On New Year's Eve, Nevadans lost power as forecasted rain unexpectedly arrived in the form of a snowstorm that caused widespread outages. Heavy snow took out power lines and left tens of thousands in northern Nevada without power and in the cold. This type of event is not uncommon, but in today’s modern and technology-dependent world, keeping the lights and heat on is more and more of an imperative.
NV Energy’s 4th Integrated Resource Plan (IRP) amendment, which will be heard at the Public Utilities Commission of Nevada on February 16th, proposes to add another 400MW combustion turbine gas plant – or “peaker plant” – in an attempt to address growing concerns about system reliability. Though adding more generation to the grid may seem like a reasonable fix at first, upon closer inspection it becomes clear that more gas may not be the best solution. If storms threaten the grid’s poles and wires, new gas electricity generation won’t find its way to customers. In extreme heat or cold, gas plants aren’t always dependable. And for new seasonal peak demand, other resources – like energy storage, energy efficiency, and demand response – can do the job better and more cost-effectively.
Peaker plants are so named because they are meant to run as back up when there are seasonal peaks in demand. These peaks are often only a few hundred hours of the year – or sometimes even less. The rest of the time, the plant is meant to sit idle and unused. If this plan is approved, Nevadans will be paying off the significant capital costs of a plant that is barely running well into the future.
In addition to capital costs, gas plants run on an expensive and volatile fossil fuel. NV Energy is already heavily reliant on gas, getting about 72% of its energy from out-of-state natural gas sources. By adding more to the system, it is only increasing its dependence on – and its customers’ exposure to – an unstable market driven by geopolitics. And the cost of gas is already driving prices up – NV Energy has said itself that recent rate increases are due to the high cost of gas.
Clean energy resources either run on home-grown energy resources or reduce the need for fuel-based electricity, and they are rapidly becoming more and more cost-effective in comparison. This will only be more apparent in the future given the unprecedented levels of federal investment in advanced energy technologies from the Inflation Reduction Act. This funding – especially for new energy storage systems, which can perform similarly to the proposed peaker plant – needs to be factored into any analyses to determine the most cost-effective resources for customers today and for the grid of the future.
And rather than investing millions of dollars for a few peak hours of the year, it is a no brainer to invest in much more cost-effective demand-side solutions that prevent those peaks from happening in the first place. The cheapest kilowatt-hour is the one you don’t use, and the cheapest power plant is the one you don’t have to build.
Local, distributed energy resources that can be installed right in people’s homes are affordable, resilient, and effective. These include solar and storage that can keep the lights on even when the grid is down, as well as energy efficiency measures that lower demand during times that the grid is most likely to burn out. Efficiency measures as basic as insulation can keep people warm in their homes when the worst does happen. But NV Energy is falling behind its peers. The American Council for an Energy Efficient Economy found that in 2018, NV Energy only saved 0.56% of retail sales with its energy efficiency programs in Southern Nevada. Meanwhile, its neighbors, Xcel Colorado and SRP in Arizona, saved 1.45% and 2.05%, respectively. That’s almost three and four times as much energy efficiency.
What’s more, energy efficiency measures such as high-efficiency lighting and appliances, home insulation, and smart thermostats have the added benefit of permanently reducing monthly electric bills. So, doubling down on efficiency as a solution to resource adequacy challenges not only avoids charging ratepayer hundreds of millions of dollars for a new gas plant, it actually lowers their current and future bills.
There are several other methods of responding to those demand spikes and balancing the grid in real time, including demand response (DR) programs that compensate participants for lowering their electricity demand during critical moments. This optimizes the grid for all users without having to turn on the dirtiest and most expensive fossil fuel generation, sacrifice home comfort, or resort to rolling blackouts. These programs have a proven track record of success. For example, Texas expanded its industrial demand response program, the Emergency Response Service after the program helped save the grid when it was on the brink of outages last summer by reducing demand by 1,000 MW. Similarly, New York City expanded its participation in the Consolidated Edison demand response program following a sweltering summer last year in which it was able to earn over $100 million in revenue to reduce demand by 115 MW. Demand response measures such as these can be set up and implemented in Nevada much faster – and for way less money – than building a whole new gas plant.
NV Energy itself admits that the option its has has chosen is not least cost, claiming the plan instead focuses on addressing resource adequacy. If its goal is solely to increase generation, NV Energy has certainly done so. However, the real goal should be to keep the power on for Nevadans at the lowest reasonable cost. In developing this plan, NV Energy has ignored the other crucial side of the equation – demand. Evaluating measures to reduce demand can reveal better, least-cost solutions that also provide a different and much needed type of reliability to real people in real grid events.
And finally, NV Energy forgot one glaring consideration in its analysis: regional electricity markets. As Nevada becomes better connected with other power providers across the region, as it is required to do by law (Senate Bill 448 of 2021), it will be able to tap into regional resources – like windpower in Wyoming and hydropower in the Pacific Northwest. NV Energy is actively participating in dialogues across the region to craft market solutions that works for Nevada and improve resource adequacy at lower cost to in-state ratepayers. With access to these regional resources and programs, this new gas plant may run even less than assumed in this filing.
NV Energy might have very well come to many of these conclusions itself in its normal IRP process. Integrated resource plans have been required from utilities for decades to ensure they meet forecasted energy demand in the most cost-effective way. To ensure sound long-term planning, utilities model their generation, transmission, and distribution systems together, typically looking out 20 years with a comprehensive update every three. But, with this filing, NV Energy is amending its big plan for the fourth time in less than two years. The amendment process does not require the utility to compare all options like the full IRP analysis and updates do. Since not all alternatives are considered, the planning is not robust, and the most suitable options can be overlooked.
Even worse, NV Energy has asked for expedited approval of this new gas plant, unfairly forcing a decision from the Commission on a compressed timeline which limits stakeholder ability to explore – and to challenge – whether or not this is really the best and lowest-cost option for ratepayers. Nevada needs sound long- and short-term planning – and a comprehensive study of the system’s reliability and resilience needs – to weather the storms to come and meet the challenges and opportunities of a modern and clean electricity grid.
Nevadans deserve better than just-in-time planning. There are great locally sourced energy options on the table, and resorting to new fossil fuel resources without a comprehensive comparison of clean alternatives is a step backwards for a state that has otherwise made great progress over the last decade.