When the Legislature required the state’s power company to produce a certain percent of its electricity from renewable energy, a primary goal was to spur the “green energy” industry inside Nevada.
Building that industry, Republicans and Democrats have agreed, is integral to the future economic health of the state.
But NV Energy, the state’s largest electric utility, has used wind power from Wyoming, geothermal from Utah and hydropower from Idaho dams, some built more than 100 years ago, to help it meet the state’s requirement.
By one measure, NV Energy met a third of its renewable energy requirement in Southern Nevada through such short-term contracts in 2011, according to filings made by NV Energy and obtained by the Las Vegas Sun.
For comparison, solar from Nevada accounted for about 9 percent of the company’s renewable energy portfolio in Southern Nevada.
Environmentalists and renewable energy advocates say that NV Energy’s purchases, which are estimated to be as much as $100 million since 2009, have been excessive, creating a surplus of renewable credits that can be rolled over to future years.
That excess has, at least in part, dampened the renewable energy industry in Nevada and provides little real economic or environmental benefits to the state, environmental groups said.
“These out-of-state purchases are a waste of money as far as carrying out the intent of the statute,” James Philip Williamson, senior policy adviser of Western Resource Advocates, said in testimony before the Public Utilities Commission of Nevada this summer. “They do not reflect investment of a single dollar in Nevada. They have no long-term effect with respect to increasing Nevada’s use of renewable energy and decreasing our dependence on fossil-fueled resources.”
He called the purchases “cosmetic,” to make NV Energy appear to be meeting the renewable energy requirement.
The Public Utilities Commission of Nevada, which regulates NV Energy, has upheld the company’s short-term purchases, including one Wednesday with the company Pacificorp.
Except for 2009, NV Energy has met or exceeded the renewable portfolio standard set by the Legislature. The company said these short-term contracts with out-of-state energy providers are the cheapest way to meet its renewable obligation and helps it meet its obligations while Nevada projects are delayed.
Higher-cost projects would, inevitably, mean higher power bills for customers.
NV Energy officials also said the out-of-state purchases are only temporary to meet the state-mandated requirement.
“We don’t expect any out-of-state purchases after this year,” said Jennifer Schurict, spokeswoman for NV Energy.
In 1997, the Legislature first passed a “renewable portfolio standard,” which mandated that a share of the energy delivered to Nevadans come from renewable energy sources. In 2005, lawmakers ramped up the requirement — 15 percent of energy in 2011 was supposed to come from renewables, increasing to 25 percent in 2025.
The state’s renewable portfolio standard for its utilities is usually described as a requirement that a certain amount of energy comes from clean energy projects — solar, geothermal and wind. But the system is measured on credits, which the utility can earn directly through its own renewable generation, by purchasing power from in-state or out-of-state producers, or through energy-efficiency savings.
The company receives credits for each kilowatt hour of generation.
The company in 2009 fell slightly short of meeting the state’s goal for renewable energy.
In anticipation of the shortfall that year, NV Energy lobbied the Legislature to pass Assembly Bill 387, allowing it to purchase the out-of-state energy credits.
In 2011, NV Energy reported in securities and exchange filings that 19 percent of its power would come from renewables, well over the 15 percent requirement set by the Legislature. By 2015, it projects it will have 32 percent of its energy from renewables, well over the 20 percent requirement.
Environmentalists and energy advocates said that is a skewed picture of NV Energy’s compliance with the renewable energy mandate and that it could damage the potential for future clean-energy projects in Nevada.
The purchase of short-term credits “generates a cosmetic surplus” that “seriously distorts the true status of (renewable portfolio standard) compliance in future years,” Williamson testified. “This surplus has the potential to displace or defer development of new long-term renewable energy projects in Nevada.”
In other words, if the power company can meet its portfolio requirement through cheap renewable energy credits, there’s little market for Nevada-based renewable energy producers or incentive to build in-state projects.
Williamson, a former PUC auditor, was testifying on behalf of the Nevadans for Clean Affordable Reliable Energy, a coalition of environmental and industry groups.
Bobby Hollis, NV Energy’s executive for renewable energy, replied in rebuttal testimony that the company needed the short-term energy contracts to meet the renewable portfolio standard.
“Without those purchases, Nevada Power would not have met its obligations under the RPS,” he testified. “In fact, Nevada Power would have been deficient by over 25 percent in 2011 had the transactions not been entered.”
Kyle Davis, policy director for the Nevada Conservation League, said environmental groups would work to change the law during the 2013 legislative session.
“The goal of the renewable portfolio standard was to develop a robust renewable energy market in the state,” Davis said. “Using short-term energy contracts is subverting the legislative intent of the original policy.”
He added that the use of renewable energy credits “is not resulting in any pollution reduction whatsoever.”
Lydia Ball, executive director of the Clean Energy Project, which advocates for clean energy development, said the group is not opposed to some short-term credits being used by the company. But the scale, she said, is excessive.
NV Energy is buying renewable power from states without portfolio standards.
Senate Majority Leader Harry Reid has been critical of NV Energy recently, calling on it to shutter one of its older fossil-fuel plants and saying it should be more aggressive with renewable energy facilities.
His spokeswoman, Kristen Orthman, said part of his criticism is about these short-term credits.
Reid “believes that credits toward (renewable portfolio standard) compliance should come from solar, geothermal and wind energy generation projects in our state, not from old renewable generation projects that are out of state or other unrelated categories,” she said.
NV Energy warned that there could be legal problems with restricting power to in-state producers only. Schurict, the company spokeswoman, also said that with Nevada looking to be an exporter of energy to other states, like California, it would send a negative message if Nevada restricted its purchases.
Consumer advocates have also warned that the push for more renewable energy could result in higher power bills.
“This stuff is more costly than traditional energy,” said Dan Jacobsen, a manager with the Bureau of Consumer Protection. Particularly with the price of natural gas at record lows, traditional fossil fuel burning power plants are cheapest.
“People need to understand that any effort to expand renewables will create upward pressure on pricing, because renewables cost more,” he said.