems here in Nevada over the next two summers. I think renewable energy is a leading means to diversifying our power supply, reducing demand and using a cleaner power option. In summary, these options are faster, cleaner, and cheaper.
I am loath to reference the California experience, but I don’t think any discussion can avoid that. There are a variety of explanations circulating regarding why California is in such dire straits. From the standpoint of renewables, energy efficiency programs were severely cut, setting the state [up] for power demand growth. Investments in renewable energy were similarly slashed. Clean energy research and development programs [were] severely cut. Growth in neighboring states absorbed excess capacity. I believe Nevada’s growth clearly had repercussions for California. And, of course, natural gas prices are up threefold in the United States, and eightfold in California.
Ms. McKinney-James continued:
So, my final comments relate to the potential solutions. I place a heavy emphasis on the need for distributed generation. I point to another measure, which was approved in the 1997 session, which established a net metering opportunity. This allows an individual homeowner to install solar or wind up to 10 kilowatts. They remain connected to the grid, but they are also able to establish a credit for any excess they generate. I think we ought to take a closer look at energy efficiency from the standpoint of building codes.
I also represent the National Renewable Energy Laboratory, and a program we’re looking at we refer to as the Zero Energy Building Concept where a combination of energy efficiency and renewables can provide great value. I think it is of little value to take an inefficient building envelope and add anything to it. I think, first, we need to have some efficiency. I was encouraged by the discussion two days ago with respect to the possibility of a mill assessment to be used as a public benefits charge, or a systems benefits charge. Many states have identified that as a mechanism to provide support and equitable funding for further research and development in this regard.
And, I was also delighted to hear discussions regarding what can only be referred to as creative public policy, an emphasis on public/private partnerships, and looking to the possibility of expanding renewables from the standpoint of an economic development tool for the state.
Senator Townsend said, “On the back of this [Exhibit I] it says wind, and then it says, ‘class 4, class 5, class 6+.’ Give me an [explanation].”
Ms. McKinney-James said, “I’m going to defer to Mr. Caldwell [Alan D. Caldwell, Lobbyist, President, Sierra Concepts] because he is my wind expert, but the classes relate to the intensity of the wind (of the resource).”
Ron Burch, President and CEO, Far West Capital, said:
One of our assets is the Steamboat 2 and 3 geothermal power plant, located about ten miles south of Reno. This power plant produces about 17 percent of the energy that is required for the City of Reno. We’ve been on-line since 1992, and we’ve had 99.8 percent availability. That is a measure of reliability, and it’s the highest on the Sierra System, including their own units.
Personally, I’ve been in “hot water” since 1986, producing electricity from geothermal power. I’ve worked in electrical power production since 1976. I’ve worked in all manners of fossil-fired power plants: operations, construction, engineering, development of new projects, financing of projects, gas, coal-fired steam turbines, [and] combustion turbines, units sized from 7 megawatts to 1600 megawatts. I’ve worked for public utilities, investor-owned utilities, and non-utility generators and QFs [qualifying facilities].
Mr. Burch continued:
I’d like to speak to you today on geothermal energy and tell you about 2000 megawatts or greater of geothermal-generating potential the state of Nevada has, and why it would stabilize pricing for electrical energy. I’d like to tell you about Nevada’s geothermal resources and supplying power for Nevadans from those resources. And . . . I’ve currently completed the business negotiations on three new power-purchase agreements with a very large agency outside of the state of Nevada. And, I’d like to tell you how that saddens me, as a Nevadan, this energy has to go somewhere else. We’ve completed the business terms, and we’re just now arguing over words.
I think the discussion on geothermal energy, so far, has been fairly comprehensive. What I’d like to talk with you about, though, is a related subject and that is, I’d like to talk to you about Nevada’s long-term energy policy. My opinion is we have none. I had a small glimpse of the problem this committee faces when I was on the Governor’s committee listening to testimony on a complex subject, trying to sort through the “wheat and the chaff.” I understand the difficulty. We had a presenter who told us about a new power plant that was going to built next to the Tracy unit up here in the Reno area: 320 megawatts, and what a wonderful thing.
But, being in the power industry for so long, it lead me to ask questions. One of those questions was, “What’s the power out of this place going to cost?” And, the gentleman said, “Well, we’re not really sure.” Now, I didn’t want to find any fault in his testimony, so I gave him a second chance. I said, “Well, let me ask you this then. If power in California costs $250 a megawatt, what are you going to charge Nevada for it?” And, he smiled sheepishly and said, “Well, you, you know,” something like that. Well, I did a little study on that, and I ran down (well, I was in the same building as the PUCN) to look at the docket. It’s docket number 0011033 for that new power plant. And, I come to find out several interesting things. One is it can only operate 70 hours a year.
Senator Townsend asked, “Are we going somewhere with regard to the rules, or are we going to talk bad about somebody else?” Mr. Burch responded, “No. I’m just telling you I appreciate where you’re coming from, and I’m about to make a suggestion.”
Senator Townsend said, “Let’s talk about the value of renewables and not talk about what somebody else is doing, negatively or positively. That would be helpful, please.”
Mr. Burch continued:
Yes, sir. What I’d like to tell you is, available renewables can’t be properly ascertained if you don’t have a policy. And we haven’t had any energy policy for several years now. We need to implement a plan, and what I’d like to ask this committee to do is to consider legislation for a project that I offer a name, Empower Nevada [Exhibit J]. . . . And, the bullet points are this: without energy planning, we don’t know whether to deregulate, or not; we don’t know how many megawatts of renewable; how many megawatts of long-term; how many megawatts of short-term we need to have. We can’t trust this to anyone but people who have the public good at heart. And, the public concern rests with the PUCN.
What I’d like to ask you to [do] is empower Nevada with legislation to develop and submit annually to the Governor an electrical resource plan that looks out 5 and 10 years. It would do traditional load-growth models, transmission capacity studies, [and] demand-side and supply-side management. Each annual plan would include these recommendations: requirements for new generation and transmission resources; an analysis of the state’s condition to begin deregulation; a measure of effectiveness of current low-income and energy conservation programs, and recommend ways to improve their effectiveness.
The annual plan would need to be approved by the Governor, and once approved, the Nevada PUC [PUCN] would direct the utility to secure the required demand and supply-side resources through an RFP process. Nothing can be cheaper than that; that is the lowest price electricity can be produced from [sic], whether it’s renewable, whether it’s fossil-fired; that’s how to get there. The contracts for these resources would then be approved by the PUCN and included in the utility’s rate base.
This plan, as it’s updated every year, would look out and see if deregulation is possible. If we have adequate supply, if we have adequate transmission, and, at that point, then a recommendation can be made to go ahead and deregulate, if that’s in the best interest of the consumers. The reason why I’m recommending this as part of my presentation is, as the old analogy goes, “If you don’t have a target, you can never hit it.” And, the utility, obviously, has failed in producing this plan in that where we’re at today. The PUCN needs to take control of it; the PUCN needs to recommend it; and then, perhaps, we can drive our own energy future.
Senator Shaffer asked, “Is it possible to take a tour of your facility?”
Mr. Burch replied, “I’d love to give you a tour, Senator.”
Senator Shaffer said, “I was there when you began the project, and there was a problem with odor at one time before you made the closed-loop system.”
Mr. Burch stated, “Let me clarify for you. I believe the odor problem was the Caithness [power] plant, and that was built several years before ours. Ours is the closed-loop system and never had that problem.”
Alan D. Caldwell, Lobbyist, President, Sierra Concepts, testified:
I am the president of Sierra Concepts, a wind-development firm. Sierra Concepts is in partnership with a company in Colorado, Distributed Generation Systems, one of the foremost wind-farm developers in the country. Dis Gen [Distributed Generation Systems, Evergreen, Colorado] developed the first wind farm in Texas, Colorado, [and], recently, Pennsylvania. A 10.4-megawatt wind farm was just completed in Pennsylvania. [Distributed Generation Systems] is currently working on a project in Massachusetts. It’s a small firm in terms of wind farm developers. I’m thinking of the other side of the equation of the Enron [Wind Corporation] and the Florida Power and Light [FPL Energy, LLC] and the SeaWest [SeaWest Energy Corporation], but we know the business, and we install excellent wind farms.
I’m also representing a group of 14 businesses here in Nevada, renewable energy businesses. The group is called the Green Energy Business Council. It is a very informal group, but all businesses in this group would like to do more business in the state of Nevada.
Mr. Caldwell continued:
I’ll make my comments brief about the resource in Nevada. We have an excellent wind resource. We have, potentially, almost 6000 megawatts of wind power. I find Jon Wellinghoff’s estimates of what is realistically developable over the next 10 years as very good, probably between 2000 and 3000 of that 6000 would be very realistic. We must remember wind power is the fastest growing renewable worldwide. Over the last decade it grew for big wind, and these are the big utility-size wind turbines and wind farms, it grew at 25 percent a year. For small wind, the home-size wind turbines, it grew at 40 percent per year for essentially a whole decade.
So, it’s a fast-growing resource, and one we have a huge abundance of here in Nevada. If you take the states west of the Rocky Mountains, the eight states west of the Rocky Mountains, we are second only to New Mexico in terms of overall wind resource. Along those lines, our wind resource, together with our geothermal resource, together with our solar resource, would put us in the top three states in the nation in terms of renewable energy. We, indeed, could become the renewable energy capital of the country.
If we develop this correctly and work with the companies here in Nevada, we can develop a whole new industry and industries centered around these three renewables. We have no fossil fuels in this state, absolutely none. But, we . . . could become the renewable energy capital of the country. At the very least, we should become a net exporter of energy. We have that much resource . . . between the three renewables that are represented at this table.
I’d like to spend just a little time, and I don’t want to go on about this (I’ll make it very brief). I would like to speak to how the wind industry has evolved over the last 20 years. I’ll use the example of the Altamont [Pass wind farm in California], because that one’s easily seen from the highway. In fact, you go right through it on your way to Stockton or San Francisco [California]. This [wind farm] was built in the early ‘80s [1980s]. It came about because there was a wind resource in this area. There was also a federal tax code provision that allowed builders of wind turbines to make wind turbines [and] developers of wind farms to put up wind farms with virtually no guarantee any energy would ever come out of those turbines. So, you had these turbines springing up [on wind farms], but you never had to produce [even] one kilowatt of electricity.
Senator Townsend interjected, “I thought you were here to tell us how good this is?”
Mr. Caldwell answered, “I am, but I want to start with the early days because [in] the early days we made some mistakes.”
Senator Townsend responded, “Everybody made mistakes in the early days.”
Mr. Caldwell continued, “We had bird problems. We had clutter problems. Those were basically the two problems in the area.’
Senator Townsend asked, “Are they [wind turbines] still the big kind, the vertical kind? Are they flat now?”
Mr. Caldwell answered, “No. You’re referring to the eggbeater [wind turbines]. They’re all three-bladed propeller turbines now.”
Senator Townsend asked, “So, you don’t have the problem [they] have in Palm Springs?”
Mr. Caldwell replied, “I have not actually seen [those].”
Senator Townsend said, “Well, pick any of the ones you drive through. They’re the big ‘roundy-rounds’.”
Mr. Caldwell replied, gesturing, “Yes, we have those, but we don’t have the kind that spin like ‘this’.”
Senator Townsend confirmed, “We don’t have those, yet?”
Mr. Caldwell answered and continued:
We do not have those, and we probably will not. They have not tested well. But at that time in the early ‘80s [1980s], power could be produced at 40 cents a kilowatt-hour. And over the 20 years, the clutter has been removed because we now space the turbines further apart. In those days, the utility-grade wind turbine was 65 to 96 kilowatts essentially. Today the smallest utility-grade wind turbine is 750 kilowatts. So, what they’re doing in the Altamont [Pass area] and other places is replacing those ten turbines with one new bigger one. The newer bigger ones have variable pitch, variable speed, and, as I say, they’re spaced more appropriately, comfortably spaced, so you don’t have the clutter problem. If you have two strings of them, you have a half a mile between the first string and the second string.
So it’s a much more visually presentable power project. And the news about the power itself is now the wind can produce, because the technology has advanced. Wind power is now at 3 to 4 cents, down from 40 cents [a kilowatt-hour]. In fact, the most recent project in Texas is coming in at 2.8 cents per kilowatt-hour. So, it’s hugely competitive with natural gas or any other power out there. And in that sense, the technology has grown in the 20 years. The placement of turbines [and] the development of the industry has grown [so] significantly in 20 years that we’re ready for some major participation in the national energy picture.
Senator Townsend said:
The maps Mr. Wellinghoff has, and maybe they’re on the back of the one that was handed out by Ms. McKinney-James, is the vast majority of the resource in the state located approximately where?
Mr. Caldwell answered:
When you’re looking at wind speeds class 4, 5, and 6, you’re looking at wind speeds on average that run somewhere between 14½ and 19½ [miles an hour]. The class 7 wind speed is very rare. In fact, the highest average wind speed in the nation is in Wyoming, at Arlington, and they have started a wind farm there. That average speed is 22 miles an hour, but that’s very unusual. There’s a cut in the Rocky Mountains, and that’s why that is an excellent spot for a wind farm. But, the normal wind speed we see on average around the world is about 12 miles an hour. In Nevada we have some good class 5 and class 6 winds.
Senator Townsend asked, “OK, and where would that be?”
Mr. Caldwell answered, “The primary wind resource in this state is in the northern half, and it’s in the eastern half, so the northeast quadrant of this state. Senator Rhoads’ area is the excellent wind resource in this state.
Senator Shaffer asked, “How do you determine what the wind [will] be; do you set up some sort of [measuring device]?”
Mr. Caldwell answered:
We do set up wind monitoring devices, and the best way to do that is to run those for a year. However, we can shortcut that process by taking a quarter and comparing our data with a near airport data. So, we can shortcut that process. The best one is to set up your anemometer for a year and see what it does over a year’s time.
Senator Shaffer asked, “Is it [placed at the] highest point of terrain, or would it be in the valleys?”
Mr. Caldwell answered:
You have to be careful you don’t go too high because [at] over 7500 feet the air starts to get thinner and the production starts to degrade. You can be on the upslope or you can be on the downslope, rarely in the center of the valley.
Senator Shaffer asked, “Can you take advantage of the thermals, like let’s say you have a basin where your temperature changes from morning to night?”
Mr. Caldwell answered:
Yes, and that does show its effect on the surrounding hillsides. As I said, we have excellent wind in the state. We do not have a composite view; we have not done a mezzo map of the state. There’ve been different efforts to do that, but there is no comprehensive view of the wind resource in the state of Nevada.
Senator Schneider asked:
We worked hard in ’97 [1997] to get that allotment for renewables in there [A.B. 366 of the Sixty-ninth Session]. And, Mr. Wellinghoff knows I’m opposed to guaranteed contracts for people, and, I think, probably a lot of the committee is, but should we be upping that allotment, increasing that to allow these guys, as an incentive, to come in and meet these projections that Mr. Wellinghoff showed?
Ms. McKinney-James responded:
I would certainly support an increase
in the current percentage, recognizing this was a new concept and one we felt
needed to gain broad support. We came
in with what we felt was a reasonable percentage. That percentage is two-tenths of a percent, ratcheting up every 2
years until the year, I think, 2009 [when] it would be a full 1 percent of the
entire resource. There are two
challenges. One, our portfolio standard
currently has what we call a solar band.
Because solar, based on these presentations (even though we have
the larger resource), from a pricing standpoint, we need to be in [on] the
ground [floor] in order to bring those prices down.
So, we had a requirement 50 percent of the renewable resource comes from solar. That then creates an issue for both wind and geothermal, and geothermal in particular. By increasing that percentage, the portfolio standard becomes more equitable for all renewable resources. I have not yet had an opportunity to look at the language. I understand there is a proposal that is likely to be submitted with an increased percentage. If you look at Texas . . . (which is a huge state) and then you compare it to something like Vermont, our current percentage is very small. So, yes, to answer your question, I would think an increase would be reasonable and equitable.
Senator Townsend asked, “Mr. Wellinghoff, do you have any kind of comparable price statistics, other than what’s on the back of that handout [Exhibit I] for the resource here?”
Mr. Wellinghoff answered:
I do not, Senator. I think the issues are that what’s on the back of that handout are ranges. And, what you’ll find with respect to particular projects, [is] each renewable site is going to be different. One may be farther away from the transmission line than another; one may have a higher class wind resource than the other.
So, those prices are really ranges, and I really think we are seeing both wind and geothermal are in a very competitive range, although geothermal would be at an even more competitive range if federal deduction tax credit applied. Mr. Caldwell referred to the 2.8 cents for wind in Texas, which is very admirable that they’re at that level, but that does include a 1.8-cent federal production tax credit. So, if you add that in, the price is still closer to 4 cents, almost 5 cents, for wind. But, geothermal could, in fact, benefit substantially from that federal production tax credit with lower geothermal and biomass and solar’s price, if it was expanded for all those other technologies.
Senator Townsend said, “Let’s talk about geothermal in the generic [sense]. If they were granted this tax credit, what is the range of price you then would see here in the state of Nevada?”
Mr. Wellinghoff answered, “Four and one-half to six and one-half cents. That’s the range. Mr. Burch may have another opinion, certainly.”
Senator Townsend said, “That’s fine. We just need to get a sense of what it is. So, I think your statement was correct, it would be incredibly competitive with what is provided [by] fossil fuels.”
Mr. Wellinghoff said:
Yes. I can tell you this, Senator. We were talking to the people in California who are doing the contract in California. We told them (at this time I was representing Vulcan [Power]) [about the] bids we were bidding into DWR [California Department of Water Resources] and the price we were bidding. . . . They said, “You’re in there with gas; you’re right there with what gas is bidding in.” And that was without the federal production tax credit. If we get the federal production tax credit, we would be bidding under gas in California.
Senator Townsend said, “That may not be hard, given [the] gas situation right now in California.”
Mr. Wellinghoff replied:
Again, bidding under electric generation fired by gas, but [sic] we have to remember we’re not going to get any substantially cheaper prices in Nevada for gas-fired generation from electricity. They’re going to be the same. We have to understand we’re going to get bid 7 cents for electricity from gas plants in Nevada. People have to understand that, and they don’t.
Senator Townsend replied, “Well, that’s the open-market issue. We’re going to pay it.”
Mr. Wellinghoff said, “Right. We’re going to be part of that big market over there [in California]. We really can’t avoid that.”
Senator Townsend asked, “Your sense, Ms. McKinney-James, given the tax credits, where, approximately, would you think you would be, putting aside net metering and those local distributive stuff?”
Ms. McKinney-James answered:
Senator, I’m going to give this a shot. . . . As an example, photovoltaics would probably be cheaper than solar thermal if you’re looking at [it] like a parabolic trough. But, parabolic trough technology has been in place in California for many years and has been serving California’s baseload at a price of . . . 15 cents, maybe, a kilowatt-hour, maybe above. I think solar probably hovers around 10 cents, maybe 10 to 12 cents right now.
But, again, I’m going to defer it to the folks who were out there. And, that is then compared to what is now. What about 6½ cents conventional in southern Nevada, and maybe 8 or 9 cents here in northern Nevada, because there’s always that distinction [in areas]. So, getting to a point where it could be competitive, but certainly needs that boost, one of a portfolio standard, because that provides a guaranteed market.
Mr. Wellinghoff said:
Senator Townsend, if I could just add to what Ms. McKinney-James said on solar, because this is very important and a distinction a lot of people don’t understand. Solar can be competitive now, because solar can be a “distributed technology” that you can put in your house, or your business. Which means, it’s competing with the retail rate. It’s not competing with the gas plant 50 miles away out in Moapa. It’s competing with what somebody’s paying in Las Vegas, and those rates are going to 10 cents. Everybody has to understand that those rates are going to 10 cents. And, the rates in northern Nevada are going to 10 cents. And when they go there, solar is going to be competitive, and they’re [the rates] going there very shortly (in 18 months to 24 months). Our rates are going to be California’s rates; it’s going to happen.
Senator Townsend commented:
So, if somehow, we, as a state, were to be able to increase that portfolio standard and find ways to encourage this. . . as soon as possible, then we would be on the road to offsetting some of that potential 12- to 24-month damage we’re going to see, particularly in our warmer months in southern Nevada.
Mr. Wellinghoff replied, “Absolutely, Senator. Then you’d give residential and business customers options that they’d never had. They’d have that opportunity.”
Senator Townsend said, “And, I think that’s the focus. At least many of our sensitivities here are to that residential customer, giving them some potential protections that are important.”
Ms. McKinney-James stated:
Senator, if I could add to that. Yes, a long way toward seeing some advancement, and also, as long as that policy encourages both conservation and efficiency measures, as well. The educational message is extremely important, and, perhaps, looking for some leadership coming from our major government centers and aggregation. There are a lot of creative ways that will enhance that and leverage the ability to reduce the emphasis on the current load.
Senator Townsend said:
For illustrative purposes only, Ms. McKinney-James, if the skin on the outside of the Luxor Hotel [Casino] were solar panels at the highest technological level, approximately how much energy would that produce during the daylight hours?
Ms. McKinney-James responded:
I’m going to allow Mr. Wellinghoff to address that, and offer the disclaimer, as a member of the Board of Directors of the Mandalay Resort Group, I’m certainly encouraging them to do that as soon as I find out how much.
Mr. Wellinghoff said, “[According to] the slide I showed you, well in the range of 8 kilowatt-hours per square meter per day. So, you’d have to calculate how many square meters you have on that face and that would give you the rough answer.”
Senator Townsend said:
Well, the reason I bring that up, Ms. McKinney-James, and I didn’t mean to put you on the spot, it’s just it’s such an identifiable landmark in our state. I wanted us, and the public, to get a sense, because when we talk about CSTRR and they’re thinking about the test site, it’s not “visual.” We wanted to show them the dramatic implications of the size, because . . . anyone who’s been in Clark County will see that facility of what that can produce. And that gives you a better sense, rather than saying I’m going to line up a whole bunch of panels and that’s going to produce “X.” It’s easier if they see that visually.
So . . . one of your facility’s folks could just tell us the approximate square meters on the outside of that facility. . . . Then we could get a figure. I think it’s important to understand the potential. Mr. Burch can understand that, because people who drive by the Mount Rose [Highway] 395 corridor, they can physically see the plant and understand what it is and how it works. Most of us have seen a wind-generating facility, but the new generation of it is different, and so we need, hopefully, to get some visual on that.
Senator Shaffer commented, “I’m just curious about the comparison in capital investment versus wind versus geothermal and solar. Do you have any idea which is more expensive, as far as capital, to construct?”
Mr. Burch responded:
I’m happy to speak to what geothermal is. Depending upon lots of variables, mainly dealing with the temperature and quality of the resource, the initial capital expenditure would range between at a low of $1400 a kilowatt to a high of around $2500 or $2600 a kilowatt to build the plant and put it on line.
Mr. Caldwell said:
Senator, I can address that as well. Wind is somewhere in the bigger, larger projects I referred to in Texas, somewhere around $850 per kilowatt as an initial capital cost. It can go up, depending on the size of the wind farm, but that’s the benchmark I would use if you’ve got everything in an ideal condition. Wind is very good, if I might digress just a moment, as a blended source, particularly with natural gas. Ford Motor Company has just built a new factory; 40 percent of its power for that factory is from wind; 60 percent, from natural gas. It saves the natural gas. The two sources are very complementary; you save natural gas and, of course, the cost of that. The initial outlay is higher for wind than the natural gas per kilowatt-hour, but there is no ultimate cost for wind as a fuel.
Senator Shaffer asked, “And, how about the water consumption?”
Mr. Caldwell answered, “There’s no water consumption with wind.”
Ms. McKinney-James stated:
Senator Schneider, with respect to solar again, it depends on the technology. If we’re talking about photovoltaics, we’re looking at maybe $3 to $4 a watt. That’s extrapolated, then, to maybe $3000 to $4000 for a kilowatt. So, once the capital investment is completed, the fuel then is free, and there’s limited maintenance. But, it is a substantial upfront cost. It’s probably consistent with what you would pay to build a conventional plant, and a little more expensive for the solar thermal technologies.
Senator Schneider said:
Rose [Ms. McKinney-James], again . . . like you, I’m anxiously awaiting the BP [Solar] people to hear about that. But, since you’re here, and we worked together so closely in ’97 [1997], didn’t we have 100 net-metering permits for the state?
Ms. McKinney-James answered:
Senator Schneider, the net metering legislation, which was approved, allowed the utilities, before the merger, to accept up to 100 customers in each of their jurisdictions for net metering. I don’t have the absolute numbers now. The northern part of the state far exceeds, in terms of customers taking advantage of that, the southern part of the state. And, I can’t tell you why. The first net metering customer is Marion Barritt [President, Sunrise Sustainable Resources Group] who has been very active with solar causes in Gardnerville. And, I believe, we have something close to 25 net-metered customers, but I have to defer to the folks at Sierra Pacific because they’d have the details. But, you did put that in place, and it would be wonderful to expand that along with some ability to make sure the customers know they have that as an option. And, with a growing interest in . . . energy independence we may well see folks taking advantage of that.
Senator Schneider said, “So, we should probably get fairly aggressive with the net-metering program, to get ready for the solar that’s going to come in when prices go to 10 cents.”
Ms. McKinney-James stated, “I certainly would like to see that, and I think any time we can be proactive, we’re in better stead.”
Senator Townsend asked:
Do any of us remember why we chose 100 [net-metering permits] in each territory? Because that’s all we could get the votes for? Mr. Young [Scott Young, Committee Policy Analyst] had done the research on this yesterday, and there are only seven (total) in the state currently. There are seven in the North [northern Nevada] and one in [northern] California [around Lake Tahoe]. Now, whether that’s perfectly accurate is irrelevant. It’s substantially less than 200. So, I think we need to encourage it, and I don’t know how to do that yet. As soon as the committee decides the best way, we’ll try it, whether it’s [by] increasing that number or finding a way to do it.
The one concern I have, Rose [Ms. McKinney-James], is (and we have to be very delicate) I don’t want the average consumer to be out there trying to do the right thing for their families, trying to do the right thing for the state, going to net metering, trying to be energy-efficient, particularly; Mr. Wellinghoff and I have had 20 years of discussions on how to be energy-efficient in your home and what things to buy, blower tests, and how to wrap your hot water heater, all the things with which we’re familiar, and we end up with aluminum siding “everybody’s-selling-it-out-of-the-back-of-their-car” problem, for lack of a better term. To make it identifiable in southern Nevada, the pool construction industry problem that we faced in southern Nevada, people inherently, particularly in this state, want to do the right thing.
Well, if all we have out there are people that aren’t quality people who are going to provide a good product or a good service, and they get stuck with it, then they’re not likely to continue with it. They’ll lose the momentum of concern for the environment and the capacity, or demand-side, issue. And, we fought this for 20 years. I don’t want to lose it because we have a bunch of bad people selling bad products and services. So, it’s just something we should be sensitive to, so when someone decides they want to go to net metering, or they want to have a certain product in their home, or whatever, we provide, legitimate, quality individuals to do that. Otherwise, the momentum will stop much quicker than it ever starts.
Ms. McKinney-James stated:
Senator Townsend, I could not agree more affirmatively with you. . . . Twenty years ago, that was a serious issue for the solar industry. [It was] a very serious issue in terms of installation [and] then the inability to have things repaired. I can’t tell you the number of horror stories I heard during my tenure with CSTRR about instances where technology was installed in a sloppy fashion. So, some of this comes down to insuring the right type of licensing and establishing some criteria.
Senator Townsend interjected, “We can do that in this committee.”
Ms. McKinney-James continued:
Yes, I know. Therefore, I think we have some ability to protect consumers. And, I think some consideration should be given to that. We have a number of solar vendors in the state who have been very successful and offer credible products. But, because, you are correct, we are likely to see an increase in folks who are looking to make money off of this, we have to have the right infrastructure to protect the consuming public.
Senator Townsend said:
Let’s shift gears for one second, because it goes to the bill, S.B. 22, I think it is in front of government affairs. That’s extremely important, and that’s the demand-side issue with regard to our building codes. Aside from demand-side management, are there technologies out there that are easily incorporated into original design/build that can benefit any of the three of these [renewables: wind, geothermal, and solar]?
Ms. McKinney-James responded:
Senator Townsend, with respect to geothermal, I know the geothermal heat pump is something being pursued fairly aggressively in other jurisdictions. And, I think [it] has some value here. There may be other technologies. Solar, of course, has both, the side that we’ve discussed here this morning, as well as the passive side, which can be integrated into design considerations. And wind, I know, has value on a very small scale, because in my neighborhood in Las Vegas (out at The Lakes), I walk past a small wind turbine every day. It’s been there forever. I’m not sure it’s legal, but it’s there and I do know and, of course, Mr. Caldwell is [in a] far better position to speak to that because I know he and his wife have actually designed some very small wind turbines for residential use.
Mr. Caldwell commented:
If I may cover three of those issues, [Senator]. I’m also part of a company based in Sparks, Independent Power Corporation. We design and sell small renewable systems, [and] hybrid systems, primarily solar and wind. Our company is developing a new, small wind turbine as Rose [Ms. McKinney-James] has mentioned. That’s a new technology, and the advantage of this particular wind turbine is it makes no noise. This is absolutely significant. When you put a wind turbine close to your home, or where you want to sleep . . . that’s a significant feature. And it’s a design built into the structure of the turbine. It’s nothing I did, or we did.
The other issue we talked about was the licensing of people who do this type of business. We approached the contractors’ board; there was no category under the contractors’ board. We approached them over 3 or 4 years [ago]. We’ve filed an application; we are going to sit down our attorney and theirs and actually design a category, so people who do install solar and wind systems have some standards to live up to.
The third thing about the net metering, one of our clients wanted to do a complete net metering situation thing at his home, and he went down to the local power company. The process is hugely cumbersome now, absolutely cumbersome. I can see where this might scare many people off who would be interested in doing this, because the packet of materials you get is perhaps that thick [Mr. Caldwell used his fingers to reference a measurement], and it covers a lot of ground. It’s a very comprehensive package, but it would tend to frighten most people, including myself. So, if there could be a streamlined, more concise way of presenting this net metering, it would be a wonderful thing for the local citizens here in Nevada.
And, I agree with you entirely, [there are] 200 [people interested in net metering] by the calls we’re getting now because of the things that wash over the border from California. Our phone is ringing, probably, ten times as much as it did just before the holidays. So, suddenly, everybody’s got this interest now. And, it’s hugely important to a lot of people who want to do what they can to save [money].
Senator Townsend said, “Tell us about this packet; what’s the problem? Who creates this problem?”
Mr. Caldwell answered, “The packet is prepared by Sierra Pacific. It has a huge section on wind, a huge section on federal regulations, a huge section on installation, the technical. . . ”
Senator Townsend interjected:
Hold on a second. Is someone here from Sierra Pacific Resources? Oh, Susan [Susan L. Reeder, Lobbyist, Sierra Pacific Power Company and Nevada Power Company], can you check into that and find out why? Some of it you may be required to do by the feds [federal government], but can we find out why it’s that way. That would be really helpful, because if it doesn’t need to be all of that, maybe we could find a way not to have it [be] so cumbersome. That’s one of those, “I’m from the government, and I’m here to help you and here’s, you know, 18,000 pieces of paper.”
Mr. Caldwell said:
The actual application form is one page; it’s just one page with maybe ten questions to answer. It’s very simple, the application itself; but what you get as an initial dose of this is just overwhelming. It’s intimidating, and those are the words of our customer. If it can be streamlined, we would all welcome that.
Senator Townsend commented:
And, they may be doing this, number one, out of [a] requirement by the feds [federal government]; and number two, out of concern to make sure the public, who is interested, has all the information. But, the flip side of that is, many times, they don’t want to know it all; they just want to net meter, and they’ve got a little solar panel, and they want to get going.
Mr. Caldwell reiterated, “The comment we have heard is, ‘It’s intimidating.’”
Senator Townsend said:
Yeah, all of that stuff is because it’s written by lawyers. It’s in 2‑point type and nobody’s going to stop to read it. I mean, let’s face it, the guy who wrote that just got fired from an insurance company.
Mr. Burch testified:
Senator, I have some quick testimony on that particular issue, too. A couple [of] weeks ago, the Reno Gazette-Journal ran an article on the net metering. And, at that time, I was fortunate enough to be working with Mr. Collin Duncan of Sierra Pacific whose job [it] is to do that; plus, I knew him from my other endeavors. And, he confirmed what you’d said, there are eight people that had taken advantage of [net metering] in the state. He said shortly after his name and phone number appeared in the paper there was an avalanche of interest, and he’s “underwater” right now in trying to respond to that because of staffing.
But, he stated to me one of the
problems is you do have to get the information out to the people. And . . . you need to be more aggressive,
and immediately, as soon as it was in the paper, there was an avalanche of interest. However, many of these people think this is
going to be something that’s going to be a net benefit to them. And, indeed, until the prices, through mass
production, come down, it’s not a net benefit.
They won’t receive an overall
energy reduction. In fact, they have to
come out of pocket $15,000 to $20,000.
Now, there’s other benefits and you have to weigh that with a lot of other things. Collin [Duncan] stated that was probably an education. One of the first things he had to do is [learn] you’re not going to cut your energy bill in half by doing this. In fact, it may go up. So, if that’s helpful.
Senator Townsend stated:
I think the issue there [is], and Mr. Wellinghoff and I have talked about this at great length, the details of an energy audit and the potential costs can be intimidating. But, when you look at it, if you get a master plan for your home or your office or your manufacturing plant that’s provided by a professional person, and [he or she] says, “Here’s what you have to do to do it all.” And, then you look at your own budget and you phase it in over time; it has a benefit to you. If somebody realized the cost of widgets they are going to buy over a lifetime and somebody gave them that figure when they turned 21 years old, they’d probably faint. But, if you show them the benefit, and if they phase it in over time, I think we can really help them. We owe that to the public because this thing is not going to change. This isn’t pork bellies; it’s going up and it’s probably going to. It’ll come down a little bit, but it’s going to stay at a very tough, costly manner. So, I think we owe it to educate them. And, unfortunately, we’ve got school districts getting hung up on whether a kid can remember what year Magellan did something good, but they never teach him about things like this that could be helpful, like when you leave a room, turn the light out.
Mr. Burch continued:
Absolutely, Senator, and one thing I think needs recognition in this is, as a consumer, I’m going to buy energy from the utility at this price, or maybe I’ll do net metering at that price. There needs to be an additional credit brought in through all the advantages of net metering. For example, the distributed generation aspect of it; the societal cost avoidance; the air emissions you’re avoiding; and all of the things somehow need to be credited to fully make that a level playing field.
Ms. McKinney-James commented:
Senator, if I might just tag on to Mr. Burch’s [testimony]. The point he makes . . . is well-taken, particularly with solar. And, remember, net metering in this state is limited to solar and wind systems. And with the solar system, depending on the size, you can spend $16,000 to $26,000 on that system. However, if you place that system, or if you have a combination of technologies as is demonstrated in Gardnerville with Marion’s [Marion Barritt] home, Marion would be happy to show you her power bill, which I think was a negative this year. And, last year I think she paid a total of $100 for the entire year because she integrated both energy-efficient products, as well as placing those solar panels on her home. So, it will vary.
Senator Townsend said, “She [Marion Barritt] is a remarkable story.”
Ms. McKinney-James replied, “She is.”
Senator Townsend continued, “And, if she lived in Las Vegas, I’m sure the media would be much more interested. But, she lives in Gardnerville [Nevada].”
Ms. McKinney-James stated, “However, she’s been on Home and Garden [HGTV], nationally.”
Senator Townsend stated, “Absolutely. And, it’s really important to get the message out this stuff does work.”
Ms. McKinney-James concurred, “Yes.”
Senator Townsend added, “It takes a little effort, but it does work.”
Ms. McKinney-James said, “And, that’s our challenge.”
Senator Townsend commented, “Thank you, all. I’m very pleased; I just think this stuff is so important. I don’t know how to put it together, yet, but I appreciate what you’ve done.”
Senator Townsend continued:
On your [committee] table, or your [office] desk, I had Mr. Young put together, with regard to the comparison of savings [Exhibit K], something that you could just walk around and, based on yesterday’s testimony between Sierra Pacific Resources’ projections, the consumer advocate’s projections, and the water authority’s projections . . . there’s no editorial in this; this is just simply giving it a one-pager [the “one-pager” is the second sheet of Exhibit I]) so you have it in your hand on what they gave with regard to the issue of divestiture, or maintaining the plants.
The second thing is the one that is probably as interesting a statistic as we will see, and has to do with the energy costs for Fiscal Year 2000 [Exhibit L]. This came directly from Mr. Comeaux [John P. Comeaux, Director, Department of Administration] at the budget office [sic]. And . . . in the state of Nevada, which includes the state, the university, and the school districts, we spent $45 million dollars on electricity last year; we [also] spent over $8.5 million on natural gas in those three entities. That’s a statistic I think is going to be a challenge for our friends in the money committees, because those will continue to rise, and somebody’s got to pick up the tab, and it’s, of course, going to be the taxpayer on that arena.
So, when we talk about renewables, we talk about net metering; when we talk about demand-side management, [and] when we talk about retrofitting, it all deals directly with that cost. And, I hope our colleagues in the other committees understand that. We can’t keep building buildings that are wasteful, and we can’t keep letting wasteful buildings lay around without dealing with them. And, there’s some tremendous advantages to all the testimony brought today.
Alfredo Alonso, Lobbyist, BP Solar, testified:
[I’m with] Lionel Sawyer and Collins, representing BP [BP Solar], and I would like to introduce Todd Foley [M. Todd Foley, Director, External Affairs and Business Development, BP Solar], who is a native Nevadan from Las Vegas. . . . Mr. Foley, about 10 years ago (or a little bit more, actually), got Potomac fever and moved to Washington [D.C.] and ended up with BP Solar. He is now the Director of Business Development for BP Solar, and I’d like to turn it [the microphone] over to him. He can give you a little idea of what the company’s doing and how it might benefit the state of Nevada.
M. Todd Foley, Director, External Affairs and Business Development, BP Solar, testified:
We [BP Solar] are the world’s largest manufacturer and marketer of solar electric power. We are part of the BP group, which many of you know, as well, and BP is actually the largest user of solar power in the world. That’s largely by virtue of the use of our solar on the service stations, part of a program we have now coming into place in the U.S. and around the world. Also, we use solar on our office buildings and including some structures like offshore platforms. It’s quite an interesting story in that regard, as well.
I think, in the interest of brevity here, and just to follow along on what I thought was an excellent discussion you had, a lot of the things I would say were said. Let me just begin by focusing on a number of points to carry on with that discussion.
As a little bit of background, BP Solar has been in the business for more than 25 years now. We are the world’s largest. We have manufacturing plants in the U.S. [United States] and around the world. We’re going to be doubling our manufacturing capacity, actually, in the next two years. The market is growing about 30 percent a year, and it’s a very rapid rate. It’s in a host of the traditional markets for solar, but also our emerging new markets. We would consider, really, the kinds of applications here in Nevada as, really, the emerging market for the technology. Our product is deployed throughout the world in 170 countries. So, the technology is proven, and it works. Its origin actually was to support the space program. But, of course, the technology has progressed since then, and it’s very much come down to earth now, as we see solar deployment, again, a host of applications around the world.
Mr. Foley continued:
I took a few notes about some of the discussion points. Let me just get into that a little bit. Solar is actually very cost-competitive and really a high-value energy source. It provides a host of benefits beyond the obvious power generation, and I think that’s very important. It’s the ultimate distributive power source. It provides you power right where you need it, at the point of demand. That’s important, because when you have issues of reliability (brownouts, blackouts) [there is] no worry if you have a power source right where you need it. It also is very important for emergency or critical public-safety needs: hospitals, traffic lights.
In fact, we see some of this in California right now where there are some real concerns. . . . Solar is an ideal solution for that to ensure the public safety. There are a host of those kinds of applications. Related . . . is that, as a distributive power source, it is very efficient, actually, to deploy it on what is already an in-place infrastructure . . . the rooftops of homes and businesses in our communities. The best time actually to use solar is to design it in, as the chairman had mentioned and alluded to, but solar is also very effective as a retrofit on rooftops. As we are very concerned about energy reliability issues [and] capacity, we have this natural infrastructure in place we can take advantage of.
I can talk a little bit more about that
as we go through this. An example of
the application of solar is the 2000 Sydney Olympics that most of us
watched. The entire athletes’ village
was powered by our solar. The solar was
actually designed in and built into townhouse structures. And, of course, now those have been sold to
purchasers, and they’re [solar generators] still generating
electricity. So, it’s a great example;
I think, at the time, it was the largest solar suburb in the world.
There are a number of these kinds of applications elsewhere. Mostly, in what are now probably the biggest markets for solar, and that’s Europe and Japan, especially Germany in Europe. The other important attribute, aside from being a distributive power source, is it’s the ideal peak shaver. Solar works best right when we need electricity most. That’s typically on a hot summer day with a lot of sun when we’re driving our air conditioners to their maximum. That’s when, actually, homes and businesses are paying the highest rates for the electricity they use to power that up, but that’s actually the point, of course, where solar is most effective.
So, it can help us shave that peak demand. The important point related to that is the grid supply we rely on is geared toward that peak load. We have to build to meet that peak demand point. There are many periods at other times when we’re not using that load. It is sitting idle. That’s a stranded investment cost. The important attribute for solar is you can probably obviate the need of building those additional central power plants for that by putting solar on a distributed way and rooftops, homes and businesses.
Mr. Foley continued:
So, you get an added economic benefit not usually captured in the actual price of the technology. I think the other thing, of course, is it’s not always captured in the price of technology as the previous panel had discussed, but it’s very important. It’s a distributive power source; power at the point of demand. It is a peak shaver, but it also provides the electricity we need without any emissions (zero emissions). There are zero moving parts. There’s not fuel. Once you put solar on a rooftop, it’s generating electricity for 30 or 40 years.
In terms of the technology itself, it’s quite interesting. The cost of solar technology has come down sevenfold in the last 15 years, and we continue to work on those cost reductions. We are moving to develop even new technologies. The chairman mentioned the Luxor Hotel down in Las Vegas. Every time I go home, I think there’s no better application for solar. Or, [another place for solar power is] even the top of the Mirage [Hotel Casino] with that gold reflecting material. Solar, actually, is most cost-effective when you design it and build it into structures, because you design around that. As Ms. McKinney-James described it, you design in other energy-efficiency measures, as well. So, you get a net benefit well beyond the individual technologies.
So, that is the time to do it. The technology we have now, there are really two basic kinds. It’s what they call crystalline, like wafers that you see, for the most part. But the new emerging technology is what we call “thin film.” It’s glass-like. It’s a thin-film deposition of an active substrate on glass. You can let as much light through as you want. And, actually, the panels you see at the Luxor, that’s exactly what it looks like. And, now, we’re working on technologies to adjust the color of those panels. That’s why I think about the Mirage.
Mr. Foley continued:
The interesting thing here is the solar is becoming, not just an electricity producer, but also a building material. It’s two bangs for the buck. And, that’s very important, especially as we move forward as we grow [and] as we have concerns about pollution, the environment, energy capacity, et cetera. The day is coming soon, with these new technologies, that we’ll actually not only be putting up structures, but those structures will actually generate electricity. So, it’s very exciting.
And, then think about the measures we go to to actually dissipate the energy of the sun . . . shading, blinds, et cetera. Well, that thin film will actually be able to provide you the shade [and] the separation from the environment you want, but [will] also generate usable electricity. So, it’s very exciting. Importantly, also as alluded to again, it’s very esthetic, this new thin-film technology. Again, it can look just like that Luxor façade. And, I think, that’s quite a sizable structure, obviously. It would generate quite a bit of electricity at that source.
So . . . what would be very important to, and I think for the committee to consider and the state [to consider], is how can you encourage new builds of homes and other structures to incorporate these new technologies. A lot of it is about awareness, but a lot of it is about codes, and . . . know-how. There are a number of things, I think, make a lot of sense that will actually help transform energy supply and how we use energy and make energy, and with tremendous benefits. What you’ve been talking about this morning is you’re foreseeing the future. The vision is right out there.
Senator O'Connell asked, “I have several questions. First of all, you talked about the lifeline being 30 to 40 years. Why is that? Why is it limited to that?”
Mr. Foley replied, “We think that’s good. I mean, that’s a real strong attribute.”
Senator O'Connell asked, “But, is it the deterioration of the panels?”
Mr. Foley answered, “Yes, it’s the degradation of the active materials over time.”
Senator O'Connell asked:
Ms. McKinney-James had mentioned before you’re looking at a cost of approximately (I think she said) $26,000 initially, if it’s built into the home system. Would you agree with that, even with the thin film?
Mr. Foley answered:
It depends again on the size of the system you’d want. Typically, our residential applications are about, probably, half that cost. They’re typically 1.5- to 2-kilowatt systems, and they cost about $13,000. You could install [a system], and that usually provides about half an average home’s energy needs.
Senator O'Connell asked, “Would that be for approximately a 2000 square-foot home?”
Mr. Foley responded:
Yes. It’s the average home in America actually. And . . . essentially, you’re using the grid as your battery. During the day when the sun is out, you’re generating electricity. In the evening when you’re not generating electricity, you’re pulling in from the grid. We actually have a residential project down in Los Angeles, some 180 medium-sized, modest-priced homes. All of them have solar built into them, along with other energy-efficiency measures. The net impact of that is the people there pay virtually no electricity bills, because we’ve designed it in, and we built it in with these other technologies.
And, their systems, I think, were typically $12,000 to $13,000. The Los Angeles Department of Water and Power has a rebate program where they actually will pay for half of that system, so the consumer paid $6000 and has virtually no electricity bill as a result. That’s what California has done with the rebate program: consumer-targeted at both homeowners and businesses. And it’s also what New Jersey is doing, what Illinois has in place, and a couple other places, as well. Those are actually very effective because they, obviously, buy down the cost of the technology.
Solar does involve a high upfront cost, but then, of course, it’s long-term and there’s no fuel, [and] again, virtually no maintenance. Once it’s in, it produces electricity for 30 to 40 years. The key thing, too, why you would want to design and build this in, especially [in] homes and businesses. An efficient way to help address that high, upfront cost issue is, of course, to include it in a mortgage, a 30-year mortgage and pay it over time. So, you can see the obvious benefits of doing that, to take care of that high upfront cost.
Senator Shaffer asked, “I’m curious about the weight. Does it place an additional weight-burden on an existing structure if you were going to put it on the roof of a home?”
Mr. Foley answered:
It’s a modest one. I don’t think it’s significant from like a safety or a structural standpoint. And, in fact, some of the materials are actually the roof itself. There’s this technology out that the solar panel is tile-like (roof tile-like). So, there is no issue there. . . . And also, when you are capturing the energy of the sun to harness it for use of electricity, it actually lessens the load inside the house for air conditioning or heat. So, you’re using less because it’s more efficient. It’s blocking the sun’s energy. So, there are all these kinds of collateral and below-the-surface benefits and attributes of the technology.
Senator Townsend asked, “Did I understand there’s a roof tile now that can be incorporated into the design?”
Mr. Foley answered, “Yes.”
Senator Townsend asked, “Is there a way to get one of the tiles to see what that’s like?”
Mr. Foley answered, “Sure.”
Senator Townsend said, “We might want to look at that technology and, when we talk about this portfolio standard, talk about it in terms of a portfolio standard relative to building.”
Mr. Foley replied, “Absolutely.”
Senator Townsend continued:
And, maybe, a half of one percent becomes what you’ve got to build and let the Clark County commission figure out what’s the half of one percent. I don’t know, I’m just saying, we’ve got to give reason for people to do these things. And, you don’t want to wait until someone says, “I don’t have an option, because my power bill is too high, and I don’t have the money to borrow because I’m paying too much on my energy costs.” We have to think about it in the transition period that could benefit them. But, that would be something that, unfortunately, the national media finds the state of Nevada a wonderful whipping boy for almost every single thing they think is wrong with the world.
It behooves us . . . to reach out and put our best foot forward to let people know we’re progressive, and we’re trying to do the right thing. Those kinds of stories could be incredibly beneficial. Senator Schneider is working on a program with the “straw-bale” house and some of the things, I believe, he’s spoken to you about that could be very beneficial. So, I think we ought to look towards that kind of creativity.
Mr. Foley replied, “Without question, Nevada is positioned to be a global leader because of its natural resource, the sun, in many respects, and other natural resources here the previous panel also talked about.”
Senator Townsend asked, “What’s the average cost to a home if you put this tile on?”
Mr. Foley answered, “It’s typically about $12,000 to $13,000.”
Senator Townsend asked, “And, what do you do with it? Do you take the old roof off and put the new roof on?”
Mr. Foley answered:
No. You can either just put it on top of [the roof], or if you’re in the design phase, you can build it in and it serves as your roofing material, in part. And the benefit of that, of course, [is] you’re getting two bangs for the buck. You’re reducing the cost of other roofing material. And, that’s how we also help bring down the cost of the technology.
One thing to think about, too, is having the state lead in this area. What we would suggest you consider is any state or government new builds, [such as] library, schools, state buildings of any other sort. Also, where you’re refurbishing rooftops that the state consider, say, solar in this case, to be included in those projects. It makes sense from all the public policy standpoints, but it also will be an important point in showing the community what can be done, encouraging others to do it as well.
Senator Townsend stated:
That point’s very well taken. I think we need to pursue that about our new construction in the state, [and] schools, particularly. I know Clark County’s under a massive school build program and nobody ever wants to talk about energy efficiency until the power bill goes up. So, this might be a really good opportunity to take advantage of that.
Mr. Foley said:
When you’ve got plenty of rooftops . . . a natural infrastructure base [is] already in place for solar. It’s all the rooftops, and you think of all the sizable rooftops in schools, et cetera. Those would be great places for the technology.
Senator Townsend asked, “Now, [what] if we mandated all new schools built in Clark County [have the solar technology built into the rooftops], starting 3 months from now? But, you don’t interrupt stuff [already] in the pipeline.”
Mr. Foley stated:
There are two quick points I’d like to make in terms of what we would suggest on the public policy side, [and] what we would think you could do to help facilitate the kind of future we’re envisioning here. One is, as I mentioned, the state could incorporate solar and these new technologies in their state structures. Two is, if you [would] look at what other states and countries are doing to expedite the process of the solar technology, like California, New Jersey, Illinois, they have these rebate programs where they actually buy down the cost of systems to consumers and businesses, a very important market-push mechanism.
Of course, we talked about the renewable portfolio standard. That’s also an important mechanism. We see that being used in Texas and Arizona and being considered in New Jersey, and elsewhere. We see these kinds of programs in Europe and Japan. And actually, those are the biggest markets right now for solar. The technology really was developed in the U.S. and the manufacturing base has been in the U.S., but really, through initiatives and these other places around the world, those are becoming the markets. And, we look at expansion. That’s where a lot of manufacturing capacity is being added, because you do it near the market.
So, there’re other opportunities here to kind of retake U.S. leadership in this area. The last thing is on net metering. Net metering is actually critical, and [as is] overall interconnection. These are what we call barriers to distributive power sources. For a business, a small business or a homeowner to get the economic value of their investment of these new technologies, you’ve got to be able to reduce your power bill by that amount you generate. And, sometimes, during the middle of the day when you’re not home and you’re generating more than you’re using, you can be a net-exporter into the grid.
Mr. Foley continued:
Now, that has a community benefit and a benefit to the utilities that at that point of peak demand are looking for supply. But, the homeowner needs to be able to capture that economically. . . . If the 10-kilowatt system is now allowed for net metering, and we talked of just a few hundred net-metered applications in each district, et cetera, that [the net metering allocations] will have to be changed [increased] if we want to see solar and these other distributive power sources play a much larger role. And, in fact, let’s say a business wanted to put a 200-kilowatt system on their rooftop or even larger, you’d want them to be able to capture that credit as well. So, when you think about net metering, the standard probably has to go way up to kind of bring about this future we’re thinking about.
The other thing is interconnection. These are new technologies for the typical grid system. But, there are technical solutions; they’re easily worked out. Consumers are finding [difficulty] in actually getting their systems net metered. We need to work on standards and codes to simplify that process. . . . Without that, you have a very difficult barrier.
Senator Townsend said:
We don’t seem to have the retail mentality, yet, to seep into these new technologies. The average person in retail understands you can’t make it difficult for a consumer, or they’re going to go down the road. So, we need a more market-driven kind of mentality to help you do that, and [overcome] these kinds of conflicts and hurdles. I think there’re two things we’re going to need from you. And, you’re, probably going to be really sorry you ever testified, because we’re going to really load you up here. First of all is . . . we’re talking about the average home. I don’t know how big average is now considered. [Is] 2000 square feet considered average? Let’s just use 2000 square feet. We need to know what it’s going to cost to do their roof in these materials and how much [power] it generates.
Senator Shaffer asked, “Where are you getting the material?”
Senator Townsend asked, “I don’t know, Home Depot or someplace. Where do we go? Do we go to a BP gas station and get it?”
Mr. Foley asked, “To get our solar panels?”
Senator Townsend answered, “No, I’m talking about the tiles.”
Mr. Foley answered, “There are distributors located here in the state that were alluded to earlier, as well, where you can purchase them.”
Senator Townsend said:
Well, we need to know, if we do a roof on a 2000 square-foot home, what does it cost, and how much [power] does it generate? Then we need to know about an average school size, and I’m sure we can find that out. And, then Ms. McKinney-James is going to come back to us and show us how long it’s going to take to convert the Luxor into the world’s largest solar generator. But, if you could do that for us, so we could have a concept of the potential impact on these things, [it] would be really helpful.
Senator Schneider asked, “Are you [Mr. Foley] going to be coming back here, to us, with this?”
Mr. Foley answered, “Whatever you would like.”
Senator Schneider said:
But then, also . . . we were fortunate enough to get the homeowner association bill [S.B. 421] back to our committee. But, we’re going to have to do some stuff in there to allow this, because those homeowner associations won’t allow this. And, we’re going to have to address, maybe, rolling shutters; we’re going to have to address the solar stuff because this is going to be big for homeowner associations, especially when you get into condos and town homes and redoing these bills.
Senator O'Connell stated:
Actually, we have in the law something right now that protects the solar, because I’ve gone through this with a constituent in a homeowner’s association. And, they are protected, and the association can’t fine them or do anything about it.
Senator Townsend asked, “Is it generic enough?”
Senator O'Connell answered, “Yes, it is”
Senator Schneider said, “We may have to put it in 116 [chapter 116 of Nevada Revised Statutes], too.”
Senator Townsend said:
Because Senator Schneider and Senator O'Connell seem to, for whatever reasons, accumulate all of the complaints about homeowners’ associations, we want to make sure that’s an issue addressed.
Senator O'Connell said, “With the new technology you’re working on, are they working on how to bank this energy? Is there any way possible to capture that?” Mr. Foley asked, “To store it?” Senator O'Connell replied in the affirmative.
Mr. Foley answered, “With batteries, certainly. And, a number of people who live off-grid, who want to be completely independent of the grid, would invest in not only the panels, but also in batteries to store it.”
Senator O'Connell said, “So, they could use it during the evening hours?”
Mr. Foley answered, “Exactly. Now, typically, the grid serves as your battery, essentially.”
Senator Townsend commented, “It’s fascinating stuff.”
Mr. Foley continued:
Yes, it’s very exciting. I would like to, before I leave, issue a standing invitation for you [the committee] to visit one of our facilities. In fact, we have one in Fairfield, California, between Sacramento and San Francisco. It’s our closest. That is the newest state-of-the-art manufacturing facility that’s going to produce our new thin film. So, it’s a great place to go and it’s nearby. The last thing about the thin film is, the reason why it’s so important, it’s glass-like and esthetic, but it is cheaper to make and, yet, is efficient in energy production. We believe that’s the step change to the future, because we’re reducing the cost substantially.
Senator Townsend asked, “This is the stuff you could do the Luxor with. Is that what you’re saying?”
Mr. Foley answered, “Yes, exactly.”
Senator Townsend asked, “When is that technology [to] be in production?”
Mr. Foley answered, “We make some thin film in Virginia, right now. The Fairfield plant will be commercially producing, we’re hoping, sometime this year.”
Senator Townsend said, “It would be interesting to see. Do you have retail locations that currently have solar attached to them?”
Mr. Foley answered, “Service stations.”
Senator Townsend asked, “Are they here in Nevada?”
Mr. Foley answered:
We don’t right now. We just commissioned a station in Tucson [Arizona], an AM/PM station in Tuscan. We’re looking at southern California and Nevada’s on the screen, as well. But, we’ve done these stations around the world. And, we’ve got some 30 or 40 now in the U.S., total. I think, the Senator [Senator Schneider] mentioned he’d actually seen one.
Senator Schneider commented:
Yes, Mr. Chairman, I was in Nashville [at] the end of October for a home owners’ thing, and they had a big opening of a new BP [Solar] gas station and mini-mart. And, it made big news there; they showed the whole thing. . . .
Mr. Foley stated:
Well, actually, you’d be surprised. Chicago has 80 percent of the sun’s power as [do] Phoenix and Las Vegas. So, you can use solar whenever there’s light. It can be overcast. It’s just when there’s light you’re generating electricity. We’ve got solar deployed in Alaska on some of the northern-most reaches. So, it’s a technology that’s very flexible; it can be used widely. All of our new service stations BP [builds]; they’re actually building in the solar to them. Just like what we call “building-integrated solar.”
Joseph L. Johnson, Lobbyist, Toiyabe Chapter, Sierra Club, testified:
Senator, I just, singly, would like to elaborate on an issue I think is important . . . and that is the net metering. . . . The issue I would like [to] point out, and it was mentioned, [is] the peaking power that’s produced. Some mention of plants being built for peaking power and the contracts being signed at much higher rates than what’s offered by the utility is essentially a 24-hour average time rate. And, this is, in part, embedded within conservation measures, or time-based charges, that we previously had presented before the commission.
But, I simply would like to ask, in review [of] the issue of net metering, that both the caps be removed, that is, the cap on numbers that could participate, and the caps on sizing of facilities. There’re some [caps]. It’s not a linear charge about how many kilowatts you have because there’s this interface control that’s a fixed charge. You have to be able to get off the system when the system goes down to provide for safe maintenance of the local power line. For instance, you have to convert energy and this sort of thing. So, there’s some economy in scale because you can up the number of panels for a particular control size.
Senator Townsend asked, “So, you’re basically saying to get rid of the two caps, let market forces, which are consumer-demand, do this kind of take over, and see what happens?”
Mr. Johnson responded:
Yes, sir. And, somehow, I would see it beneficial, and I don’t know how you would do this without going through a more elaborate process of capturing this external system charge, if you wish, that peak power cost that doesn’t accrue to the person who signs up on that metering.
Senator Townsend said, “I’m sure we had a remarkably cogent reason for doing that, it just escapes us at the moment.”
Mr. Johnson said, “I think Ms. McKinley [sic] [Ms. McKinney-James] defined that. . . . We took a pilot program, and we had difficulty getting the votes.”
Jeffrey Hanson P.E., Manager of Regulatory Affairs, Avistar, Incorporated, and AXON Field Solutions, testified:
We’re a licensed alternative seller in the state [of Nevada], and [a] metering and energy information provider in California and Arizona. What I want to do today is just come in and say we support the Shell [BP Solar] proposal that was presented to you earlier this morning, and submit some information that would complement Shell’s proposal. And, it’s based on our observations in other states, and our experiences in other states in the deregulated markets around the country.
Our proposal is really based around the fact, in addition to the supply issues we’ve discussed today, competition in retail electric services is a critical part of the comprehensive solution to the challenges facing Nevada’s energy market. We developed a five-point kind of proposal [Exhibit M], or ideas, we believe are necessary to promote that.
The first is we believe small customers deserve to know a fixed default electric price. Currently, customers that take service from the utility end up getting a default electric price and then, possibly, a deferred fuel charge afterwards. And, we think [they should get] just a default energy price so the customers know exactly how much they’re paying for energy . . . so they can make decisions on such things as energy-efficiency, or choosing another provider.
Our second idea is we believe large customers should be required to secure their own energy supply. The default provider can have extensive costs in having large customers switch to the default and then switch away from the default because of purchase power transactions and things like that. We feel if the large customers are required to secure their own supply that takes that burden away from the default supplier. And, the default supplier can just work with small customers and has a very solid base of small customers that they know they’re working with.
Mr. Hanson continued:
The third point is we believe default service for small customers should be subject to competition. Which means that, like Shell proposed this morning, the default service should be bid out, or an RFP should be set up for the default service, so [customers] would get the lowest price, as well as the best service from the default supplier.
And, then, our fourth proposal is once the minimum price is set for default . . . once that’s out there and the large customers that switched away, or are acquiring their own supply, then all customers should be able to choose who their energy provider would be, if they want to switch from the default provider. This would allow them to choose more environmentally friendly power sources, different things like that. But, by having a fixed price for the default service, they know what they’re comparing to different offers that people are providing them.
And, the fifth, and final proposal, is the
municipal aggregation with an opt-out provision should be allowed. Many cities have talked about this around
the country . . . to where cities have actually aggregated and are going out
and acquiring supply. . . . And, we
believe that is useful, especially if you’re talking about renewable energy
sources and things like that where you may have a community that wants to get a
lot of green power, and just the portion that would be provided by the default
provider. But, they may want more green
power than that to be environmentally
friendly, so that community should be able to do that. . . . I just want to let you know we do support
the Shell proposal.
There being no further business, the meeting was adjourned at 11:13 a.m.
RESPECTFULLY SUBMITTED:
Gayle Nadeau,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: