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October 30, 2014

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State promoting small-scale urban solar development

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Sam Morris

Nevada wants to aggressively add solar panels, like these at Southern Nevada’s main water treatment plant, to its buildings and installations.

Gov. Jim Gibbons

Gov. Jim Gibbons

Even though Nevada’s coffers are nearly empty, that shouldn’t be an obstacle to a new tack to grow the state’s solar energy industry.

Gov. Jim Gibbons last week announced the plan for dozens of new small-scale solar installations on state property.

The beauty of the plan is that the state won’t pay for the projects. Instead, developers will cover the cost through a third-party ownership or lease-to-own-style deal, and it should also provide a spark for the local economy.

It should be a step toward making Nevada a leader in solar development and should “save taxpayers millions of dollars in utility costs,” Gibbons said.

The project is the brainchild of state energy Director Jim Groth, who oversaw the development of a similar, but much smaller, effort at the Nevada Army and Air National Guard headquarters in Carson City. The announcement was applauded by members of the renewable energy industry and environmentalists who said it’s a smart move.

“We’re very pleased to see a good idea come out of this administration’s energy office,” Nevada Conservation League spokesman Scot Rutledge says.

The technology and type of project — small-scale urban solar development called distributed generation — are popular with environmentalists because they affect the environment less than the large scale solar projects proposed for swaths of Southern Nevada desert.

These developments would be on previously disturbed land — whether parking lots, rooftops or vacant urban parcels. And because the electricity would be used on-site, there would be no need to build transmission lines.

That means no dead bunnies, relocated tortoises or decimated desert landscapes.

It also reduces the need for NV Energy to burn natural gas and coal in its power plants, and thus helps clean the air and fight climate change.

“Distributed generation is an efficient way to address energy issues right now, not five or more years from now when the grid is up to par,” says Herve Mazzocco, a renewable energy consultant with RA Energie. “It also has a lower carbon footprint, there are no line losses, nor a need for large and expensive grid storage solutions for demand control.”

By June 28 the state intends to request proposals from developers, contractors and installers interested in serving as a general contractor for numerous solar photovoltaic projects across the state.

The state has identified about 30 sites where it would like to see solar panels. Many are parking lots, where the installations would provide both electricity and shaded parking for employees and visitors, similar to Springs Preserve’s.

More sites could be added in the coming weeks as state agencies identify other suitable land suitable, Groth says. “We’ll take as many state agencies as have a desire to join on,” he says.

Construction would occur over the next couple of years, and the right deal could save the state millions of dollars in energy costs, pump hundreds of millions of investment dollars into the economy and put hundreds of Nevadans to work.

It’s the type of economic diversification the state has been seeking for years and can start faster than the large-scale solar energy export plants planned for rural deserts, Mazzocco says.

“Most of the large solar farms are developed by out-of-state or even foreign corporations,” he says. “These smaller systems give the opportunity to Nevada-based companies to participate in the state’s energy strategy. This is good for the local economy.”

The plan would involve zero upfront cost to Nevada. The contractor would finance the project and be paid back over many years through a per-kilowatt hour fee. The upfront costs could be lowered by economies of scale as well as state SolarGenerations incentives, federal tax credits, net metering and the potential to sell renewable energy credits.

These credits represent the environmental benefits of a given renewable energy project and in many cases can be sold to companies that want to lower their carbon footprints without buying solar arrays.

Click to enlarge photo

The installation of solar panels could be a common sight in Nevada if contractors buy into the state's plan.

“The total (fiscal and tax) benefits go to the vendor,” Groth says. “We want to do the best job we can to entice the bidder to submit a proposal.”

This type of deal is rare in Nevada but is popular in California, where large corporations, small businesses and homeowners are signing on to third-party ownership deals similar to the one proposed by the state.

Some energy consultants wonder if Nevada is ready for this. Companies are interested in bringing third-party ownership to customers here, but are still unsure if the economics pencil out.

“For these types of deals to happen I believe that we need to develop a better environment for the trading of renewable energy credits, which ultimately can make or break such arrangements,” Mazzocco says. “Unfortunately, even after the federal tax credit, the cost of electricity alone does not suffice to satisfy the financing entities return-on-investment goals.”

In Arizona, for example, the main utility Arizona Power Service has set up renewable energy credit-only contracts independent of the purchase of the electricity. Mazzocco says these are attractive for small-scale renewable energy developers because it creates a secondary income stream for their products.

Nevada law requires that the renewable energy credits and the electricity stay together. So if a project is funded in part by NV Energy’s SolarGenerations incentive program, the owner cannot sell the renewable energy credits. NV Energy gets to count the project toward its renewable energy goals.

Without separating the credits from the energy, it could be hard for developers and contractors to make the deal pencil out, Mazzocco said.

Groth says it can be done, on private or public property, and that the state will lead the way.

“We proved at the National Guard that there were enough tax credits and things out there to make a deal with us financially viable,” he says. “And there’s no lack of interest in distributed generation solar energy in this state.”

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