(BRK.A), (BRK.B)
Berkshire Hathaway’s NV Energy has been in a fight on several fronts. On one side it has rooftop solar companies, such as Solar City, trying to pitch consumers to generate their own electricity. On the other side are major casinos that are looking to dump NV Energy because they say their rates are too high.
Both MGM Resorts and Wynn Resorts are paying tens of millions to exit the NV Energy power grid on October 1.
Faced with these challenges, NV Energy is doing the smartest thing it can. It is working to cut the cost of generating electricity in order to make it the most attractive option for residential and commercial customers alike.
A proposed 100-megawatt solar project in Boulder City, Nevada, will do just that. When it comes on-line in 2018, it will produce electricity at only four cents per kilowatt-hour, which is one of the lowest costs in the United States.
The new solar energy project is the result of a Request for Proposals that was issued earlier this year. With the oversight of an independent evaluator, NV Energy signed a 25-year power purchase agreement with Techren Solar LLC to build a 100-megawatt high-efficiency single-axis solar photovoltaic project in Eldorado Valley. The project is in the development phase and, subject to regulatory approval, is expected to be operational in the fourth quarter of 2018.
NV Energy’s Senior Vice President of Energy Supply Kevin Geraghty noted that the selection criteria for the new solar project was primarily based on the best value to NV Energy customers, but also factored in economic and job benefits to Nevada.
“At an average cost of energy for the life of the project at approximately four cents per kilowatt-hour, this is one of the lowest-cost solar projects in the nation. And, we are very pleased with the fact that Techren has already signed a work-site agreement with local unions 357 and 396 of the International Brotherhood of Electrical Workers,” Geraghty said.
This is not the first low-cost solar deal for NV Energy. In 2015 it agreed to a 20-year fixed-rate contract for First Solar’s soon to be built 100 MW Playa Solar 2 at the low rate of only 3.87 cents a kilowatt-hour.
Retiring Higher Cost, High Polluting Coal-Fired Plants
The other part of the battle is getting rid of higher cost, legacy coal-fired plants. The plants not only cost a lot to run, but put NV Energy on the wrong side of green consumers.
Also in its August 15 filing, NV Energy proposed an earlier retirement date for the remaining 257-megawatt coal-fired unit at the Reid Gardner Generating Station. The proposal asks to move the original December 31, 2017, retirement date to February 28, 2017.
NV Energy already retired the first three generating units at Reid Gardner at the end of 2014, and is also exiting its participation in Arizona’s coal-fired Navajo Generating Station by the end of 2019.
Lots of Sunshine
With Nevada having an average of 294 sunny days a year, it’s one the most attractive states for rooftop solar, but that also makes it one of the best states for large-scale solar farms.
The good news for NV Energy, and all of Berkshire Hathaway Energy, is the cost of large-scale solar power generation has dropped far more rapidly than analysts had predicted.
The U.S. Department of Energy (DOE) noted that “2020 price projections are approximately one-half of what same analysts projected 5-10 years ago.”
The DOE is projecting a decline in solar PV system module prices for utility scale installations from its $4 in 2010 to less than $2 by 2016. Utility-scale PV is defined as ground-mounted systems that are greater than ≥5 megawatts.
NV Energy is betting that it can retain customers by aggressively lowering the cost of power generation with low-cost, long-term agreements, and by closing its legacy coal-fired generating plants. Its planned 100-megawatt Techren Solar project will bring NV Energy’s total renewable energy portfolio to more than 1,900 megawatts–enough energy to serve more than a million average homes.
It’s the right plan for NV Energy in the battle for the Nevada consumer.
© 2016 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.