REQUIRE GREENHOUSE GAS REDUCTION PLANS AND PRIORITIZE DECARBONIZATION IN UTILITY INTEGRATED RESOURCE PLANS

Passed in the 2019 legislative session, SB 358 set the goal for providers of electric service to use a net-zero carbon emissions resource portfolio to meet their customers’ electricity needs by 2050. Requiring greenhouse gas (GHG) reduction plans and prioritizing decarbonization in utility integrated resource plans (IRPs) would further progress toward this goal.

Nevada requires electric utilities to file an IRP with the Nevada Public Utilities Commission (PUCN) on or before June 1 every three years. The IRP must set forth a three-year action plan to meet demand for electric service in an efficient, reliable, and sustainable manner over a 20-year planning period. Among other requirements, the PUCN must give preference to the measures and sources of supply that provide the greatest economic and environmental benefits to the state.

An electric utility’s resource plan must include several different components, including a forecast of future load, a demand-side plan, a supply-side plan, a financial plan, an energy supply plan, and an action plan for next steps in the utility’s resource procurement or demand-side resources.

Nevada’s regulations already require environmental issues be addressed in a supply-side plan. Every option for supply must include an examination of the environmental impacts, taking into account the best available technologies and the environmental benefit of renewable resources. Options for lower carbon intensity must be assessed, and the plan must include at least one alternative plan of low carbon intensity (referred to as the low-carbon case). The alternative low-carbon plan must account for the generation or acquisition of an amount of renewable energy greater than required by the RPS, changes to the utility’s existing fleet of resources for the generation of power, and the application of technology that would significantly reduce emissions of carbon. Also, the environmental costs to Nevada associated with operating and maintaining a supply plan must be quantified for air emissions, water and land use, and the social cost of carbon.

Currently, natural gas-fired generating units can be used as placeholders in the IRP in the electric utility’s supply-side plan. These are only used to permit analysis of different supply-side options and maintain consistency between placeholders over multiple IRP cases so that assumptions about the future do not influence the selection of resources in a supply-side plan. To be clear, the utility is not seeking PUCN authority to construct the natural gas-fired generating units that serve as placeholders. Using natural gas-fired generating unit placeholders allows the production cost modeling software to complete its algorithm over the requisite 20-year analysis period.

However, eliminating the ability to use natural gas as placeholders and requiring the electric utility to use placeholders that more closely model Nevada’s GHG emissions-reduction goals in its IRP would provide valuable information regarding grid reliability in order to effectively map a path toward net-zero emissions without compromising power delivery.

Eliminating natural gas-fired generating unit placeholders would be consistent with the PUCN’s recent findings in NV Energy’s most recent triennial IRP:

These [natural gas-fired unit] placeholders demonstrate an increase in gas generation and a decrease in renewable generation over the resource plan period. Although NV Energy is not seeking approval for any of these resources in this Docket and generally keeps placeholders identical among various Plans to provide a fair and more accurate comparison, the [PUCN] encourages NV Energy to select placeholders in future resource plan filings that more accurately reflect the general policy of the State toward more renewable generation and energy efficiency as well as NV Energy’s own aspirational goals of supplying an ever-greater percentage of energy from renewable sources.

Greenhouse Gas Implications

The PUCN is required to give preference to electricity supply portfolios that reduce customer exposure to the potential impacts of GHG emissions and it considers the social cost of carbon. For these reasons, prioritizing decarbonization in IRP proceedings could lead to GHG emissions reductions and benefit Nevada’s communities. 

However, without additional production cost modeling by the electric utility to determine the electric generation dispatch needed to meet forecasted electricity demands, the amount of GHG emissions reductions that are possible from decarbonization in Nevada is unknown. This uncertainty is a function of the utility’s current production cost modeling software, PROMOD, which does not solve for lowest GHG emissions in determining the best resources for supply-side options. It also cannot model battery storage. PROMOD solves for a balance of supply and demand, particularly looking for the lowest-cost electric generation dispatch. 

In order to understand the effects of broad-scale decarbonization, a different approach would be necessary. Recently, NV Energy filed a study for achieving full decarbonization with the PUCN.

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Climate Justice

Since the natural gas-fired electric generating units are placeholders in the IRP used primarily for the purpose of modeling, it is not expected that these natural gas-fired electric generating units will be constructed and operated. Therefore, moving away from natural gas-fired units as placeholders does not impact low-income communities, communities of color, Indigenous peoples, and other vulnerable populations. 

If fossil-fueled generating units are retired early as a result of achieving net-zero emissions, ratepayers could bear the stranded asset costs associated with their early, as well as the costs of the new replacement renewable energy resources. This could potentially burden low-income households. 

However, exploring net-zero emissions scenarios, prioritizing decarbonization in the IRP, and requiring plans for achieving net-zero emissions in the IRP will allow for a broader understanding of how the power sector might evolve in the future in a more-transparent manner. This would allow additional time to identify any implications for rates in order to identify creative solutions. It would also ensure that accessibility of renewable energy for all Nevada’s communities is considered. 

As temperatures continue to rise, cooling degree days will also increase along with power demand (NCA, 2018). Consequently, ensuring that low-income communities have access to air conditioning, and that power is affordable, will reduce the exposure of vulnerable communities to extreme heat—particularly in Southern Nevada. NV Energy does have programs in place to support low-income households. However, several states are moving toward more-aggressive measures requiring utilities to address equity and social justice concerns across all aspects of operations and planning. 

For example, in 2019 the State of Washington adopted the Clean Energy Transformation Act. Beyond establishing a 100% by 2045 RPS, the legislation also binds electric utilities to consider equity issues across all aspects of operations and planning as part of the IRP process. Oregon is taking similar steps. In response to legislation passed in 2017 directing the PUC to identify ways to navigate a changing electricity sector, the Oregon PUC issued a report indicating that the public’s top priorities for the PUC are climate change and equity. The report provides a roadmap for the PUC to address these two issues, including specific recommendations to bolster issues of environmental justice and affordability. This was followed by (failed) legislation in 2019 and 2020, intended to put the roadmap in action by expanding the authority of the PUC. 

Nevada could consider requiring utilities to integrate more-comprehensive equity considerations in the IRP in order to address social justice issues and protect the same communities that are disproportionately impacted by climate change.

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Integrated Economic Assessment

Implementing and administering these options would necessitate additional resources based on similar policies adopted in other states. 

In California, SB 350 required the state’s PUC to “implement a process for integrated resource planning that will ensure that load-serving entities (LSEs) meet targets that allow the electricity sector to contribute to California’s economy-wide greenhouse gas emissions-reduction goals.” The state supports the administration with ongoing annual costs of $1.65 million for personnel services and $2.3 million in operating expenses for the PUC to fulfill the requirements of the bill.

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Implementation Feasibility

As noted above, the Nevada Legislature passed SB 358 in 2019, setting “a goal of achieving by 2050 an amount of energy production from zero carbon dioxide emission sources that is equal to the total amount of electricity sold by providers of electric service” (NRS 704.7820).  

Minimal legal challenges exist to prioritizing decarbonization in IRP proceedings as part of, or in addition to, the low-carbon base case. 

The PUCN has the authority to “prescribe the contents” of the IRP, including determining “the best combination of sources of supply to meet the demands or the best method to reduce them” (NRS 704.741(2)(a)(2)). NRS 704.746(5) requires that the PUCN give preference to measures and sources of supply that provide the greatest economic and environmental benefits to the state, among other requirements. NRS 704.746(6) says that the PUCN shall adopt regulations that determine the level of preference to be given to those measures and sources of supply, and may adopt regulations that prioritize decarbonization. In fact, it can be argued that the regulations already require some degree of prioritizing decarbonization of the utility’s generating fleet. Specifically, NAC 704.9355(1)(e) states that options for lower carbon intensity must be examined. The IRP regulations also require a robust environmental review of both new and existing resources. 

However, any decarbonization policy must be balanced with reliability concerns, as NRS 704.746(5) also states that the PUCN must give preference to sources of supply that provide levels of service that are adequate and reliable. The PUCN must work with the electric utility to ensure that making decarbonization a priority in IRP proceedings does not cause any reliability concerns. Even though decarbonization and reliability concerns must be balanced, the legal challenges to a policy that prioritizes decarbonization in IRP proceedings are minimal. 

Moving away from using natural gas-fired generating units as placeholders should be straightforward and will not require any changes to statute or regulation. Currently, there is nothing in statute or regulation regarding placeholders. A mandate to use placeholders other than for natural gas-fired generating units can be accomplished via regulation or on a case-by-case basis in a PUCN order. In fact, as noted above, the PUCN has already stated a preference for the utility to select placeholders in future resource plan filings that more accurately reflect the general policy of the state toward more renewable generation and energy efficiency. 

To the extent that the PUCN believes a specific regulation governing the placeholders used in IRP is appropriate, NRS 704.746 provides the PUCN with a pathway for adoption of such regulations. As noted above, NRS 704.746(5) requires that the PUCN give preference to measures and sources of supply that provide the greatest economic and environmental benefits to the state, among other requirements. Furthermore, NRS 704.746(6) says that the PUCN shall adopt regulations that determine the level of preference to be given to those measures and sources of supply. The PUCN, in adopting regulations regarding the preference to be given to various sources of supply, may adopt regulations that mandate renewable placeholders, for example, as a means of evaluating the supply resources proposed by the utility. 

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