Cloudy forecast: Nevada solar rulings spur concerns about chilling effect on investment

Tera Mills, center, and other solar supporters rally in front of Public Utilities Commission offices Wednesday, Jan 13, 2016. Mills said her parents have installed solar panels on their rooftop.

When SolarCity came to Nevada in 2013, the Las Vegas Metro Chamber of Commerce moved out of its space, subleasing it to the Silicon Valley solar company for use as a headquarters.

The move, which helped SolarCity accelerate its plans to tap a market where the sun shines virtually year-round, was a big moment in Nevada's economic development. Politicians from Gov. Brian Sandoval to Sen. Harry Reid to Rep. Joe Heck made appearances at the opening of the SolarCity headquarters in Town Square.

Today, though, the promise of that festive day has collapsed amid contraction of the solar industry in Nevada, where companies have scaled back in reaction to a recent ruling by utility regulators establishing new fees for solar customers.

Click to enlarge photo

Clark County Commissioner Steve Sisolak, Rep. Joe Heck and Gov. Brian Sandoval, right, gather around Senate Majority Leader Harry Reid as he greets SolarCity CEO Lyndon Rive after cutting the ribbon to open the Las Vegas office of SolarCity at Town Square, Wednesday, Aug. 14, 2013.

With the ruling and big solar retreat, some worry about how much the recent developments will chill investment from Silicon Valley.

“People will question whether or not Nevada has a long-term commitment to supporting clean energy,” said Rose McKinney-James, a lobbyist and a consultant on clean energy policy. “How we work through this will determine whether we see new investment in this area going forward.”

The Public Utilities Commission of Nevada, which regulates NV Energy and approved the new rates, is in the process of hearing requests to revisit the new tariffs implemented Jan. 1. The ruling increased bills for solar customers by raising a fixed fee and slashing the value of credits users can earn for generating excess energy under a program known as net metering.

But several Silicon Valley investors — partners from well-known venture firms like Draper Fisher Jurvetson and Kleiner Perkins Caufield & Byers — already are speaking out about the ruling.

“We are gravely concerned about the unprecedented decision to impose significantly new charges on existing customers and reduce the value of the credit for excess generation,” clean energy investors wrote in a letter last week. “This is already creating a chilling effect within the investor community and will force us to reconsider future commitments of capital in the state.”

The letter’s organizer, Nancy Pfund, a managing partner at DBL Partners, said in an interview that in addition to the monetary impact of the rates, the ruling also would temper the enthusiasm of the industry here.

“Already, the state has lost the dynamism,” she said.

Pfund, whose firm invests in SolarCity and Tesla, said that many were feeling positive about the state after it lured the electric car company’s battery manufacturing plant to Northern Nevada. Given that the factory will be producing home batteries that could be used to store energy created by rooftop solar panels, Pfund called the increased costs for solar customers a “disappointing irony.” And it’s a decision Pfund predicts could have a ripple effect on investment in other areas.

“It just makes people think: ‘Wow. If that can happen in that industry, we need to be very careful going forward,’” she said. “I think that’s a very logical progression of thought.”

Robert Lang, executive director of Brookings Mountain West at UNLV, expressed concern that the ruling would damage economic development efforts by sending the wrong signal to investors.

Most businesses consider Nevada a good place for business because it has little regulation, low costs and offers competitive incentive packages, Lang said. But he worries the commission’s decision shows investors a side of the state that they do not often think about — that there are regulatory barriers to entry if a new company is going up against a giant like NV Energy.

“If the state appears rigged, it’s going to ruin our diversification efforts,” he said.

He likened the situation with the experience of ride-sharing companies attempting to enter the Nevada market. After launching in 2014, a judge banned Uber from operating here, citing risks to safety and a violation of rules. Despite opposition from taxicab companies, the ride-sharing firms hired lawyers and lobbyists and eventually were permitted to operate through legislation.

“Uber hired the right lobbyists,” Lang said. “My advice to the solar industry, my advice to Silicon Valley: Sure, you can operate in Las Vegas, but you’d better hire the right lobbyists.”

Lang predicts that if it fights the new rules, solar could prevail. “At the end, I think unless NV Energy can generate cloudy weather and keep out the sun, it may lose this battle,” he said.

That suggests that the companies could be back and their exits could be a temporary setback rather than a permanent blow to economic development. Others argue that it is important to keep the ramifications of the commission’s ruling in perspective. The ruling applies to rooftop solar for residential housing or small business but not to solar for large customers or utility-scale projects.

“We hate to see anything that hurts any part of the renewable sector, but utility-scale developers are not as impacted by this decision,” said Sarah Cottrell Propst, executive director of Interwest Energy Alliance, a nonprofit trade association that represents a variety of renewable interests.

For large projects, she said her organization still considered Nevada a promising market.

“Nevada has made clean technology a big part of its economic development agenda,” she said.

In 2011, a plan for economic development, prepared by Brookings Mountain West, identified clean energy, including solar energy, as a high-potential development target for the state.

Nevada’s renewable standards require it to have a portfolio of 25 percent renewable energy by 2025. As of this year, at least 6 percent of that portfolio is required to be generated by solar facilities.

In many ways, the state has encouraged the solar sector. The Governor’s Office of Energy lists several subsidies and incentives that have been provided to solar projects. They include $459 million in tax abatements for 16 commercial-scale solar projects that have resulted in 2,900 jobs, more than $8 million in grants and loans for small and large projects throughout the state and $230 million in incentives through an NV Energy program for rooftop solar customers.

“The Governor’s Office of Energy has been instrumental in promoting development of innovative solar projects around the state to serve local economic needs,” Angie Dykema, the office’s director, said in a statement. “We are continually seeking opportunities to promote and encourage the development of new solar projects and programs which benefit the industry and are aligned with our agency’s mission to lead the nation in renewable energy production."

One of these projects is a 100-megawatt solar power plant near Boulder City. It is projected to receive $22 million in incentives and to result in $228 million in improvements, payroll and taxes. Officials expect it to create 120 jobs in its one year of construction.

“Boulder Solar is another example of a project attracted by the streamlined permitting in Nevada and enhanced incentives offered through my Office of Energy,” Sandoval said in a statement. “We have proven to solar energy developers that Nevada means business."

But economic development officials have avoided commenting on the net metering decision. The Governor’s Office of Economic Development did not respond to requests for this story. Las Vegas Global Economic Alliance, the primary economic development authority in Southern Nevada, has not commented directly on the decision except to say that NV Energy, businesses and solar companies should all be part of the mix to provide affordable and reliable energy.

Sandoval has repeatedly said he would not intervene with the commission’s decision in the net metering case since his appointees on the three-member panel serve as a quasi-judicial body.

Deliberation of the new rates is far from settled. Several parties have asked the commission to reconsider the rates. Parties could further challenge the PUC decision in court.

The PUC sees the new rates as a measure to ensure solar customers, who buy less electricity and avoid paying some of the utility’s fixed fees, are not shifting costs to other ratepayers.

The Bureau of Consumer Protection, which represents ratepayers in these matters, is arguing for a more moderate approach. Solar advocates argue the cost shifts are false and that the rules fail to factor benefits of solar to all ratepayers, which include effects on the environment, a reduction of strain on the grid, and the decreased need for NV Energy to invest in infrastructure.