E3 Nevada NEM Study Overview for New Energy Industry Task Force
April 14, 2017
Zach Ming, Consultant
1
About E3
• Founded in 1989, E3 operates at the nexus of
• 40 professional staff located in San Francisco, CA composed of
• Economists
• Engineers
• Resource planners
• Public policy experts
• E3 staff bring a deep understanding of analytical techniques and electricity
industry economics to solve high-level problems for a wide variety of clients
Energy Environment Economics
Consumer Advocates
Environmental Interests
Energy Consumers
State Agencies
Regulatory Authorities
State Executive Branches
Legislators
Utilities
System Operators
Financial Institutions
Project Developers
Emerging Technology
Companies
2
Nevada NEM Study Overview
• E3 commissioned by PUCN in 2014 to forecast the costs and benefits of NEM in
Nevada in response to Nevada AB 428
• Study completed under direction of PUCN with regular input throughout the process
from a stakeholder advisory group including
• PUCN staff
• Utility
• Solar industry
• Ratepayer advocates
• Study completed using publically available data where possible with a publically
available analysis tool (some confidential utility data redacted)
• Funded by the National Association of Regulatory Commissioners (NARUC)
and
many
others…
3
Key Study Questions
Costs and benefits of NEM in Nevada calculated from five
perspectives using an industry standard approach
• Participant
+ Bill credits & subsidies
- Installation cost
= Cost-effectiveness
• Non-Participating Ratepayer
+ Utility avoided costs
- Bill credits & subsidies
= Cost-effectiveness
• Program Administrator (Utility)
+ Utility avoided costs
- Integration and program costs
= Cost-effectiveness
• State of Nevada
+ Utility avoided costs
- Installation cost
= Cost-effectiveness
• Society
+ Utility avoided costs & societal benefits
- Installation cost
= Cost-effectiveness
Is NEM cost-effective for the
customers who install systems?
Does NEM raise or lower rates for
other customers?
Does total bill revenue collected
increase or decrease?
Is NEM a cost-effective resource
for Nevada?
Is NEM a cost-effective resource
when including societal benefits?
4
Ratepayer Impact Measure (the ‘RIM’ test)
• NEM provides value to the utility by reducing energy purchases, new power
plant purchases, etc… these are known as avoided costs
• If the bill savings to NEM customers exceed avoided costs, there is a cost-
shift that raises rates to non-participating customers
5
Input Assumptions and Major Sources
• Results are driven by study assumptions
• Used resource plans developed at the PUCN in 2012 and 2013
• NV Energy provided utility avoided cost data
• A number of factors have since changed which would impacts study
results
• Senate Bill 123
• Coal retirements
• New build of both
renewable and
conventional generation
• Market developments
• Natural gas price decline
• Solar price decline
6
Ratepayer Impact Measure Results – Base Case
Cost Benefit Cost Benefit Cost Benefit Cost Benefit
All Vintages ExistingInstallations
(through 2013)
2014/2015Installations
2016Installations
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
Leve
lized
Co
st-B
enef
it (
$/kW
h)
Integration Costs NEM Program CostsRPS Value Utility IncentivesUtility Avoided Costs NEM Customer Bill Savings
E3 separated NEM customers
into three vintage categories
1) Installations through 2013 •Policy and incentives in 2013
1) 2014/2015 vintage •Incentives reduced in 2014
1) 2016 vintage •RPS ‘multiplier’ reduced in 2016
E3 forecasts a cost-shift for
existing systems, but a net
benefit to ratepayers for
systems installed after 2014
7
RPS Value
• Incentivized NEM generation counts
towards RPS in NV
– For systems built before 2016, every MWh of
generation counts as 2.45 RPS credits
– NEM also reduces the RPS compliance obligation by
reducing net load (obligation: 25% of all generation by
2025)
– Result: 1 MWh of NEM PV generation in 2015 can be
banked until 2020, when it can replace almost 2.7
MWh (2.45 + 0.25) of utility-scale PV generation
– Note: this value only applies in future years when NV
Energy needs to procure renewable energy for
compliance (> 2020)
▫ SB 123 could change these results
Cost Benefit Cost Benefit Cost Benefit Cost Benefit
All Vintages ExistingInstallations
(through 2013)
2014/2015Installations
2016Installations
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
Leve
lized
Co
st-B
enef
it (
$/kW
h)
Integration Costs NEM Program CostsRPS Value Utility IncentivesUtility Avoided Costs NEM Customer Bill Savings
8
Participant Cost Test Results – Base Case
Cost Benefit Cost Benefit Cost Benefit Cost Benefit
All Vintages ExistingInstallations
(through 2013)
2014/2015Installations
2016Installations
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
Leve
lize
d C
ost
-Be
nef
it (
$/k
Wh
)
Federal Incentives Utility Incentives
NEM Customer Bill Savings Pre-Incentive Capital Cost
Installing a NEM system was
historically beneficial to the
average participant
Based on solar cost forecasts
at the time of the study, NEM
is not cost-effective for
participants in 2014 and
beyond
9
Total Resource (Nevada) Cost Test – Base Case
Cost Benefit Cost Benefit Cost Benefit Cost Benefit
All Vintages ExistingInstallations
(through 2013)
2014/2015Installations
2016Installations
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
Leve
lize
d C
ost
-Be
nef
it (
$/k
Wh
)
Pre-Incentive Capital Cost Utility Avoided CostsFederal Incentives RPS ValueNEM Program Costs Integration Costs
Overall, NEM installed through
2016 will cost NV about $100
million or $0.02/kWh
Note - adding emissions
related externalities adds
more costs because NEM
reduces total installed
renewable capacity
With the RPS multiplier,
2014/2015 NEM installations
save NV money
10
Sensitivity Results - Utility-Scale Solar Price
-$800 MM
-$400 MM
$0 MM
$400 MM
$800 MM
$1200 MM
RatepayerImpact Measure
ProgramAdministrator
(Utility) Cost Test
Total ResourceCost Test
Societal CostTest
NP
V N
et
Be
ne
fit
Low PPA Price Base Case PPA Price High PPA Price
The cost of utility-scale solar
impacts the cost-effectiveness
of NEM significantly since
NEM avoids purchases of
additional utility-scale solar
Actual publicly released costs
of utility scale solar are less
than $50/MWh for utility scale
solar
Based on these contracts, the
‘Low PPA’ price sensitivity is
more appropriate than the
base case assumption
11
What Has Changed Since the Study?
n/a New NEM tariffs
SB 123: 800 MW of coal retirements
SB 123: 350 MW of additional renewable capacity (+200 MW
conventional)
n/a Continued dramatic decreases in cost of solar (utility-scale
and NEM)
Decrease in natural gas prices
? ? Other utility resource planning changes
Ra
tep
aye
r
Pe
rsp
ec
tive
Ne
va
da
/So
cie
tal
Pe
rsp
ec
tive
benefits increase relative to costs
costs increase relative to benefits
Many changes have occurred since the study
We don’t currently know the magnitude of each
change or the net impact of all changes combined
12
Contact Information
For more information contact:
Zach Ming– [email protected]
Energy and Environmental Economics, Inc. (E3)
101 Montgomery Street, Suite 1600
San Francisco, CA 94104
(415) 391-5100
www.ethree.com
Appendix
14 14
NEM PV Forecast
15
NV NEM Subsidies
15
16
Detailed Base Case Results
Benefit (cost) to customers who
participate in NEM
Installs through
2013
Installs in 2014-2015
Installs in 2016
All installs through
2016
Lifecycle NPV
($Million 2014) $23 ($115) ($43) ($135)
Levelized ($2014/kWh)
$0.02 ($0.03) ($0.04) ($0.02)
Benefit (cost) to non-participating
ratepayers
Installs through
2013
Installs in 2014-2015
Installs in 2016
All installs through
2016
Lifecycle NPV
($Million 2014) ($141) $168 $6 $36
Levelized ($2014/kWh)
($0.14) $0.05 $0.01 $0.01
Benefit (cost) to the state of
Nevada, including externalities
Installs through
2013
Installs in 2014-2015
Installs in 2016
All installs through
2016
Lifecycle NPV
($Million 2014) ($133) $90 ($36) ($75)
Levelized ($2014/kWh)
($0.11) $0.02 ($0.02) ($0.01)
Participants
Ratepayers
Nevada
17
Distribution Sensitivity
-$200 MM
$0 MM
$200 MM
$400 MM
$600 MM
$800 MM
$1000 MM
RatepayerImpact Measure
ProgramAdministrator
(Utility) Cost Test
Total ResourceCost Test
Societal CostTest
NP
V N
et
Be
ne
fit
Base Case Distribution Sensitivity
18
Rate Scenario Sensitivity
-$250 MM
-$200 MM
-$150 MM
-$100 MM
-$50 MM
$0 MM
$50 MM
$100 MM
$150 MM
Participant Cost Test Ratepayer ImpactMeasure
NP
V N
et B
enef
it
Current Rate Scenario Rule 9 Compliance + Primary
19
Rate Escalation Sensitivity
-$200 MM
-$150 MM
-$100 MM
-$50 MM
$0 MM
$50 MM
$100 MM
Participant Cost Test Ratepayer Impact Measure
NP
V N
et
Be
ne
fits
Low Rate Escalation Base Case Rate Escalation High Rate Escalation
20
Demand Charge Sensitivity
-$160 MM
-$120 MM
-$80 MM
-$40 MM
$0 MM
$40 MM
$80 MM
Participant Cost Test Ratepayer ImpactMeasure
NPV
Net
Ben
efit
Base Case Demand Charge Sensitivity
21
Utility-Scale PPS Sensitivity
-$800 MM
-$400 MM
$0 MM
$400 MM
$800 MM
$1200 MM
RatepayerImpact Measure
ProgramAdministrator
(Utility) Cost Test
Total ResourceCost Test
Societal CostTest
NP
V N
et
Be
ne
fit
Low PPA Price Base Case PPA Price High PPA Price