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July 28, 2014

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The problem with renewable energy in Nevada

We’ve got abundant land and sunlight, and powerful wind currents. But there’s a roadblock.

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Tiffany Brown

Power lines are silhouetted Thursday near the Hoover Dam. The economic stimulus bill includes $3.2 billion for low-cost loans to build lines to carry renewable energy.

Years from now, when Nevadans wonder why their state and others abandoned coal plants in favor of renewable energy, they are likely to remember these days.

Washington is moving aggressively if sometimes in unseen ways to remake the nation’s energy landscape. Intricate pieces of legislation are unfolding on Capitol Hill that would radically alter the nation’s energy policy, one bill at a time.

The big-ticket items are well known: cap-and trade legislation, for example, which would put a price tag on carbon emissions; a bill requiring that more of the nation’s energy come from renewable sources, as President Barack Obama promises.

But lesser known bills have the potential to shift the country sharply away from fossil fuels and, in the process, transform entire landscapes in Nevada and elsewhere in the West.

Last week, plans for one of two massive coal plants in Nevada’s White Pine County were put on hold. The other plant was similarly postponed weeks earlier.

If the nation’s energy policy is like an ocean liner trying to make a U-turn, here are pieces of legislation quietly guiding the ship.

Tucked into the economic stimulus bill is a $3.2 billion provision championed by Senate Majority Leader Harry Reid that gives power companies in Nevada and elsewhere access to low-cost government loans to build transmission lines to carry renewable energy.

The lines are necessary to connect new power sources in desert solar fields and atop remote hilltop wind farms to the nation’s electric grid, a problem that has long vexed renewable energy developers.

Investors are reluctant to finance power lines until renewable energy companies are up and running. But renewable energy producers can’t persuade investors to put up money for plants until they know the electricity will indeed be shipped across a power line.

It’s a chicken-egg problem that in the past has largely looked to a single solution: Coal.

NV Energy and other large companies knew they could pay for transmission lines by building coal-fired generators. Coal power plants are cheap and reliable energy producers that can turn out enough energy immediately to fill up new transmission lines, providing the revenue to repay the cost of building those lines.

Paying back loans for transmission lines is far more difficult if the power comes from solar, wind and other boutique sources. Those industries are still in their infancy and will need years to mature to the point that they can fill new transmission lines.

But the equation changes with the government now providing lower-cost financing for transmission lines, which can cost up to $2 million a mile.

The stimulus bill provides $3.2 billion in bonding authority for transmission lines that would carry mostly energy from green sources. The money will be available through the Western Area Power Authority, a federal agency that coordinates and oversees construction of transmission lines.

Suddenly, building a $500 million, 250-mile power line between Las Vegas and Ely mainly to carry renewable energy makes more financial sense.

Obama, in his address to Congress last month, proclaimed, “We will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country.”

Three weeks ago, as Obama’s $787 billion American Recovery and Reinvestment Act was making its way through Congress, NV Energy announced it was shelving coal. Last week, LS Power, which had proposed the other coal plant near Ely, followed suit.

But the companies say they will press on with their transmission line proposals — each is trying to build what would be Nevada’s first north-south trunk line.

Tony Sanchez, a vice president of NV Energy, said the federal stimulus funding did not influence NV Energy’s decision to abandon coal.

Running renewable energy on the transmission line pencils out better today than it did even a few years ago as more and more renewables companies are sprouting and potentially seeking a spot on the line.

“In 2006 there weren’t as many developed renewables as today,” Sanchez said.

But having financing potentially available to help develop the transmission line, he added, is a great opportunity.

LS Power said last week that its transmission line is shovel-ready, ready for groundbreaking this year, bringing 20,000 direct and indirect construction jobs — just what Obama ordered in the stimulus.

Nearly 90 wind projects alone are waiting in a queue at the Western Area Power Authority to join the grid. In the past, the agency required the companies to provide the money upfront. Now, it will be in the business of lending it out, with the companies responsible for repaying the federal government after they open for business.

Tom Darin, an energy transmission attorney at Western Resource Advocates, sees the $3.2 billion as one more piece of a puzzle falling into place, shifting the country’s policy away from coal and toward renewable energy.

“The notion that we need coal to pair with wind to make it economically viable is fading,” Darin said.

“That is a significant movement away from where we were a year ago.”

Government financing of transmission lines will likely help to propel an industry by removing a sizable amount of investor risk.

Yet, energy developers still must contend with NIMBYism as residents may protest new power lines crisscrossing their communities.

To push aside this long-standing problem, Reid has stepped up with another bill. Introduced last week, the legislation would give the federal government sweeping new authority to situate the power lines by exercising the power of eminent domain over private property, if necessary.

Reid’s bill encourages states to develop renewable energy zones, and chose where power lines would go. But if they don’t, the feds could step in through the Federal Energy Regulatory Commission. The commission’s acting chairman is Jon Wellinghoff, a one-time renewables energy expert in Nevada whom Reid recommended to the commission.

In many ways, Reid’s effort resembles the federal government’s authority to develop natural gas pipelines from the Gulf Coast states to transport the resource to customers across the nation.

But one big difference is clear: Gas lines are typically underground, while power lines hang overhead.

In Nevada, eminent domain may not bring as much protest as elsewhere because so much land in the state is owned by the federal government.

Reid’s office says the new federal powers would cut in half the eight to 16 years it typically takes to build a transmission line.

“We’re going to move beyond where one state can hold that up forever,” Reid said at an energy summit he hosted last month in Washington. “As we did with railroads, we did with highways, as we did with the telegraph, there may become a time when the federal government will step in.”

The legislation is expected to be rolled into a broader energy bill making its way through Congress. That bill will likely contain another crucial element of the energy policy transformation — the mandate that states receive a certain percentage of their energy from renewable sources, as Obama wants.

Greg Williams, a former Federal Energy Regulatory Commission attorney now in practice at the law firm Bracewell Giuliani, said the shift in energy policy that is under way in the stimulus funding and the transmission line bill is an effort to reverse the 100-year history of the federal government’s reluctance to build an energy grid.

“It’ll be a big deal if they do it,” Williams said. “The energy legislation they’re proposing is historic. The fact the majority leader is sponsoring this thing is all you need to know.”

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