Warren Buffet discovers renewable gold in Nevada.

 

Nevada's Solar Energy Catastrophe

27 September 2024

Norman Rogers

 

Nevada is under a spell promoted by a marriage of strange bedfellows – one of the world’s richest investors, Warren Buffet, and liberal environmental non-profits, like the Sierra Club. Each of these bedfellows are promoters of solar energy, but for different reasons.
 

The owner of NV Energy, Nevada's electric utility, is Warren Buffet’s company Berkshire Hathaway. He purchased NV Energy to make money, not to save the world from climate change. Not only does he own Nevada's electricity system, but he also owns the Kern River Pipeline that brings the natural gas to Nevada that powers the electric generating plants.

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The Sierra Club is an over-the-top promoter of solar energy. It does not hesitate to make comically exaggerated claims, such as claiming that solar electricity is cost competitive with fossil fuel electricity. Without state and federal subsidies solar electricity costs as much as seven times more than electricity from natural gas. With the subsidies it still costs at least double. Given the looming possibility of a Trump administration, there is a good chance that the federal subsidies will go away.

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The official goal of Nevada is to increase renewable power, mainly solar, to 50 percent of the electricity by 2030.  The numerous new solar plants that are in the works incorporate time shifting batteries to move the midday solar peak to the early evening. The batteries are very expensive and increase the cost of solar power by at least a third. Solar cannot replace any significant portion of Nevada's natural gas plants because solar does not work when it is cloudy or at night. All those plants must remain in place, fully staffed and ready to step in on short notice. 

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The biggest rationalization for solar power is reducing CO2 emissions to prevent a climate disaster.  Using solar power to reduce CO2 emissions is incredibly expensive, about $400 per metric ton of CO2 emissions avoided. Using nuclear power to reduce CO2 emissions is at least three times cheaper per ton.

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Currently nuclear power is not a realistic option for Nevada. Due to the sustained attack on nuclear by environmental non-profits a generation ago, nuclear is nearly dead in the U.S. Nuclear is alive and well in places like France, China and Korea. Because the U.S. is blessed with incredible reserves of cheap coal and natural gas, nuclear is not cost competitive unless we are willing to pay a premium for the supposed benefit of CO2 reduction.

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It is hard to justify spending billions to reduce CO2 emissions in Nevada when Chinese emissions are rapidly increasing as they construct new coal generating plants every week. New Chinese emissions will quickly erase any Nevada efforts to reduce emissions.

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Nuclear has great future possibilities that will take decades to materialize. For example, liquid salt thorium reactors could utilize vast resources of thorium and be both cheaper and safer.

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Solar electricity promises to be a bonanza for Warren Buffet. Regulated utilities like NV Energy are allowed to make a profit in proportion to the value of their capital investment in power lines and generating plants. For NV Energy they are allowed about 10 percent of their capital investment as their annual profit. The capital investment depreciates each year according to a schedule. The depreciation is considered an operating expense and is paid for by the customers. The key to higher profits is making more capital investments. They cannot do this except as approved by the Public Utility Commission. Solar power involves about four times as much capital investment per kilowatt hour of output compared to natural gas. NV Energy is starting to purchase solar plants from the independent power producers that currently own them. Depending on the way these purchases are treated profits will increase. They are building the “greenlink” $4 billion power line from southern to northern Nevada that can be expected to enter their rate base, further augmenting profits. The emerging picture is that solar energy is great for Warren Buffet’s bottom line.

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Given that NV Energy and the PUC are engaged in a joint crusade to adopt solar electricity it seems doubtful that the PUC will too hard on their joint crusader. In a contest of wits between Warren Buffet operatives and the PUC it is likely that the Buffet side will come out on top. Big corporations that are regulated usually capture their regulators.

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A more rational approach to energy planning would be to authorize the continued use of natural gas as a bridge to nuclear. Nuclear could become highly practical in ten or fifteen years. The bridge approach is under discussion in Europe where they have traveled further down the green road with dubious results.