A better approach to energy policy

I am compelled to respond to the recent “Nevada Views” opinion piece by Michael Yackira which minimizes the ability for alternative energy resources to supplant the need to build a massive coal-fueled power plant in Northern Nevada.

If completed, that multibillion-dollar facility would burden Nevada electric ratepayers for many decades to come. There is a superior and less expensive way to meet Nevada’s need for reliable and affordable energy. With vision and through cooperation between the utility, regulators, lawmakers and the incredibly inventive entrepreneurs from the private sector who have recognized the value of renewable energy development in Nevada, we can chart a new course.

I think many share my view that Nevada should lead the nation in a 21st century energy policy that protects both consumers and the environment. Nevada is blessed with a vast array of energy options. Instead as Mr. Yackira, the former president of FPL Energy, indicates in his essay, Nevada Power is obsessed with promoting coal-fueled power plants as the only alternative. Every national trend indicates that is a risky business strategy for both utility ratepayers and his shareholders.

Across the country dozens of proposed coal-fueled electric plants have been canceled in the past year, largely because of the financial risk they represent. It is important to remember that if the Ely plant is built, it will largely define Nevada’s energy choices until late in this century: Current ratepayers, their children, grandchildren and likely their great-grandchildren will be paying the costs of the planning decisions we make today. The sad truth is that the “clean coal” and “cheap coal” mantras the industry drills into paid media campaigns deceive Nevada’s consumers. Future coal-fueled power plants will be neither cheap nor clean.

A recent article from the reliably conservative Forbes magazine indicated coal prices could double over the next two years. Peabody Energy, the nation’s largest coal company, presented financial analysis recently that their own projections indicated a 59 percent increase in coal prices over the same period.

At the same time, the Department of Energy has moved to abandon its much publicized experimental clean coal generation project — FutureGen — due to soaring cost projections. Major investments banks have recently indicated that financing for future coal plants may be conditioned on their economic viability under potentially very expensive restrictions on carbon dioxide emissions.

But Nevada Power seems to adopt the premise that whatever these future costs will be, they will be passed on to Nevada ratepayers. If future Public Utility Commissions determine otherwise, an enormous potential risk exists for the company’s shareholders and its creditors.

Nevada has long been considered the nation’s “breadbasket” of renewable resources. Properly developed, Nevada’s solar and geothermal potential alone far exceeds our electricity consumption, allowing Nevada to eventually become an exporter of green energy to less fortunate states. Advertising which leads consumers to believe our utility has deeply invested itself in geothermal and solar projects so as to claim that Nevada’s per capita production of these resources leads the nation is deceptive. Private companies have developed the geothermal and solar projects that sell renewable power to the utility under long term contracts. Nevada Power has not invested its own capital in major renewable facilities.

These long-term contracts also impair the utility’s balance sheets because they are treated from an accounting standpoint as equivalent to long-term debt obligations.

So what is a reasonable alternative? Let me briefly outline one plan that would create good jobs, enhance the rural tax base and benefit Nevada’s current and future ratepayers.

In order to meet Southern Nevada’s unique energy needs, it is critical to have reliable and affordable base load energy and adequate supplies to meet the peak summer needs when air conditioning essentially doubles the electric load in Las Vegas. A balanced portfolio of renewable resources can economically meet those demands, protect the environment and create more jobs for Nevadans than the coal alternative Nevada Power seeks to impose.

Geothermal resources in Northern Nevada have been conservatively estimated at between 2,500 and 10,000 megawatts, enough to meet our needs far into the future. Geothermal power can be developed at rates that are currently comparable to coal-generated power, and without any risk of future fuel price increases or environmental costs.

Geothermal energy is reliable and available 24 hours a day. Concentrated solar thermal power is ideally suited to Southern Nevada’s electric load profile, and new technologies and economies of scale can produce that power at prices comparable to that for peak energy needs to provide air conditioning during the summer heat. Ancillary technologies, such as solar hot water heating, cost effective photo-voltaic arrays, and enhanced energy efficiency can also supplement our energy resources.

If Nevada’s utilities are unwilling to invest their own capital (for whatever reason) in utility-owned renewable facilities, the state should allow the long-term renewable contracts to be treated as a regulatory asset that can earn a rate of return. The status quo gives the utility a tremendous incentive to place massive and expensive multibillion-dollar facilities, such as the Ely coal plant, into its rate base to earn a return for shareholders (and to increase consumers bills). If the financial incentives for renewable power contracts are equivalent, large and risky developments such as Ely will quickly become less attractive to utility management and the shareholders.

In order to deliver expanded geothermal base load power to Southern Nevada, an interconnecting transmission line is essential, as the governor’s renewable energy transmission task force recently proposed. Private firms have recently expressed a desire to share in the cost of such a line and federal incentives may become available as the nation revises its energy policy to encourage the reduction of greenhouse gases. This line would be economically viable without the “anchor tenant” of a multibillion-dollar coal plant. With that transmission infrastructure in place, other renewable energy such as wind, when available, can then be transmitted to displace fossil fuel generated electricity.

It has been estimated that the solar thermal potential in Southern Nevada alone, when properly developed, could supply a substantial portion of the nation’s electric load at rates equivalent to fossil fuel. That peak energy can first be generated near Las Vegas and integrated into the existing utility infrastructure, and ultimately exported to other states.

Technology for the storage of solar thermal power is also progressing, so that solar power could eventually supplement base load electric resources.

A focused effort by the state and the utility to develop 100 to 200 megawatts of geothermal production per year over the next decade and the transmission infrastructure needed to supply that energy to Southern Nevada would displace in a cost-effective manner the need for a multibillion-dollar coal-fueled plant with its enormous risks of future costs to Nevada consumers and enhance our energy security and reliability. The simultaneous expansion of solar thermal generating and manufacturing facilities can make Nevada the center of a vibrant 21st century industry and the good local jobs it would create.

So why does the new CEO of our utility want to lock Nevada ratepayers into decades of payments to out-of-state coal companies? Utilities are sluggish, unimaginative and bureaucratic in my experience. With a favorable regulatory environment, business as usual which places all future economic risk on Nevada consumers satisfies shareholder and management interests — and has resulted in the doubling of electric rates in Las Vegas over the past decade.

As consumers, we need and deserve a creative, forward-looking energy policy centered around renewable energy because in the long term that is the only responsible policy Nevada can afford. Will this be a challenging endeavor? Of course. It also may be the best legacy we can offer future Nevadans.

Tim Hay, a former Nevada consumer advocate and former member of the Public Utilities Commission of Nevada, writes from Reno.