Total Installed Megawatts: 320 MW
The Nevada CHP Landscape
Nevada’s electrical and natural gas services are primarily provided by investor-owned utility companies (IOUs), with additional services provided by rural cooperatives. The major IOUs – providing a combined total of over 90% of the electricity used in the state – are Nevada Power Company and Sierra Pacific Power Company. These two companies merged in 1999 and now are jointly held by Sierra Pacific Resources. Natural gas is supplied in Nevada by Southwest Gas Company and Sierra Pacific Power Company.
Nevada currently has approximately 320 MW of installed CHP capacity, which contributes to 7% of the state’s electricity generation. Although only a fraction of the population and economy of the Pacific region, Nevada has significant opportunities for reducing greenhouse gas emissions through the deployment of CHP in their buildings sector, particularly in the growing hospitality industry.
CHP systems in the western states of California, Hawaii, Nevada, and Arizona are collectively estimated to be saving more than 370 trillion BTUs of fuel and 50 billion tons of CO2 emissions per year, compared with the conventional generation they have replaced (Hedman, 2006).
Summary and Status of CHP Policy Issues in Nevada
Important policy issues for CHP include utility interconnection procedures, utility rate structures including “standby charges” and “exit fees,” and economic incentive measures. An overview of these CHP/DG policy areas for the Nevada market is provided below.
Grid Access and Interconnection Rules -- On December 17, 2003, the Public Utilities Commission of Nevada (PUCN) adopted interconnection rules – known as Rule 15 -- for customers of Nevada Power and Sierra Pacific Power. The provisions of Rule 15 are consistent with California’s interconnection standards vii (Rule 21), IEEE 1547 rules, and the model interconnection agreement of the National Association of Regulatory Utility Commissioners (NARUC). Rule 15 specifies interconnection procedures for the DG systems of up to 20 MW in size. Somewhat controversially, Rule 15 allows utilities to charge customer-generators for past fuel and purchased-power expenses in their tariffs (DSIRE, 2007). The December 2003 agreement also revised Nevada’s net metering standards for renewable energy systems including biomass-powered ones. The rules revised the net-metering program to allow systems of up to 150 kW to be net metered, up from a previous limitation of 10 kW (DSIRE, 2007a).
Market Incentives for CHP System Installation - In contrast to states like California, which have been actively promoting the installation of CHP systems through incentive programs, Nevada does not yet have clear plans for promoting CHP technology. Nevertheless, the state has taken steps toward working with industry and recognizes the need to change interconnection rules so that distributed generation can be better accommodated (NSOE, 2005; ACEEE, 2006). Nevada does not currently offer funding or rate class exemptions for CHP. However, they have established environmental regulations and net metering standards, which now encourage the implementation of a wide range of distributed power sources, and could potentially include CHP in the future.
Energy Portfolio Standard - As part of its restructuring efforts, Nevada established its Energy Portfolio Standard (EPS) in 1997. The PUCN administers the EPS and requires the two IOUs to obtain a certain fraction of their energy from renewable sources. The EPS was later revised in 2001 to require a scheduled portfolio increase of 2% every two years, hitting a maximum of 15% in 2013. In 2005, the EPS was amended once again under Assembly Bill 3 (AB 3). Increases were raised to 3% every two years, reaching a maximum of 20% in 2015. The bill allows for the EPS to be met through renewable energy generation or credits and savings from efficiency measures. Also, AB 3 requires that at least 5% of total electricity come from solar systems. Under the current standard, systems that quality for the portfolio include biomass, solar, geothermal energy, wind, and some hydro projects.
Net Metering Rules and Utility Rates - First introduced in 1997, net metering in Nevada allowed IOUs to meter renewable systems up to 30 kW. The rules were subsequent modified in 2001, 2003, and 2005 to allow to systems as large as 150 kW. Nevertheless, for units greater than 30 kW, customers are required to install their own meter. Moreover, the utilities can arbitrarily charge interconnection facility and demand fees. For units smaller than 30 kW, net excess generation (NEG) could be carried over to the next billing cycle indefinitely. Under utility terms for time-of-use rates, the excess generation would be added to the same time-of-use period of the subsequent months.
Governor’s Energy Plan - The state of Nevada has provided relatively little policy or financial support for DG and CHP. However, the Governor’s most recent comprehensive energy plan makes general pro-DG/CHP recommendations such as to make “incremental changes in tariffs to allow net metering and selfgeneration” and make “changes in tariffs and interconnection rules to accommodate distributed generation” (NSOE, 2005).
Energy Requirements for Government Buildings - Starting on July 1, 2007, Nevada will require that all public buildings sponsored or financed by the state must meet standards specified by the Leadership in Energy and Environmental Design (LEED) system (NRS 338.187). Technologies that earn LEED certification points include passive solar space heating, and renewable energy systems (including biomass and biogas), as well as a potential point or two for CHP systems more generally in the “innovation and design” category. In addition, the measure requires at least two constructed public buildings to meet the equivalent of LEED “silver” or higher over every two-year period.
Beyond these issues, a more general issue for Nevada is the controversial construction plans for future coal-fired power generation in the state, relative to other power-generation alternatives. A specific recent issue is the potential construction of the Ely Energy Center (EEC). Since proposed, the EEC has proven to be highly controversial and the project has recently been delayed over environmental concerns. This plant has been proposed to provide 1500 MW of generation capacity and potentially up to 2500 MW, with the first of two 750 MW units to be online by 2015 and the potential for two additional 500 MW units to be added in a future phase (Sierra Pacific Resources, 2008). Figure 1, below, shows the location of the proposed EEC and a new transmission line that would connect the facility to Las Vegas.
Figure 1: Proposed Ely Energy Center
(Source: Sierra Pacific Resources, 2008)
The Market Potential of CHP Systems in Nevada
The major lodging, resort, and casino sector provides Nevada with a significant opportunity to
implement CHP in higher-end hotels. The EPA estimates that about 10,000 hotels nationwide
have energy demand profiles that can be efficiently met by CHP, and Nevada establishments
have the highest average number of rooms in the country. Many existing sites in Nevada are
eligible for conversion to CHP, and many more lodging units are expected to be built with the
tourism and gambling industries expanding for the foreseeable future.
Other major industries include manufacturing, printing, and publishing. In 2003, the state gross
product was estimated to be $88 billion according for the Bureau of Economic Analysis. Nevada
is the fastest growing state in the country with 8.0% annual growth last year (Wachovia, 2006).
The growth is largely driven by gains in the tourism and gaming industries, commercial and
residential construction, and an influx of retirees.
EEA has recently completed a market assessment report for Nevada and Arizona that indicates
that Nevada has a technical potential for 2,334 MW of additional CHP through 2020. EEA
estimates that 1,792 MW of this potential is in existing facilities, and 1,216 MW of the potential is
in new facilities that are expected to be built between 2005 and 2020. The total technical
potential is reduced somewhat to arrive at the 2,334 MW figure, to avoid double counting in
some applications where both traditional and cooling CHP opportunities were assessed. Table
ES-2 below presents these technical potential estimates by existing and new facilities and the
application (EEA, 2005a).
Table ES-2: EEA Estimate of Nevada CHP Technical Market Potential by Application
Summary of CHP System Financial Assistance Programs
There are no specific state incentive programs for CHP system installation in Nevada. The state’s net metering program provides a form of incentive for biomass-based CHP projects, of 150 kW or less, by allowing export of extra power to the grid that can then be withdrawn at a later time. The main applicable financial assistance programs include federal tax programs, including the microturbine and fuel cell system tax credits, and CHP project screening services that are available on a limited basis from the PRAC and the U.S. Environmental Protection Agency.
Nevada is the highest growth state in the country in terms of population and energy demand growth. The state has relatively little CHP installed at present, with only a few hundred MW of installed capacity. The hotel and casino sector represents a particularly attractive sector for CHP systems, and one that is growing rapidly. Additional market potential includes the hospital, grocery, and wastewater treatment sectors, and some remaining mining and industrial sector opportunities. Further DG/CHP policy development in Nevada could be important to furthering CHP opportunities in the state. Some basic elements are in place, in terms of interconnection standards for systems of up to 20 MW in size and net-metering programs for renewable systems. Additional programs to provide financial support for CHP system installation – to encourage them for their energy efficiency, economic, and environmental benefits – and to consider further development of CHP compared with other alternatives in the context of the state IRP process, would be helpful to further develop the CHP market in Nevada.