Transition from fossil-fueled electricity generation to clean energy sources

In order to meet the 2050 greenhouse gas (GHG) emissions-reduction target of net-zero emissions established by SB 254, as well as realize SB 358’s 2050 goal of producing energy from zero- emissions resources, the energy sector will ultimately have to transition away from coal and natural gas-fired power generation. Today, there are two coal-fired power plants and nine natural gas plants operating in the state. Key steps toward shifting entirely to non-fossil power sources include the systematic retirement of fossil-fueled power generation and replacing that capacity with clean energy sources.

In 2013, the Nevada Legislature passed SB 123 that required Nevada Power Company (NPC), NV Energy’s Southern Nevada utility, to retire or eliminate at least 800 MW of coal-fired electric generation in Clark County under an Emission Reduction and Capacity Replacement (ERCR) Plan. More specifically, SB 123 required the utility to include a plan for the retirement or elimination of at least 300 MW of coal-fired generation capacity on or before December 31, 2014; an additional 250 MW by December 31, 2017; and an additional 250 MW by December 31, 2019. The last coal retirement was NPC’s share of the Navajo Generating Station (Arizona) in 2019.

The ERCR plan also addressed replacement resources for the coal-plant retirements. NPC was required to issue requests for proposals (RFPs) for electric generating capacity from new renewable energy facilities. The utility was granted enhanced ratemaking treatment for all power plants constructed or acquired pursuant to an ERCR plan.

While all of the required retirements and eliminations of coal-fired generating capacity have occurred pursuant to SB 123, not all of the replacement capacity has been filled. As such, NPC is still authorized to construct or acquire an additional 35 MW of utility-owned electric generating capacity from new renewable energy facilities upon a determination that the utility has satisfactorily demonstrated a need for such capacity (Docket No. 14-05003, PUCN Order).

It is important to note that SB 123 did not apply to the coal plants operated by Sierra Pacific Power Company (SPPC), NV Energy’s Northern Nevada utility. Two coal-fired power plants are still in operation in the region: the North Valmy Generating Station and the TS Power Plant. SPPC, in conjunction with Idaho Power, owns the North Valmy Generating Station. Valmy Units 1 and 2 are slated for retirement at the end of 2021 and 2025, respectively (Docket No. 20-07023, Volume 3). Newmont Gold Mines owns the TS Power Plant.

Nevada Gold Mines recently announced that it has begun the conversion of the TS Power Plant to a dual-fuel facility, allowing it to also generate power from natural gas. Additionally, Nevada Gold Energy also filed with the Nevada Public Utilities Commission (PUCN) an application under the provisions of the Utility Environmental Protection Act for three permits to construct the TS Solar Project. This project is a 200 MW solar PV electric generating facility, a 120 kV on-site substation, a 120 kV generation-tie line, and an optional battery storage system. These solar facilities will be located adjacent to the TS Power Plant. The PUCN granted the application subject to several conditions on August 28, 2020 (Docket No. 20-06014, PUCN Order).

There are no applications pending with the PUCN for new fossil-fueled generation. More-aggressive policies to ensure a transition to 100% clean energy production, implicit in a net-zero GHG emissions target by 2050, will need to be considered moving forward. Already, NV Energy has filed a study regarding achieving full decarbonization in response to a request from the PUCN.

Nevada’s experience with SB 123 and long-term commitment to a strong renewable portfolio standard (RPS) demonstrate the state is well on its way replacing remaining fossil generating capacity with clean energy resources. What is needed now is a long-term transition from the remaining fossil generation to clean energy, prioritizing retirement of old, inefficient gas plants located in population centers. With the 2050 100% RPS goal as the guide post, policy mechanisms such as a clean energy standard, securitization (allowing customer-backed bonds to pay off stranded asset costs), and alternative ratemaking should be considered.

Transmission upgrades facilitating better market integration and expanded access to diverse resources will be needed for this transition and will promote reliability and cost containment for customers. As battery and other storage systems evolve and deployment expands, these technologies will assist with load following and ramping, services currently provided by the natural gas fleet.

Greenhouse Gas Implications

Under Nevada’s current RPS, GHG emissions from Nevada’s electricity generation sector would remain above 10 million metric tons CO2e through 2039. However, the zero-emissions target in 2050 necessitates the transition from fossil-fueled power in Nevada. 

The TS Power and North Valmy coal-fired electric generating units emitted approximately 1,073,958 and 1,645,434 metric tons of carbon dioxide in 2018, respectively. Together, that is equivalent to annual emissions from 580,000 passenger cars. Clearly, accelerating the retirement of remaining coal-fired electric generating units will reduce GHG emissions in Nevada. However, careful consideration of the timing and implementation of the phase out is critical to maintain the bulk transmission systems reliability.

Currently, the North Valmy and TS Power coal-fired electric generating units provide critical voltage support, on a seasonal basis, to NV Energy’s transmission system in Northern Nevada. To maintain voltage support on the transmission system, these plants may need to be replaced with other electric generating resources. Once the replacement generation is known or the utility provides an alternative means to ensure reliable service, it will be easier to provide a more-accurate GHG emissions-reduction estimate. 

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Climate Justice

During the Renewable Energy listening session several Nevadans mentioned that low-income communities are being affected by the emissions from fossil-fueled generation and stated that renewable energy should replace those generating facilities.

Although natural gas-fired power plants emit fewer GHGs per unit of electricity relative to a coal-fired facility, there are still negative impacts to the health of nearby communities posed by natural gas. Like coal, burning natural gas releases particulates, as well as nitrogen oxides (NOx) and sulphur dioxide (SO2), all of which can diminish air quality and compromise public health. Further, when considering the supply chain of natural gas, there is evidence of negative health outcomes (e.g., Currie et al., 2017) associated with hydraulic fracturing—a process used to extract natural gas.

The pollutants associated with burning coal have a more-significant effect on the health of communities of color (Thind et al., 2019). Children living near coal-fired power plants suffer higher rates of adverse health outcomes (Amster & Levy, 2019). More generally, health impacts of climate change driven by GHG emissions disproportionately impact vulnerable populations (NCA, 2018). Vulnerable populations have the most to gain from eliminating fossil-fueled generation and reducing GHG emissions.

While NV Energyhas not conducted an economic analysis of the total cost that ratepayers may pay for phasing out all fossil-fueled generation, the company did conduct a study on the Effective Load Carrying Capability (ELCC) of Renewable and Storage Resources, which was filed in NV Energy’s most recent fourth amendment to its integrated resource plan (IRP) (Docket No. 20-07023, Vol. 8, ECON-5). A separate analysis found that Nevada can move entirely off fossil fuels while keeping energy bills low (Evolved Energy, 2020).

Accelerating the retirement of Valmy Units 1 (currently slated at 2021 in the IRP, but being depreciated at a 2023 retirement) and 2 (currently slated at 2025) could possibly result in a stranded asset that SPPC’s ratepayers would pay for even though the asset was no longer in use. However, when considering the costs that would be required to upgrade the facility to meet federal Best Available Control Technology (BACT) requirements and extend the life of the asset, not to mention current coal plant operating costs, earlier retirement with replacement by clean resources may well be the less-expensive option. Ultimately however, the replacement costs are currently unknown given that the utility has not proposed any specific replacement capacity for these units.

Simply, the impact to customers’ energy bills, and the implications for low-income households, is unclear, although the health benefits are indisputable. Given the long-term trajectory of clean energy resources becoming cheaper, the increasing expense of coal plant operation, and the potential price volatility of natural gas as a fuel source, a long-term commitment to clean energy capacity replacement is financially prudent.

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Integrated Economic Assessment

The PUCN is responsible for implementing any policies related to power plant retirements and modest resources may be required to support any additional administrative demands. 

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Implementation Feasibility

Nevada regulations already allow for and contemplate carbon reduction. In addition to these regulations, 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(5) also states that the PUCN must give preference to sources of supply that provide levels of service that are adequate and reliable. NRS 704.746(6) provides that the PUCN shall adopt regulations that determine the level of preference to be given to those measures and sources of supply. The Nevada Legislature has stated the goal of achieving by 2050 zero carbon emissions from electricity providers (NRS 704.7820(2)).

In addition to the PUCN’s broad authority over integrated resource planning, the PUCN would also call attention to SB 300, which requires the PUCN to adopt regulations allowing an electric utility to apply for approval of an alternative ratemaking plan. Alternative ratemaking mechanisms represent a shift from the traditional cost-of-service ratemaking that the PUCN and most other state utility commissions have applied to electric utilities for decades. The electric utility industry is changing rapidly, and as a result, regulators across the country are evaluating whether changes in ratemaking are required to align regulatory mechanisms with those industry changes. SB 300 includes a menu of possible alternative ratemaking mechanisms, including, but not limited to, performance-based rates, subscription-based pricing, formula rates, decoupling, earnings sharing mechanisms, and multiyear rate plans. 

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