A ‘HOOVER DAM’ FOR THE 21ST CENTURY

At the beginning of the 21st century, Nevada and many of the once flourishing economies of southwestern states are locked in deep economic depressions. In the 1930’s this region attacked a similar challenge in part by constructing large public works projects.

Perhaps none of these projects succeeded like the Hoover Dam. At the time, Hoover Dam was the largest hydroelectric dam and the largest concrete structure in the world. It provided employment and valuable flood control, irrigation, and electrical power. Perhaps most importantly it dramatically took on and solved problems that seemed intractable.

If we wanted to build a ‘Hoover Dam’ for the 21st century, what would it look like and do we as a country even have the capacity to undertake big, game changing projects anymore? Of course a ‘Hoover Dam’ for the 21st century would not be a dam and it is doubtful it would a ‘traditional’ public works project.

But it is equally certain that we face large challenges of energy security, climate stabilization, and economic revitalization in the southwest. Nevada in particular, could lead the way forward. It is time once again to make no small plans.

As a nation we face an urgent need to develop energy resources that limit or remove CO2 emissions and enhance our national security. Just as the Hoover Dam actually provided three benefits – energy, flood control, and irrigation – the 21st century equivalent needs to produce energy, control CO2 emissions and reduce our national dependence on imported fossil fuels.

Solar electricity can meet that challenge but to-date Nevada has added only small, incremental projects: 60 MW at Solar One and 20 MW from First Solar. A project on the order of magnitude of the Hoover Dam would look to add 1000’s of MW and bring new manufacturing and needed economic development to Nevada and the region.

In our view, renewable energy’s greatest potential and competitive advantage is its ability to innovate and evolve rapidly, offering technologies that produce electricity at lower and lower prices that have no carbon emissions and that decrease our dependence on imported fossil fuels. To take full advantage of renewable energy’s potential we need to pursue breakthroughs from basic science through to adoption in full-scale commercial projects. Without the last step of successful commercialization, the potential for rapid technology innovation will be lost. Currently, developing utility-scale renewable energy projects requires dealing with hundreds of private and public utilities all operating under strikingly different state regulatory requirements, and often requiring substantial upfront investments just to respond to requests for proposals. For first-time commercial scale projects, this last step can be a roadblock.

Here is an effective policy that, working with other already existing programs, can accelerate renewable technology innovation: Create a set of national Standard Offers or feed-in tariffs for new significantly better renewable technologies. This policy would set a national price that any renewable energy developer would receive in long-term contracts. This feed-in tariff would work with already existing R&D and commercialization policies like loan guarantees to pull breakthrough technologies into the energy marketplace.

The great virtue of offering a national price for renewable energy is that it would be immediately transparent and open to any technology company/developer. The feed-in tariff price we are proposing would be set below what current renewable technologies deliver in order to focus support on breakthroughs that will drive the price of renewable electricity down in order to replace more and more traditional, fossil fuel based electricity generation. The national feed-in price could be adjusted over time in order to move renewable electricity through the price points that would deliver greater market share to renewable generation. For example, the set of feed-in-tariff price points could be set by (1) on-peak natural gas fired generation to (2) combined cycle natural gas –fired generation to (3) base load coal generation with an adjustment to reflect the cost of CO2 emissions.

How close are we to delivering renewable technologies at the threshold of commercialization that can get to the first price point – on-peak natural gas fired generation? An on-peak natural gas fired plant will generate a kWh of electricity at a cost of between $.09 and $.13 depending largely on the price of the natural gas used as fuel. The cost of capturing and storing the CO2 emissions from that generation has been estimated at about $.028 per kWh (S&P Viewpoint, ‘Which Power Generation Technologies Will Take the Lead in Response to Carbon Controls’, 11 May 2007).

Setting an initial Feed-In tariff for solar technologies at that first price point of $.12 per kWh or less would draw out multiple breakthrough technologies and greatly advance their market penetration.

The commitment should be to purchase a substantial amount of renewable power, thousands of megawatts. To further support utility-scale projects, the feed-in tariff could come with an offer to provide federal land and transmission access.

Nevada could serve as a test case for the policy. An existing Department of Energy report demonstrated the feasibility of using part of the Nuclear Test Site in Nevada, 1200 square miles, to host utility-scale solar energy projects. (See www.repp.org for the Report). A small portion of the Test Site would be optioned to Nevada. Clark County could set up a non-profit economic development corporation that would hold the option to the land. The non-profit would manage environmental permitting and transmission access and would negotiate with developers to assure the location of manufacturing facilities in southern Nevada to provide the PV.

NV Energy would manage the transmission interconnection. With transmission access, a small portion of that land could be offered at a low or zero cost lease to support huge solar projects. Other federal lands could be identified and made available over time.

A national feed-in tariff would be straight-forward to implement. One model would be to establish a Renewable Power Marketing Authority to buy and resell the electricity at a price that would attract buyers. Any revenue shortfall would be covered by federal appropriations, but the cost of the program should be low. For a 100 MW PV project that lost $.03 for every kWh generated, the annual cost would be roughly $6 million per year. But at the aggressively low standard offer prices there is only a very small chance the projects would lose money.

We believe this simple step by offering a transparent, accessible price tied to a long-term contract could accelerate major technology advances out of labs and turn development companies into mainstream companies.

Once scaled up, these breakthrough technologies would assure that renewable energy would become a major source of utility power projects. These new and increasingly cost effective technologies would go a long way to assuring that renewable energy contributes to not only stabilizing climate change and increasing our energy security, but to also seriously lowering the cost of meeting those goals.

For Nevada the benefits would be dramatic. Cutting edge solar manufacturing would move to southern Nevada. NV Energy would lead the development of the transmission upgrade. The area would host the largest solar installation in the world. And perhaps, Nevada would cut through the difficult project development maze and lead the development of solar energy that could replace fossil fuel generation. It would be a Hoover Dam for the 21st century.