Updated August 15, 2022 - 10:40 am
A newly published study shows Nevada could get billions in benefits and thousands in jobs if the state joins a western energy collective.
If all 11 states in the West join an energy collective called a regional transmission organization or independent system operator, that could boost the economy by enticing businesses to the region. according to the study by Advanced Energy Economy.
Seven RTOs are already in operation in the United States covering areas in 35 states, including one in California that includes part of Nye County.
Multiple states have seen a push in the past year to set up an RTO. Both Colorado and Nevada passed legislation requiring the electric utilities in each state to join an RTO by 2030.
The Nevada legislation, Senate Bill 448, is the “most cost-effective way” for the state to meet its future energy and decarbonization goals, according to the legislation’s chief sponsor, state Sen. Chris Brooks.
“It would organize and lower the costs of exporting energy out of Nevada, to our neighboring states and neighboring utilities,” Brooks said. “(With an RTO) we have everything to gain in the state and nothing to lose.”
The economic impact study, released in July, shows how millions could be gained if the 11 western states — Nevada, Arizona, California, Colorado, Idaho, Montana, New Mexico, Oregon, Utah, Washington and Wyoming — entered into a RTO that could net thousands of jobs and billions in taxes. Advanced Energy Economy, which produced the study, is a group of businesses dedicated to enabling “rapid growth of advanced energy businesses,” according to its website.
The economic impact study claims that such a regionwide commitment to energy sharing could increase the region’s total gross domestic product by $18.8 billion to $79.2 billion per year depending on growth, add between 159,000 to 657,000 permanent jobs and save $2 billion annually in energy bills for the region by 2030.
Operational costs for a RTO are estimated to be $116 million in 2025 and grow to $162 million by 2035 as the demand for electricity in the region is expected to grow.
It also estimates that governments in the West could get $619 million to $2.4 billion in annual tax revenues based on the increased economic growth that could come with an RTO. This study looks at the benefits of the western region RTO and doesn’t include the specific benefits Nevada could get from a RTO; nevertheless, state officials were excited to share the information in the AEE study.
Gov. Steve Sisolak has advocated and tweeted in support for an RTO after the AEE released its economic impact study.
“A Western RTO can help expand Nevada’s ample clean energy resources, save money and create jobs for Nevadans in the process. It’s a win all around,” wrote Mehgin Delaney, the director of communications for the governor, in an email to the Review-Journal.
As part of SB448 Sisolak has appointed 19 members to the Regional Transmission Coordination Task Force, which will look into at what it would mean for Nevada to join an RTO and brief lawmakers on their findings sometime in November, Brooks said.
The study cites that an RTO would reduce the cost of electricity and therefore entice businesses, especially those that use a large amount of electricity, to the West. It found that the main industries that would benefit from an RTO are construction, food and beverage processing facilities and technology-focused processing/manufacturing operations.
Although an RTO would only improve the transmission of energy, the economic gains associated with an RTO are a result of the fragmented nature of energy sharing in the West, according to Chris Hansen, the Colorado state senator who sponsored similar RTO legislation as Nevada’s.
“The West starts off in a situation where we essentially have 38 different grids operating in the western states, as you can imagine, that many subgrids leads to lots of inefficiency,” Hansen said.
Since each separate grid can negotiate its own price for electricity and the price of electricity can fluctuate greatly depending on demand. During summer afternoons the hourly electric rate for homes in Southern Nevada supplied by NV Energy is over 400 percent from the hourly rates in the winter.
Having an RTO could allow for areas with high demand to get access to a wider range of energy resources, according to David Bobzien, director of the Nevada Governor’s Office of Energy. He points to 2015 when NV Energy joined the Energy Imbalance Market, a 10-state organization that allows energy to be sold in real time and that has saved ratepayers a cumulative $152 million in the last seven years.
NV Energy, the state’s largest electric utility, has thrown its support behind joining an RTO.
“We believe a western regional transmission organization could provide a wide range of benefits including clean energy growth, cost savings, and improved reliability throughout the west. NV Energy is actively participating in or monitoring several regional coordination efforts in the West,” Jennifer Schuricht, NV Energy director of corporate communications, wrote in an email to the Review-Journal.
Improving energy costs in the West could be a steep goal because of the 11 states that would be in the proposed RTO, 10 already have electric rates under the national rate of 10.59 cents/kilowatt-hour with California being the lone exception, according to the U.S. Energy Information Administration. The average rate for these 11 states is 9.74 cents/kWh and Nevada’s average cost is 8.33 cents/kWh.
The economic study only looked at the outcomes if all 11 states joined the RTO, but it’s unknown if all the electric utilities in the states will join. Brooks noted that not every state has passed similar legislation mandating RTO membership by a certain year like Nevada did with SB448.
But even if not every state moves forward with an RTO, Nevada will still move forward with joining a regionwide trade organization, according to Brooks.
A major step on this front are two projects called Greenlink West and Greenlink North being put forward by the state’s largest electric utility, NV Energy, Brooks said. These two projects will install more than 500 miles of transmission lines in the state to create a circular network of transmission connecting the areas of Las Vegas, Reno and Ely.
“You need transmission capacity, the actual wires with capacity on them to connect all of those dots, but you also need an organized market in place,” Brooks said. “And you need an organized grid operator in place to help us efficiently move the energy where it’s available.”
An RTO would help organize that transfer of energy and also allow for a more steady stream of renewable energy brought to energy markets in the West, Brooks said. A report commissioned by the Department of Energy stated that an RTO would allow states to “optimize” renewable energy because it can use the renewable energy where it’s being produced. For example, if it’s cloudy in Nevada but sunny in California, Las Vegas could still get solar energy transferred in from California under an RTO.
“The sun is setting in eastern Utah, and the air conditioners are coming on in California. … How do you move all that electricity?” said Brooks. “You need transmission capacity, the actual wires with capacity on them to connect all of those sources, but you also need an organized market in place.”
The study estimates that anywhere from 844 to 4,400 megawatts of additional renewable energy could be added in the West if an RTO is formed. Wind and solar would be the main forms of renewable energy that could be used.
The southwest U.S. already has high potential for solar and wind projects are often placed in remote places and an RTO encourages more remote energy projects because of the emphasis put on transmission lines in an RTO.
There are many low-end and high-end estimates in the study that give a range of options if a western RTO is formed, so the potential impact of an RTO is unclear. Low-end estimates are based on firms and businesses having a minimal response to any rate changes that happen in an RTO while high-end impacts are based on if businesses are able to utilize the potential savings provided by an RTO.
Collaboration in West
Both Brooks and Bobzien are optimistic about the effects an RTO could have on Nevada and the other 10 states joining a regionwide RTO.
“We all have different politics and all have different goals,” said Brooks. “But we all have common ground, and the common denominator is we all want cheap, reliable, clean electricity.”
Most states in the West have clean energy goals to reach by 2030 to hit renewable standards and greenhouse gas emission cuts; Wyoming and Idaho are the only states without these goals, according to the National Conference of State Legislatures. Nevada has its goal to get 50 percent renewable energy by 2030, while other states have more aggressive goals, such as California having a 2030 target of 85 percent renewable energy.
Entering into RTO can help each state meet its various climate and energy goals, says Bobzien and each state is taking their own approach to a region-wide RTO. Some states the electric utilities are driving the conversation while in others state governments are leading the conversation.
“I think what is important is that all the states approach the conversation,” Bobzien said.
But while Nevada is pursuing an RTO there are still many details to work out and a lot of conversations still to be had, according to Bobzien.
“The details of a future market are incredibly important, and the main challenge for Nevada and our energy partners lies in arriving at an optimal design,” he said.
Although a majority of the estimates and projections in the economic impact study are based on what happens if an RTO is formed by 2030, Brooks and Hansen don’t think the infrastructure and cooperation will allow for a regionwide RTO by then. But both indicated they believe the work around the RTO will continue in the next eight years and that studies like the one by Advanced Energy Economy push the conversation forward.
“It’s hard to say when (a western RTO) is going to happen, because I don’t think it’s going to be we flip a switch, and, ‘Hey, we’re in an RTO,’ ” Brooks said. “I think it’s gonna slowly evolve into what that RTO will look like.”
This story has been updated to correctly reflect the energy collective’s name.