President Donald Trump’s version of "energy dominance," as described in his “Energy Week” speech on Thursday, is mainly about tapping fossil fuel reserves. But increasingly, states, even those led by Republican governors, are showing they’re intent on dominating in renewable energy.
The latest example is Nevada. In the past month, Republican Gov. Brian Sandoval signed 11 of the 13 energy-related bills that came to his desk from the state’s Democratic-majority legislature.
The bills primarily targeted electric utilities and the public utilities commission (PUC). Among many technical regulatory changes, they established requirements for utilities to spend a certain amount on programs for low-income customers, established requirements for the PUC to incentivize the installation of solar energy systems and energy storage systems, and created the Nevada Clean Energy Fund.
One bill stands out above the rest: AB 405, which revives “net metering,” a policy that requires utility companies to reimburse customers for energy they put back onto the grid from their own rooftop solar arrays. A year and a half ago, the successful lobbying efforts of electric utilities companies thwarted net metering in Nevada, causing an exodus of solar companies and thousands of jobs.
The move was politically unpopular at the time. Now, with this restoration of net metering, Tesla, Vivint Solar, and Sunrun are all ready to return to business in Nevada, and the state is poised to be a leader in solar.
“I believe, humbly,” Sandoval proclaimed at the bill-signing event, “that this will be a national model.” It will also be the latest experiment in balancing the competing interests of a rising decentralized renewable energy industry and the utilities that don’t want to lose their grip on the electricity market.
What is “net metering,” and why is it such a big deal?
When someone installs solar panels on their house, they can become a generator of energy for the grid — as long as their panels are producing more than their household is consuming or storing.
States began to enact legislation to deal with this in the late 1990s. In 1997, Nevada, Maryland, and New York implemented policies that required utilities to reimburse at the retail rate of electricity those customers who supplied the grid with more energy than they took. This was called “net metering” because it relied on the data from the electromechanical power meter typically found in a box outside one’s home. Over time the policy was tweaked a bit, but it wasn’t substantially changed until 2015.
Net metering laws ushered in a thriving residential solar industry in Nevada, but the more solar grew, the more the utilities companies pushed back. Utilities dislike customers generating their own power because it reduces demand for electricity from the grid. Net metering policies only add to this by making the utilities pay the customers for their surplus energy, thereby incentivizing further rooftop solar installation.
As Vox’s David Roberts explained in 2015, utilities companies essentially operate as monopolies. There is no market. They are the only providers of electricity to customers in their territory.
In December 2015, Nevada’s PUC upended the state’s budding rooftop solar industry by slashing the net metering rates that electricity utilities would have to pay to customers with solar panels while simultaneously raising the fees those customers would have to pay.
This was a major boon to the utilities like NV Energy as well as a success for conservative interest groups (like Americans for Prosperity) that oppose the proliferation of renewable energy across the country because of the threat they say it poses to American dependence on fossil fuels.
But it was a major blow to the popular and growing residential solar industry. The decision would make the installation of rooftop solar less appealing to Nevadans, and thus, it made the entire industry less lucrative in the Silver State. As a result, companies like SolarCity (since acquired by Tesla) announced huge layoffs, and others such as SunRun announced that they were ending operations in Nevada entirely.
But as Roberts explains, utilities can’t make the case against net metering/rooftop solar by claiming that it hurts their bottom line. Instead, they claim it is unfair to their consumers who don’t have their own solar panels, which tends to be lower-income households. Customers who don’t have solar panels are essentially subsidizing the costs of using the grid for the customers who do have solar panels but still benefit from the infrastructure investments of the utility company, they say.
This argument makes logical sense. However, solar advocates counter that residential solar reduces costs for utilities by reducing the need for further investment in more power generation. Moreover, because the time of day when solar generates the most energy tends to coincide with the highest demands for electricity, reduced midday demand from the grid as well as surplus solar energy put onto the grid by residential solar customers reduces the total amount of more expensive “peak power” the utilities must provide. Rooftop solar also comes with a whole bunch of social benefits, like reducing carbon emissions and local pollutants.
There’s a dearth of quantitative evidence on the subject, but most studies seem to indicate that net metering has little net benefit or net cost to ratepayers without rooftop solar. In other words, with few, if any, economic costs to Nevadans, net metering can incentivize more rooftop solar installation, ushering in the social benefits of decreased dependence on fossil fuels as well as the economic benefits of further investment in the solar industry in the state.
The Tesla model: how solar plus storage changes the game
The new net metering bill doesn’t quite restore payments at the “retail” rate of electricity for surplus rooftop solar where it used to be.
But it creates a tiered system in which customer-generators get reimbursed at a rate slightly below retail. The first 80 megawatts of excess residential solar energy sent back to the grid will be reimbursed at 95 percent the retail rate of electricity, with the compensation rate declining by 7 percent for each subsequent 80 MW but eventually settling at 75 percent of the retail rate.
Tesla played an important role in restoring net metering in Nevada. As early as March 2016, Tesla CEO Elon Musk invited state lawmakers for a sneak peek of the Gigafactory, Tesla’s secretive battery factory in Reno, where Musk and SolarCity founder Lyndon Rive lobbied against the December 2015 slashing of the state’s net metering program.
But while the restoration of net metering promises to revive the solar industry in the state, former SolarCity/Tesla chief policy officer Jon Wellinghoff told Greentech Media that the more significant part of the legislation is the section officially dubbed the Renewable Energy Bill of Rights. This bill of rights guarantees Nevadans’ right to, among other things, “Generate, consume and export renewable energy and reduce his or her use of electricity that is obtained from the grid,” and to “use technology to store energy at his or her residence.”
Energy advocates have feared that utilities could try to prevent, such as through fees, customers from using their own solar energy to reduce their demand from the grid. This bill of rights codifies that a customer-generator’s solar production that they consume themselves will offset their consumption from the grid at the full and exact cost-saved rate, which sometimes varies from the retail rate. Customers can only be charged for the energy they consume from the grid.
According to Wellinghoff, with increasingly advanced storage technology, Nevadans with rooftop solar will be able to store and consume more of their own energy. (Without storage systems, excess energy produced by solar panels during daylight hours would go into the grid and would be reimbursed at a below-costs-saved rate.)
As David Roberts wrote in a solar-plus-storage explainer, solar plus storage still has a long way to go in terms of technology and lowering costs, but it’s likely to be as cheap as or cheaper than utility power within the next few decades.
Sandoval signed 10 other energy bills and vetoed two
Gov. Sandoval also signed 10 other bills, ranging from a regulatory change about when local governments can and cannot impose restrictions on the installation of wind turbines to the creation of a Nevada Clean Energy Fund to provide funding for and increase significantly the pace and amount of financing available for clean energy projects in the state. SB 150, for example, requires the Nevada PUC to set annual energy savings goals for utilities and requires utilities to implement plans to meet those goals. And AB 223 requires utilities to include in their Integrated Resource Plans (submitted every third year to the PUC) a proposal for at least 5 percent of their total expenditures on efficiency and conservation programs to be directed to low-income customers.
But the green wave in the Nevada statehouse was not without a couple of losses. Sandoval vetoed two important pieces of legislation that would have significantly boosted Nevada’s renewable energy leadership even further.
AB 206 (RPS)
29 states plus DC, Puerto Rico, the Virgin Islands, and Northern Mariana Islands all have renewable portfolio standards, or RPSs, laws that mandate a certain minimum proportion of their energy mix to be from renewable sources, rising over time. When introduced by Assembly member Chris Brooks, AB 206 sought to ramp up Nevada’s RPS (currently at 25 percent by 2025) to 50 percent by 2030 and 80 percent by 2050.
But it faced staunch opposition from the Nevada Resort Association, the state’s hotel and casino lobby, which called it “too much and too soon.”
After much debate, a compromise bill, lowering the target to 40 percent by 2030, passed both houses of the Nevada legislature with just hours remaining in the 2017 session. Nevertheless, in the end, Sandoval vetoed the bill. In his veto message, he expressed concern that “the questions associated with the acknowledged costs, risks and rate issues connected to an enhanced RPS are ones that were not fully answered during the debate on AB 206.”
SB 392 (solar gardens)
SB 392 would have established parameters for the implementation and operation of community solar gardens, for which subscribers would receive credits on a par with the net metering payments established for individual households in AB 405.
Riley Snyder of Nevada Independent reports that Sandoval wrote in his veto message that there was “much to commend” in SB 392 but that he was “concerned that community solar gardens could operate as ‘utilities within utilities’ without the regulations governing existing energy providers” and ... “could harm both Nevada’s ratepayers and its broader clean energy economy. At this time, the possible benefits of SB 392 do not outweigh the risks.”
In 2016, Nevadans overwhelmingly voted to deregulate the energy market with a constitutional amendment that would force the state’s power utility, NV Energy (which currently controls all generation, transmission, and maintenance of the electricity system in Nevada), to sell its energy production assets and exit the generation market (though it could retain its control of the state’s transmission lines). The amendment would end NV Energy’s monopoly on electricity and would open the door for a market of competing energy providers.
This would allow Nevadan households and businesses greater access to choose to buy from renewable energy providers, whereas the energy one can purchase now is limited to the generation sources employed by NV Energy. (Google, for example, is reported to be dissatisfied with NV Energy’s lack of renewable sources and is reported to be seeking alternatives before it builds a massive data center in the northern part of the state.)
But in Nevada, constitutional amendments through the initiative process need to be approved twice, so the once-approved “Question 3” will appear on the ballot again in 2018. However, it passed by a wide, bipartisan margin in 2016 (with votes in favor of the amendment exceeding votes against in all but one county, White Pine, where there were exactly four more votes against than for the amendment); thus, it is very likely the amendment will be approved in 2018.
According to an April 2017 report on clean energy momentum in the US, Nevada already stands as the leader in solar jobs per capita and was ranked third in overall clean energy capacity, based on its strong solar development. With the 11 bills recently signed and the potential to create more choice in the energy market, Nevada is becoming more and more appealing to renewable energy companies and is poised to continue to be even more of a renewable energy leader.