Placeholder image

Solar installation at the Visitor Center in Red Rock Canyon National Conservation Area.

Deregulation, electricity rates, and the future of solar in Nevada

About 30% of the states in the U.S. have deregulated electricity markets. Now, in 2018, Nevada is seeking to officially join those states through the second passage of a ballot measure that would provide for the establishment of an open, competitive retail electric energy market in Nevada. It has been said that deregulation has led to customers paying higher rates in other states, but data shows that this claim is misrepresented. Nearly all of the deregulation that exists today was initiated about 20 years ago, give or take a couple years, and almost every jurisdiction in the nation has seen a rate increase of about 50 percent or more over the last two decades, whether that state was deregulated or not. According to the American Public Power Association report, Retail Electric Rates in Deregulated and Regulated States, data from the U.S. Energy Information Administration shows that since 1997, retail electric rate increases have been about the same in both deregulated and regulated electric markets. In general, northeastern states such as New York, Maryland, Massachusetts, and Vermont have significantly higher electric rates than Nevada, deregulated or not, and some deregulated states such as Illinois, Ohio, and Texas have electric rates that are about the same as what we currently pay here in Nevada.

Perhaps the question for electricity deregulation is not necessarily about rates. Maybe it is about choice and what choice could do for our economy. Will more choice give customers more options? Will it drive innovation in distributed solar and other renewable technologies for the power generation of the future? By definition, competition is a driver of innovation. Opening up the electric market in Nevada could bring new opportunities to its residents that promote diversity of electricity generation that could include generating and storing more power locally or even at the source of its consumption. This could, in fact, support population growth, job growth, and provide relief to an already strained power infrastructure that expects a population increase of nearly 25% in its largest metropolitan area over the next few years.

A good example of this potential can be seen in the New England region of the U.S. which is comprised of six states, five of which have deregulated electricity markets. Although five times more densely populated than Nevada, all six New England states cover approximately 35% less land, yet feature over 2,400 MW of installed solar electricity, the majority of which is comprised of small scale systems 5 kW or less, according to ISO New England. While Nevada's total installed solar capacity tops 2,600 MW, most of this is utility scale, with only a few hundred megawatts actually net metered and contributing to distributed generation throughout the state. Many jurisdictions throughout the U.S. have had to address net metering rules and caps due to a growing solar market, however, some states have exemptions to promote distributed generation. In Massachusetts, residential solar electric systems smaller than 10 kW are exempt from the state's net metering cap, and this in a place that receives just four hours of solar insolation on average per day. For comparison, sunny southern Nevada sees closer to eight hours of solar insolation per day, making it one of the best places in the nation, and even the world, for solar generation.

Battles between the state's largest electric utility, NV Energy, and the desire of the public to have more distributed rooftop solar and grid resiliency have continued since late 2015 when NV Energy announced it was seeking to halt equitable net metering rates for new solar customers due to hitting a cap of 235 MW of installed net metered solar. At that time, the Public Utilities Commission of Nevada (PUCN) voted to approve NV Energy's request to scale down the rate paid to net metered customers for excess solar energy transmitted to the grid to an unprecedented low of 2.6 cents per kWh over the course of four years. The four year timeline was extended to twelve years for the tiered rate reduction, but that was not good enough for Nevadan residents and legislators alike. In 2017, the legislature passed numerous bills relating to renewable energy including Assembly Bill 405 establishing a Renewable Energy Bill of Rights and new net metering rates for now.

Through the bill, which NV Energy had to comply with by the end of 2017, Nevada's newest solar residents were guaranteed to get 95% of the retail rate for every solar kWh they put back into the grid. However, that rate of 95% return only applied to the first 80 MW of solar installed after the new legislation's implementation. The rate guarantee then tiers down three times to 88%, 81%, and then 75% of the retail rate. Each tier supports 80 MW of installed capacity for a total of 320 MW. As of November 1, 2018, the PUCN reports that Nevada is already 26 MW into the second tier. Another provision of Assembly Bill 405 was that NV Energy could not put net metered customers into a separate rate class than non-net metered customers. This was significant because the PUCN had approved NV Energy to form rate classes and charge net metered customers higher basic service charges than non-net metered customers. The renewable energy legislation that passed in 2017 was not because NV Energy had been setting goals, but rather, because they had been setting limits.

Utilities develop solar farms, but it is the distributed and rooftop solar market that promotes diversity of technology. This sparks scientific discovery and promotes innovations such as net zero buildings, smart buildings, solar greenhouses, and green communities. Deregulation promotes choice, choice drives competition, and competition drives the innovation that will lead to technological advancements, shaping the future of how we generate and consume electricity.