A publication of 
DECEMBER 14, 2009
Vol. 1, Issue 8
Uncertain Future Impacts Power Plant Decisions
Jeff Ceccarelli, senior vice president of energy supply for NV Energy
A
s senior vice president of energy supply for NV Energy, Jeff Ceccarelli knows what it takes today to keep Nevada humming with electricity. What he doesn’t know is what it will take in the future.
A lagging economy and lingering questions over climate-change legislation in Washington are forcing NV Energy to take a wait-and-see approach before committing massive funds to new power plant projects.
“Our biggest challenge right now is the downturn in the economy,” says Ceccarelli, who first joined NV Energy in 1972 as a student engineer while attending the University of Nevada, Reno. “It has put a lot of pressure on our customers financially, and we see that in the difficulties they have in their bills and credit issues, etc. In the longer term, we face the uncertainties around the impacts associated with national energy policy. That is one we are all trying to understand and prepare for.”
These concerns prompted NV Energy recently to put its planned Ely Energy Center on hold. The $3.8-billion project would have generated 1,500 megawatts of electricity at two coal-fired power plants in rural East Central Nevada. The plants originally were scheduled to come online in 2011 and 2014.
“The company made a decision to put the Ely Energy Center on hold six months ago, pending some clarity going forward on the impacts of climate legislation and cap-and-trade,” Ceccarelli says. “Carbon sequestration has not been effectively proven yet, and that was the rationale for putting the Ely Energy Center on hold.”
What’s not being delayed, however, is the planned 235-mile-long transmission line from near Ely to northeast Las Vegas. “That project will be back in front of our state commission for review in December, with a tentative in-service date of end of 2012,” the
NV Energy executive says. “Even though the coal plant portion of the project is on hold, the transmission project continues to move forward.”
At an estimated cost of $500 million, the 500-KV transmission line represents one of the largest power infrastructure projects in the West. The project is necessary to meet the demand of 2.4 million NV Energy customers in Nevada and northeastern California.
Major markets served by the utility include Las Vegas, Reno-Sparks, Henderson, Elko and South Lake Tahoe. NV Energy, whose origins date back over 150 years, also supplies natural gas to more than 145,000 people in the Reno-Sparks area. The company’s total service area covers 54,500 square miles.
The challenge is forecasting demand, notes Ceccarelli, who received a degree in civil engineering and also completed the Public Utility Executive Program at the University of Michigan. In a recent interview with Site Selection in Reno, Ceccarelli addressed this challenge and how his company would adapt.
SITE SELECTION: How is NV Energy positioned with power capacity, and how do you see future demand impacting that capacity?
JEFF CECCARELLI: The incredible growth that we had experienced through the middle part of this decade — nominally 4 to 5 percent — is now basically flat. We are not seeing growth rates at that level. Customer hook-ups are growing at 1 percent or less. So the sense of urgency that we had in 2005 and 2006 to increase generating capacity has been moderated. Our forecasts indicate growth to be very slow through 2010 and then pick up in 2011. We are looking forward to the days that growth returns at some level.
SS: What are your infrastructure plans now and going forward?
CECCARELLI: The push for large infrastructure additions around the Las Vegas strip has diminished. Building projects have either been completed or put on hold in Vegas. We are no longer seeing the push for
demand and infrastructure. We see demand being pretty slow through 2010 and not back to 5 percent levels, but more at 2 to 3 percent. We look at it in the form of our integrated resource plan filing in December. We have no additional generation beyond the Harry Allen project in what we call the 3-year action plan. That is from the end of 2009 for the next 3 years. But we do have money to study potential sites that we might be able to utilize further downstream. (Editor’s Note: The Harry Allen project is a new 484-MW natural-gas, combined-cycle, electric-generating plant about 25 miles northeast of Las Vegas. It is set to come online by the summer of 2011.)
SS: What is NV Energy doing in the area of renewable energy?
CECCARELLI: We still have increasing quantities of renewable power generation coming into the system. We have an abundance of geothermal resources in Northern Nevada, solar power in both the north and the south, and wind energy generation in the east. The driver for that is the Renewable Portfolio Standard which establishes targets for renewable energy as part of our overall portfolio. In 2009, the target for our company was 9 percent to come from renewable resources. We slightly exceeded that in 2009. That target ramps up to 25 percent by 2025. It increases every couple of years. Most of those renewable resources have come in the form of purchase power contracts. We have bought the output from geothermal facilities and solar plants. We are starting to partner in at least one geothermal deal and take more of an ownership position. The Carson Lake project is a good example. (Editor’s Note: The Carson Lake geothermal energy project near Fallon, Nev., about 70 miles east of Reno, is expected generate at least 30 megawatts of net power.)
SS: What are you seeing in Nevada in terms of economic development?
CECCARELLI: The number of inquiries and potential locations of companies is at an all-time high. That may be driven by the economy just to the west of us in California. They are having an even more difficult time than Nevada. Opportunities for renewable energy and an overall favorable business and tax climate make us a good spot for companies to analyze for relocation.
SS: How has the Reno-Sparks area been impacted by the recession?
CECCARELLI: The gaming industry has been hit very hard in both the north and the south. In downtown Reno, you can see the strain on the local gaming operations. But we do have a little more diverse business climate in the north than in the south. The overall economy has also dampened the meetings and convention business, but there appears to be some early signs of recovery. It is starting to pick up a little bit.
SS: What are some emerging industries in Nevada?
CECCARELLI: The renewable energy industry is a potentially unique growth opportunity. The north has an abundance of geothermal. The south is at the center of the highest solar rate in the country. Both are great opportunities for Nevada. Also, because we have an abundance of renewable energy, companies that would like to be branded as green are looking at Nevada as an opportunity to help them do that.
SS: What is the perception of Nevada and its business climate, especially among corporate executives?
CECCARELLI: I think there is a perception that we have a favorable business climate and a favorable tax climate. But I don’t know if there is a deep understanding of all the benefits that may be associated with this area. There are some preconceived notions about the gaming industry relative to the state. In the north, the economy in the business community is well diversified. Those misconceptions about our state can be a bit hard to overcome. But there are an awful lot of advantages that businesses can find here — once they understand the facts.
SS: What challenges do you see NV Energy facing two years from now?
CECCARELLI: In two years, I hope we will be talking about the challenges of dealing with growth and integrating renewable energy into our existing grid, and the challenges of operating — for the first time — an integrated north-south electric system. The transmission line project associated with Ely is called the ON Line or the One Nevada Line. It will interconnect the northern utility and the southern utility, which today have no interconnection. That will be significant for our company.
A lagging economy and lingering questions over climate-change legislation in Washington are forcing NV Energy to take a wait-and-see approach before committing massive funds to new power plant projects.
“Our biggest challenge right now is the downturn in the economy,” says Ceccarelli, who first joined NV Energy in 1972 as a student engineer while attending the University of Nevada, Reno. “It has put a lot of pressure on our customers financially, and we see that in the difficulties they have in their bills and credit issues, etc. In the longer term, we face the uncertainties around the impacts associated with national energy policy. That is one we are all trying to understand and prepare for.”
These concerns prompted NV Energy recently to put its planned Ely Energy Center on hold. The $3.8-billion project would have generated 1,500 megawatts of electricity at two coal-fired power plants in rural East Central Nevada. The plants originally were scheduled to come online in 2011 and 2014.
“The company made a decision to put the Ely Energy Center on hold six months ago, pending some clarity going forward on the impacts of climate legislation and cap-and-trade,” Ceccarelli says. “Carbon sequestration has not been effectively proven yet, and that was the rationale for putting the Ely Energy Center on hold.”
What’s not being delayed, however, is the planned 235-mile-long transmission line from near Ely to northeast Las Vegas. “That project will be back in front of our state commission for review in December, with a tentative in-service date of end of 2012,” the
The new gas-fired Tracy Combined Cycle Plant east of Reno generates up to 541 megawatts of energy for northern Nevada. Completed in the summer of 2008, the plant increased NV Energy’s northern Nevada generating capacity by more than 50 percent.
At an estimated cost of $500 million, the 500-KV transmission line represents one of the largest power infrastructure projects in the West. The project is necessary to meet the demand of 2.4 million NV Energy customers in Nevada and northeastern California.
Major markets served by the utility include Las Vegas, Reno-Sparks, Henderson, Elko and South Lake Tahoe. NV Energy, whose origins date back over 150 years, also supplies natural gas to more than 145,000 people in the Reno-Sparks area. The company’s total service area covers 54,500 square miles.
The challenge is forecasting demand, notes Ceccarelli, who received a degree in civil engineering and also completed the Public Utility Executive Program at the University of Michigan. In a recent interview with Site Selection in Reno, Ceccarelli addressed this challenge and how his company would adapt.
SITE SELECTION: How is NV Energy positioned with power capacity, and how do you see future demand impacting that capacity?
JEFF CECCARELLI: The incredible growth that we had experienced through the middle part of this decade — nominally 4 to 5 percent — is now basically flat. We are not seeing growth rates at that level. Customer hook-ups are growing at 1 percent or less. So the sense of urgency that we had in 2005 and 2006 to increase generating capacity has been moderated. Our forecasts indicate growth to be very slow through 2010 and then pick up in 2011. We are looking forward to the days that growth returns at some level.
SS: What are your infrastructure plans now and going forward?
CECCARELLI: The push for large infrastructure additions around the Las Vegas strip has diminished. Building projects have either been completed or put on hold in Vegas. We are no longer seeing the push for
The new 500-megawatt, natural gas-fired, combined cycle generating plant NV Energy is constructing at its Harry Allen Generating Station is expected to be producing power for southern Nevada by summer of 2011. Most of the company’s new generating facilities, including the Harry Allen project, are highly efficient combined cycle plants. The gas-fired combustion turbines generate energy, and waste heat from the turbines is captured and used to run traditional steam generators. These air-cooled power plants also use less water than older generation gas-fired power plants.
SS: What is NV Energy doing in the area of renewable energy?
CECCARELLI: We still have increasing quantities of renewable power generation coming into the system. We have an abundance of geothermal resources in Northern Nevada, solar power in both the north and the south, and wind energy generation in the east. The driver for that is the Renewable Portfolio Standard which establishes targets for renewable energy as part of our overall portfolio. In 2009, the target for our company was 9 percent to come from renewable resources. We slightly exceeded that in 2009. That target ramps up to 25 percent by 2025. It increases every couple of years. Most of those renewable resources have come in the form of purchase power contracts. We have bought the output from geothermal facilities and solar plants. We are starting to partner in at least one geothermal deal and take more of an ownership position. The Carson Lake project is a good example. (Editor’s Note: The Carson Lake geothermal energy project near Fallon, Nev., about 70 miles east of Reno, is expected generate at least 30 megawatts of net power.)
SS: What are you seeing in Nevada in terms of economic development?
CECCARELLI: The number of inquiries and potential locations of companies is at an all-time high. That may be driven by the economy just to the west of us in California. They are having an even more difficult time than Nevada. Opportunities for renewable energy and an overall favorable business and tax climate make us a good spot for companies to analyze for relocation.
SS: How has the Reno-Sparks area been impacted by the recession?
CECCARELLI: The gaming industry has been hit very hard in both the north and the south. In downtown Reno, you can see the strain on the local gaming operations. But we do have a little more diverse business climate in the north than in the south. The overall economy has also dampened the meetings and convention business, but there appears to be some early signs of recovery. It is starting to pick up a little bit.
SS: What are some emerging industries in Nevada?
CECCARELLI: The renewable energy industry is a potentially unique growth opportunity. The north has an abundance of geothermal. The south is at the center of the highest solar rate in the country. Both are great opportunities for Nevada. Also, because we have an abundance of renewable energy, companies that would like to be branded as green are looking at Nevada as an opportunity to help them do that.
Nevada Solar One is comprised of 182,000 mirrors on 400 acres south of Las Vegas that concentrate the sun’s rays onto fluid-filled tubes that produce steam to drive a conventional turbine. Completed in June 2007, Nevada Solar One is the third-largest concentrating solar power plant in the world and the first such plant built in 17 years. NV Energy purchases the plant’s entire 64-megawatt output.
SS: What is the perception of Nevada and its business climate, especially among corporate executives?
CECCARELLI: I think there is a perception that we have a favorable business climate and a favorable tax climate. But I don’t know if there is a deep understanding of all the benefits that may be associated with this area. There are some preconceived notions about the gaming industry relative to the state. In the north, the economy in the business community is well diversified. Those misconceptions about our state can be a bit hard to overcome. But there are an awful lot of advantages that businesses can find here — once they understand the facts.
SS: What challenges do you see NV Energy facing two years from now?
CECCARELLI: In two years, I hope we will be talking about the challenges of dealing with growth and integrating renewable energy into our existing grid, and the challenges of operating — for the first time — an integrated north-south electric system. The transmission line project associated with Ely is called the ON Line or the One Nevada Line. It will interconnect the northern utility and the southern utility, which today have no interconnection. That will be significant for our company.
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©2009 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.
©2009 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.