Saturday, Nov. 5, 2011 | 2 a.m.
PAHRUMP -- If all goes according to plan, sometime next year this rural community 60 miles from Las Vegas will become headquarters to Nevada’s hottest solar energy corridor.
That a town best known for its state-sanctioned brothels could somehow pull itself to the center of the state’s renewable energy economy seems like the unlikeliest of feats. That is, until you account for geography, the vagaries of moving electricity around the West and, most importantly, neighboring California’s seemingly endless appetite for electricity, particularly renewable energy.
The whole effort hinges on Pahrump’s 50-year-old utility seceding from Nevada’s grid and plugging into the Golden State’s, providing a seamless route to export solar-generated electricity.
The sunshine that Valley Electric Association hopes to capitalize on is what led to its establishment: In the mid-1960s, farmers looking for a better way to irrigate the dry Pahrump and Amargosa valleys formed the co-op; today, it serves 17,000 households over 6,800 square miles, mostly in Nevada.
But Valley Electric also crosses into parts of California’s Inyo and Mono counties, making it a dual-state certified utility — the critical factor in giving the area a brighter solar energy future than most of Nevada.
The entire Silver State may have an endless source of sunlight, but it doesn’t have endless demand for it. For that you have to go next door, and the edge in that renewable race goes to those who first break into the California market.
This August, Valley Electric used its California toehold to sign a memorandum of understanding with the California Independent System Operator Corporation (Cal ISO), which governs the California grid. Last month, they filed papers with the Federal Energy Regulatory Commission (FERC), which is supposed to deliver its approval by year’s end.
If the project gets the go-ahead, Valley Electric will join the California grid in January 2013 — a partnership that CEO Thomas Husted says will be good for the area’s power users and developers looking build plants and production facilities that could bring jobs to the area.
Pahrump is seeing intense interest from developers, Husted told the Las Vegas Sun.
“We have right now, in our queue list, generators that are equivalent to two times the output of Hoover Dam,” he said.
Valley Electric Association’s move highlights growing competition between Nevada and California for regional renewable energy dominance.
Two months ago, Nevada Gov. Brian Sandoval and California Gov. Jerry Brown met on a stage in Las Vegas to discuss the future of renewable energy in the region.
Sandoval told the crowd, as have many other state dignitaries, that Nevada is primed to become an energy exporter, sending the product of its solar and geothermal plants to California, which by state law must get 33 percent of its power from renewable sources by 2020.
Brown’s response: Thanks, but no thanks.
“How much we import has to be balanced with how much we’re building locally ... hopefully we can be an exporter,” Brown said. “We’re going to try to build as much indigenously as we can … we’re going to generate a lot of energy.”
If true, that is a big problem for Nevada’s renewable energy industry.
For years, the go-to buyer for Nevada’s renewable energy was the state’s largest utility company, NV Energy. Its renewable buying spree was spurred by Nevada’s renewable requirement. First set in 1997 and amended in 2005, it requires that by 2015, 20 percent of all energy generated in the state be renewable, with at least 5 percent from solar.
The utility’s appetite is almost sated.
“Most of the renewable activity for the past decade has been driven by the renewable portfolio standard here in Nevada,” said Bobby Hollis, Executive Director for Renewable Energy with NV Energy. “Now we’re looking at this as (cost) competitive with other forms of energy production.”
California’s goal is far more ambitious, requiring a higher percentage of renewable energy production — 33 — for a much larger population — 37 million residents compared with Nevada’s population of less than 3 million.
“Most industry experts’ view is that it’s going to be difficult for California to meet ... that with in-state resources,” said Kevin Smith, CEO of SolarReserve, a California-based renewable energy company with solar projects in both California and Nevada, including the energy storage facility at Tonopah.
“While California would prefer to build projects in-state, the permitting process is very difficult and very expensive,” Smith said, adding that Nevada’s processes are far easier. “But California, it has the demand. That’s what makes the California market a good market.”
And that has many lining up to meet that demand.
Cal ISO oversees the bulk of California’s transmission lines, which any developer must access to compete with the state’s indigenous market.
Once a year, in March, Cal ISO looks at new projects hoping to join California’s energy matrix. More than 80 percent are hawking some kind of renewable energy; right now, the list of would-be providers are shopping a total of 69,000 megawatts.
To get a sense of California’s energy needs, consider the worst-case scenario: Back in 2006, the grid hit peak usage of 50,000 megawatts.
It’s clear there’s a potential for a glut in the market.
“There is a gold rush of sorts that is going on in the West, and that includes Nevada,” said Stephanie McCorkle, a spokeswoman for Cal ISO. “There’s enough transmission to reach 33 percent, and at some point there’s going to be enough generation — and that’ll make it harder for renewable projects to get on the grid.”
California prefers to buy energy from in-state projects, but Nevada plants can generally offer a lower price and in that way compete with the locals.
“The utilities are really bound by least-cost alternatives, so they have to look and fairly judge if an in-state or out-of-state project is a better alternative for the ratepayers,” Smith said. “Potentially, if you’ve got a better solar resource available to you in Nevada versus California, the cost might be lower.”
But to get to market, you’ve got to build the thoroughfare — and that can increase costs for the developers, who have to foot the bill themselves.
“In order to build the transmission, we have to have assurances that somebody’s going to pay for it,” said NV Energy senior vice president Roberto Denis, who’s currently trying to organize pools of developers so they can share the cost.
But geography matters.
“It’s a very unusual plant that’s put up in the middle of nowhere,” said Bob Boehm director of the Energy Research Center at UNLV. “That’s really expensive.”
The desert that houses Pahrump is shared by two states worn down by the recession. With times so tough, every utility seems to be fending for itself.
The West has been slowest to build a regional grid, meaning energy developers usually run into a different set of regulatory hurdles at every state line.
In California, the state Energy and Public Utility Commissions give preference to projects that can provide energy most reliably, at the lowest cost, or in keeping with some other policy goal — a provision that lets them favor Golden State-based projects over outsiders.
Only a few Nevada companies have successfully made contracts with California utilities, which speeds up their access to the grid: the 150-megawatt Sempra solar facility in Boulder City, for example, has a 25-year deal with California’s Pacific Gas & Electric, and taps into the California transmission system through the Eldorado and Mead stations near Henderson.
But Nevada and California haven’t put much effort into a state-to-state network.
This summer, the Federal Energy Regulatory Commission tried to push the West in a regional direction: Order 1000, which the FERC issued in July, requires public utilities to map out a plan for regional transmission, remove interstate tariffs, and start to talk about sharing costs.
But that’s a long-term process that’s not likely to conclude, or yield many changes before 2020, when California must meet its 33 percent renewable portfolio standard. If Nevada developers want to profit from the demand next door, the window of opportunity is now.
“You know how in real estate, it’s location, location, location? This is market, market, market,” said Boehm, the Energy Research Center director at UNLV. “We do have the resource — it’s the making dollars off it that we’ve got to figure out.”
Within a year we’ll see if Pahrump has.