Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards
Unlike Texas and Massachusetts, Nevada ultimately decided not to pursue electricity restructuring, shaken by the experience of neighboring California. However, energy issues have retained high saliency in Nevada throughout the last decade. As the state's population and economy have expanded, so have electricity demand and concern about supply reliability. As the exploration of energy alternatives has intensified, Nevada officials have increasingly concluded that they may well possess an unusually diverse and plentiful set of renewable energy supplies. And as the federal government continues to press the case that all of the nation's high-level radioactive waste should be transferred to a repository in the southern part of the state at Yucca Mountain, a unifying theme in Nevada politics has been taking every conceivable step to demonstrate to the nation that there are viable alternatives to nuclear energy (Rabe 2003).
These factors have converged to make renewable energy, and RPS legislation, a staple in every Nevada legislative session since 1997. In four of the last five sessions (1997, 2001, 2003, 2005), Nevada has overwhelmingly passed RPS legislation. Building on a fairly modest start in 1997, Nevada has continually expanded its RPS and has increasingly come to depict itself as an emerging national leader in the generation of a wide range of renewable energy sources. In its most recent iteration, signed into law by Republican Governor Kenny Guinn in June 2005, Nevada elected to "up the bar" again. The state now mandates that 20 percent of Nevada's electricity come from renewable sources by 2015.
Few anticipated such an ambitious target in 1997 when the legislature enacted an RPS that called for a very modest set of incremental increases in renewable energy, reaching one percent by 2009 (Nevada Assembly Bill 366, 1997). The primary driver behind that legislation was an effort to promote a large solar facility near the Nevada Test Site, which is best known as a former weapons testing facility and has been proposed periodically as a transitional waste transfer site prior to the planned opening of Yucca Mountain. Indeed, the RPS called for "at least half" of the RPS-mandated energy to come from solar sources. The proposed project collapsed for financial reasons and yet the framework for RPS expansion was established.
Four years later, during the California electricity crisis that prompted that state to desperately attempt to increase imports of energy from its neighbors, the Nevada legislature repealed the earlier bill and replaced it with a far more expansive and ambitious RPS, including a markedly higher standard that reached 15 percent of electricity from renewable sources by 2013. (Nevada Senate Bill 372, 2001). Many important provisions were modeled after the RPS experience in Texas, including the renewable energy credit system and a provision to confine eligible electricity to that generated within state boundaries or imported through a dedicated transmission line. "We looked primarily to Texas as a state that had a large RPS and was fairly successful," noted one former state official. "We took some aspects of the Texas law and incorporated it to some degree into the Nevada bill. But we also realized that we had to tailor our RPS to our own resource situation." Unlike Texas, Nevada decided to retain a solar carve-out, although reducing the level from solar to five percent from the higher level established in 1997. And whereas Texas quickly realized that it was likely to derive most of its renewables from one source (wind) in one part of the state (West Texas), Nevada prepared for a much more diverse set of energy sources (including geothermal, wind, solar, and biomass, among others) from virtually every corner of the state.
Over the next four years, however, Nevada would return its RPS to the legislative shop for further modification, reflecting broad consensus about the potential for renewable expansion and its possible impact on economic development. Senator Randolph Townsend (R-Washoe County), Chair of the Senate Committee on Commerce and Labor, proved to be a dominant figure in the laws enacted in 2001, 2003, and 2005. He retained a fairly broad body of support in both chambers and in the executive branch. As in Texas, the primary drivers behind the RPS continued to be energy diversification and economic development, although environmental benefits have become increasingly salient as concerns about air quality and nuclear waste storage persist. Anticipated greenhouse gas reductions have not figured prominently, although state officials have become increasingly aware of this issue as the anticipated levels of renewables have climbed.
Nevada's 2003 revisions provided a new boost for solar energy, through development of a REC bonus or "multiplier" for electricity that is generated from the sun as opposed to other sources. This multiplier provides a credit value of 2.4 (as opposed to 1.0) for each kilowatt hour of electricity provided by a solar photovoltaic system, as long as it was installed on a private residence and at least half of the electricity generated by the system was used on the premises. At the same time, the state decided to add electricity generated by the use of a "reverse polymerization" process on used tires, but set the credit at only 0.7 due to the amount of energy that must be used in this process (Nevada Assembly Bill 296, 2003). Two years later, Nevada literally transformed its renewable energy credits into "portfolio energy credits" by giving RPS credit to approved energy efficiency activities. According to the 2005 legislation, "a provider is entitled to one portfolio energy credit for each kilowatt-hour of electricity that the provider generates, acquires or saves from a portfolio energy system or efficiency measure" (Nevada Assembly Bill 385 Section 22, 2005). However, the total amount of credits that an electricity supplier can derive from energy efficiency is capped at 25 percent and at least half of any efficiency initiatives approved for credits must provide energy savings on residential sites. To date, only Nevada, Pennsylvania, and Hawaii have formally included energy efficiency in their RPSs, raising a number of complex implementation concerns.
The repeated modifications of the Nevada RPS have given the Public Utility Commission of Nevada (PUCN) a series of implementation challenges, involving a massive set of rule-making procedures that have continued into 2006. Thus far, one of the biggest challenges in implementation has been the financial woes of the state's two primary electricity suppliers, Sierra Pacific and Nevada Power. Their suspect credit has given pause to potential renewable energy investors who would need to enter into long-term contracts with the utilities in order to meet RPS requirements. At the same time, the pace of PUCN approval of renewable energy suppliers for REC eligibility has intensified in recent years, including some significant new projects for geothermal, solar, and wind, leaving Nevada officials increasingly sanguine about the prospect of meeting each increase in the renewable standard (PUCN, 2005).
All references are cited in the report, which can be downloaded here.
