CARSON CITY – Two major solar power projects proposed by Nevada Power could be a boon to customers because of a dramatic drop in the cost of the renewable energy technology.
Nevada Power is seeking approval from state regulators to build two 100-megawatt renewable solar energy projects as part of a three-year plan to help replace the utility‘s coal-fired electrical capacity set to be fully retired by 2019.
In an attention-getting an example of just how cheap mass-produced solar power has become, the company, in its July 1 filing with the Nevada Public Utilities Commission, said the price in the proposed 20-year agreements with Boulder Solar and Playa Solar 2 are under $50 per megawatt hour. The utility said the average cost of solar renewable energy delivered to Nevada Power in 2014 was about $137.65 per megawatt hour.
The price for the Boulder Solar project, which would be built in Boulder City, is $46 per megawatt-hour and does not escalate over the 20-year agreement. The project is projected to generate 289,288 megawatt-hours of renewable energy in its first full year of service in 2017.
The solar projects appear to be competitive with other more traditional forms of energy generation. Lazard, a leading worldwide financial advisory and asset management firm, issued a cost of energy analysis in 2014 that showed large solar projects are running $60 to $86 per megawatt-hour, and the two proposed Nevada Power projects are well below that level.
Also, the report shows natural gas at a $61 to $127 per megawatt-hour cost and coal at $66 to $151, so the projects are competitive with other energy sources. The ranges are for unsubsidized costs.
The Playa Solar project price is $38.70 per megawatt-hour in the first year. The plant is expected to generate 307,820 megawatt-hours of renewable energy in its first full year of service in 2017. The purchased power agreement would allow a 3 percent per year increase, the filing said.
Solar gets cheaper
The projects could be completed as soon as December 2016 if regulators approve the filing by later this year.
In their first year of operation in 2017, the facilities would result in about $25 million in costs to ratepayers. But they would also replace $18 million worth of natural gas that the utility would have to buy if they were not built, resulting in a net cost to customers of $7 million.
"Overall, the two projects are very reasonable priced when compared (a) to existing solar contracts and (b) to other, fossil-fuel driven generation," the filing said. "The projects advance the purposes of Nevada‘s emission reduction and capacity replacement statute, and provide value to customers."
The PUC will have several months to act on the requests, which were filed as part of the company‘s Emissions Reduction and Capacity Replacement Plan covering three years beginning Jan. 1, 2016. The projects and the replacement plan will be the subject of pre-hearing conferences in early August.
Nevada Power is a subsidiary of NV Energy, which is a company owned by Berkshire Hathaway.
Interested parties, including the state Bureau of Consumer Projection, have yet to weigh in on the details of the filings.
The solar projects are being proposed because of Senate Bill 123 of the 2013 legislative session, which required the utility to end its reliance on coal-generated electricity. Because of the measure, the utility closed three of its coal-fired units at the Reid Gardner plant at Moapa in December. The fourth unit will close in 2017, and the utility‘s share of power from the Navajo Generating Station at Page will end in 2019.
In all, 812 megawatts of coal-fired generation is being retired or eliminated under the plan, which must be replaced.
Big companies try to flee
But Nevada Power is not planning to proceed with other renewable power projects as specified in the 2013 legislation because of the applications by three large gaming companies to leave Nevada Power to buy their own energy on the open market.
The uncertainty cleared up in the case of another company looking to leave when Nevada Power and data storage company Switch announced Tuesday that it would stay with the utility. Switch uses only 34 megawatts of peak power, however, while the gaming companies ’ Wynn Las Vegas, MGM Resorts International and Las Vegas Sands Corp. ’ use a combined 370 megawatts of peak demand and more than 2,000 gigawatt hours of retail load now supplied by Nevada Power.
Concerns about whether additional power plants will be needed in the near future, including a third 100-megawatt renewable energy project, prompted the 2015 Legislature to pass Assembly Bill 498, which requires the utility to demonstrate demand for the energy production before getting an OK from the PUC.
The gaming company "exit" applications are being reviewed as the PUC considers a new way of determining how to capture costs incurred by Nevada Power to provide the electricity to meet the existing energy needs of the companies that no longer will be needed if they are approved to leave.
PUC staff initially had sought a $27 million exit fee for Switch, for example, but that was rejected by commissioners in June because of uncertainty over whether the amount was appropriate.
Randi Thompson, state director of the National Federation of Independent Business, said Nevada‘s small-business owners are concerned about the consequences should large companies leave Nevada Power while the utility moves to build more capacity.
"We all know utilities make money when they build power plants," she said. "If we lose 400 megawatts, it would be foolish to build a plant and end up with excess capacity."
While welcoming the news of lower costs for solar plant energy production, Thompson said her group will be watching the action of the PUC on the filings closely.
"We don‘t have the luxury to petition the PUC to leave the grid, so who is going to be left holding the bag?" she asked. "We want the PUC to hear what the ramifications are for those small businesses that have created thousands of new jobs."
The three-year plan submitted by Nevada Power relies largely on energy purchases on the wholesale market to cover much of its energy needs because of the uncertainties about the level of demand.
As the company said in its filing: "Constructing a long-term (plan) in this environment is challenging."
The utility has proposed three alternatives to covering the energy demand over the short term.
"In all three cases the company proposes to make only the most necessary and immediate resource commitments, leaving the need for large-scale future supply decisions to a later filing (once load certainty improves)," the company said.
The preferred plan of the three cited in the filing would include the company‘s acquisition in 2017 of the 25 percent interest in the Silverhawk gas-fired generating facility owned by the Southern Nevada Water Authority of approximately 130 megawatts in addition to the power purchases.
Contact Sean Whaley at email@example.com or 775-687-3900. Follow @seanw801 on Twitter.