DEVELOPING NEVADA’S CLEAN ENERGY RESOURCES

FORWARD
This analysis was prepared by Clean Energy Project using McKinsey’s US Low Carbon Economics Tool, which is a neutral, analytic set
of interlinked models that estimates potential economic implications of various policies using assumptions defined by Clean Energy
Project. The policy scenarios, input assumptions, conclusions, recommendations and opinions are the sole responsibility of Clean Energy
Project and are not validated or endorsed by McKinsey. McKinsey takes no position on the merits of these assumptions and scenarios or
on associated policy recommendations.
More background about McKinsey's US Low Carbon Economics Tool is available here:
http://www.mckinsey.com/clientservice/sustainability/low_carbon_economics_tool.asp

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Developing Nevada’s Clean Energy Resources
October 2010

1. Executive summary
Nevada currently imports nearly all of its fuel for energy, whether in the form of
natural gas, coal, petroleum or electricity. However, the state has vast domestic energy
resources in the form of renewables and energy efficiency. Nevada has an opportunity
to save over $300 million dollars per year by 2025 due to decreased energy imports
and increased electricity exports if the state aggressively pursues the development of
its clean energy resources. In this scenario of clean energy export plan, Nevada could
increase its GDP by $540 million and create over 9,000 clean energy jobs directly
supporting the new clean energy infrastructure by 20251.
This report explores the path we are currently on for clean energy development in
Nevada and the opportunity in Nevada to build a stronger clean energy economy in
more detail. It presents plausible pathways to capturing the value at stake, quantifies
the impact of these pathways on Nevada ratepayers, jobs, and GDP, describes likely
barriers to achieving the opportunity, and discusses potential policy and other measures
that could help overcome these barriers.
2. The opportunity for developing clean energy in Nevada
Nevada imports nearly all of the fuel required to generate electricity for the state’s
consumers and businesses. In 2008, almost 90% of the electricity generated in Nevada
was from out-of-state fuel sources (Figure 1). This power was produced using $1.7
billion of imported fossil fuel: $1.3 billion of natural gas and $400 million of coal. In
addition, Nevada imported 1.2 million MWh of electricity (3.4% of its electricity,
worth approximately $60 million) from out-of-state generators.

1 This accounts for green jobs associated with building and operating renewable energy facilities and transmission lines, and retrofitting buildings. Does not account for job losses in other industries
3
Figure 1: 2008 generation mix and costs

In 2008 almost 90% of the

Nevada generation mix in 2008 Associated Fuel Costs
TWh $Millions electricity generated in Nevada
Imports 36.3 was from out-of-state fuel sources
1.2
Renewables*
Hydro*
1.8
1.5
1,300
(Figure 1). This power was
All gas imported
produced using $1.7 billion of
from other states
imported fossil fuel: $1.3 billion of
Gas 24.0
natural gas and $400 million of
coal. In addition, Nevada
400
imported 1.2 million MWh of
Coal 7.8 electricity (3.4% of its electricity,
2008 Coal Gas
worth approximately $60 million)
from out-of-state generators.
* Small hydro is included in total hydro, not renewables
SOURCE: Energy Information Administration; SNL Financial Database; SEC Form 10-K

However, Nevada has large and high-quality renewable energy resources and significant energy efficiency potential. The combination of
energy efficiency and renewable power could reduce Nevada’s energy imports, increase its exports of electrical power and stimulate a
local clean energy industry.
Renewables
Nevada has among the best geothermal resources in the country. Geothermal energy could theoretically supply between 1,500 and 3,000
MW of baseload generation capacity (10 – 20 million MWh of energy per year, or 30-60% of Nevada’s total demand), a potential second
only to California. Much of the state, particularly the north, contains known or potential geothermal resources (Figure 2). In addition,
geothermal power generation has an established track record and a potential that will continue to grow as exploration technologies are
refined and costs drop.

4
 Figure 2: Nevada has among the best geothermal resources in the US

SOURCE: National Renewable Energy Lab

Nevada also contains world-class solar resources (Figures 3 and 4). Solar energy, including both solar thermal and utility-scale
photovoltaic generating plants, could theoretically provide orders-of-magnitude more electricity than needed to meet Nevada’s peak
demand. The limiting factors for solar generation are therefore not the size of the renewable resource, but siting, transmission and
economic constraints.

5
Figure 3: Nevada has among the best solar PV resources in the US

SOURCE: National Renewable Energy Lab

6
 Figure 4: Nevada has among the best solar thermal resources in the US

It found that the U.S. could

save up to 23 percent of
projected energy demand
in the residential,
commercial and industrial
sectors. These measures, if
put in place, would cost
$520 million but save a
total of $1.2 trillion in
energy costs.

SOURCE: National Renewable Energy Lab

Other renewable resources in Nevada include wind, distributed generation (mostly solar photovoltaic) and solar hot water heaters. Nevada
has between 15,000 and 20,000 MW of wind energy potential. There is several hundred MW of distributed solar PV potential on homes
and commercial buildings, which could provide hundreds of thousands of MWh of energy per year (a few percent of total demand).
Finally, solar hot water heaters could reduce electricity demand by displacing electric water heaters, potentially saving 1.2 – 1.5 million
MWh (3-4% of total demand) per year (and removing the need for ~350 MW of generating capacity).2
Energy efficiency
A report published in 2009 by McKinsey & Company examined in detail the potential for greater efficiency in non-transportation uses of
energy, including the effect of measures such as retrofitting homes, installing more efficient appliances and lighting and constructing
more energy-efficient new buildings.3 It found that the U.S. could save up to 23 percent of projected energy demand in the residential,
commercial and industrial sectors. These measures, if put in place, would cost $520 million but save a total of $1.2 trillion in energy costs.

2 Department of Energy (EnergyStar)

3 “Unlocking Energy Efficiency in the U.S. Economy”, McKinsey, 2009
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 This large net savings could be obtained
because the cost of energy efficiency
measures is usually significantly lower Electricity savings
than the cost of energy. For example, gas specifically are of interest
generation costs 5-7 cents/KWh, whereas for this report. Energy
saving a KWh of energy through efficiency efficiency measures could
costs on average about 3 cents/KWh.4
save up to 13 million
In Nevada, the total economic (NPV- MWh of electricity (33%
positive) energy efficiency potential in
of total electricity demand
buildings and industry using known
technologies is 153 trillion BTUs in 2025, in 2025), removing the
or 26% of Nevada’s estimated energy need for about 3,000 MW
usage in those sectors (Figure 5). Although of generating capacity, or
this potential savings opportunity is large, 30% of today’s capacity.
capturing it in practice could be very
difficult, given multiple barriers that
impede the deployment of energy
efficiency measures. Most energy efficiency programs are expected to capture less
than a third of the total economic potential. The barriers to capturing energy
efficiency, and ways to overcome them, will be discussed in Section 5.
The largest energy efficiency opportunity is in residential and commercial buildings,
where measures such as retrofitting homes (improving insulation, sealing ducts,
replacing windows, etc.), using more efficient appliances and lights and adhering to
strict building codes could save about 30% of energy use in these sectors.
Electricity savings specifically are of interest for this report. Energy efficiency
measures could save up to 13 million MWh of electricity (33% of total electricity
demand in 2025), removing the need for about 3,000 MW of generating capacity, or 30% of today’s capacity.

4 K. Gillingham, et. al., “Energy Efficiency Policies: A Retrospective Examination”, Annual Review of Environmental Resources, 2006.
8
 Figure 5: Nevada’s economic energy efficiency potential in 2025 is 26% of
stationary energy consumption Residential
Nevada stationary end-use energy demand, 2025 Commercial
Trillion BTU
Industrial

593

491 -26%
208
440

178
148 -29%

175
132
120 -31%

181 209
172 -18%

No action 2010 No action 2025 With full potential 2025

SOURCE: Energy Information Administration

Typically, energy efficiency refers to demand-side savings, but there may also be a significant opportunity on the supply side. Various
estimates suggest 2% to 6% savings from such measures as transmission loss reduction and voltage variation reduction,5 resulting in 0.88-
2.4 million MWh of energy savings.

5 “Energy Efficiency in the Power Grid”, ABB 2007; IEEE article

9
3. The economics of renewables and efficiency
Renewables.
There are multiple economic impacts from building renewable generation. Primary effects include the following.

Figure 6: Jobs created by typical clean energy projects Indirect/induced

Estimated job creation by clean technology investments Direct

Number of jobs

Initial jobs per year during construction*

1,140

830

900 610
520
600
410
390

240 230 200

130

Ongoing permanent jobs

90

20
15
5

100 MW Solar PV 100 MW Geothermal 100 MW Wind 500 KV, 200 mile
transmission line
(600 MW capacity)

* Assuming 2-year project length

1. Job creation from construction and operations.

Figure 6 shows job creation numbers for typical projects in a two year time period: a 100 MW solar PV installation, a 100 MW
geothermal plant, a 100 MW wind farm, and a 200-mile long 500 kV transmission project. The total job impact is due to direct
construction, engineering, and other project jobs; indirect jobs from demand along the renewables supply chain; and induced jobs created
as the income earned in direct and indirect sectors is spent on additional products and services (e.g., restaurant meals purchased by
renewables construction workers). These job gains will be accompanied by a small number of job loss in sectors where demand is
reduced (e.g., coal and gas generation). However, because Nevada has no significant coal mining or natural gas production, these losses
are found primarily in other states.
10
 Note that because many of Nevada’s renewable resources are located in rural areas (especially the
Establishing 400 MW/year geothermal resources that dominate the renewables mix over the next 10-15 years), many of the
of solar panel jobs created during the construction phase could be filled by workers from rural communities.
manufacturing capacity in 2. Increase in GDP due to changes in trade
Nevada (enough to meet Renewables generation benefits state GDP by improving Nevada’s balance of trade, reducing
Nevada’s peak solar imports of fuel and power and increasing exports of power. 6 For example, a new 100 MW solar PV
module demand), plant and 100 MW geothermal plant could produce a total of 800,000 MWh of electricity. Some of
including wafer, cell and this additional electricity could displace gas-generated electricity (if it were used within the state),
while some of it could be exported. For example, if half (400,000 MWh) of the renewable
module manufacturing, electricity was used in Nevada and displaced 400,000 MWh of gas-generated electricity, and the
would create 6,000 – other half of the electricity was exported, state GDP would increase by about $405 million per year.
7,000 jobs.
3. Other impacts
Increased renewables deployment has a number of positive impacts not directly quantified by the model. These include the financial
value of reduced exposure to volatile gas and potential CO2 prices, possible future monetary transfers in any national Renewable Energy
Credit market, and the additional benefits to Nevada’s economy if the increased deployment accelerates the growth of Nevada’s clean
energy industries.
Although these impacts were not included in the calculations, their impact could be quite large. For example,
a) A 30% reduction in natural gas generation (similar to what is achieved in our clean energy scenarios below) would reduce the
cost of a hypothetical future gas price spike (to $10/MMBTU) by $340M per year, assuming that gas spikes up from a long-
term price of $6/MMBTU.
b) If future U.S.carbon prices reach $30/ton, as envisioned under many national policy scenarios, the clean power deployment
modeled below would save Nevada $60-$150M per year (based on an estimated carbon dioxide emissions reduction of 2-5
million tons per year) vs. a scenario with no clean power deployment
c) Establishing 400 MW/year of solar panel manufacturing capacity in Nevada (enough to meet Nevada’s peak solar module
demand), including wafer, cell and module manufacturing, would create 6,000 – 7,000 jobs.7

6 We conservatively assume that payments for renewables ultimately flow mainly to non-resident investors, so there are no follow on benefits from this spend within Nevada
7 Solar manufacturing industry financials and employment data
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Energy efficiency
The economic impacts of energy efficiency are broadly similar to those of renewables, in that that both types of measures require upfront
capital expenditures and result in reductions in fossil fuel expenditures. In addition to the above benefits, cost effective energy efficiency
programs will: (1) significantly reduce electricity bills, stimulating the local economy and making business more competitive, and (2)
have a positive impact on jobs, as they tend to shift spending away from capital intensive energy industries and toward labor intensive
service industries (e.g., duct sealing, home retrofitting, etc).
Figure 7 illustrates the level of short-term job creation expected from a 1-year home retrofit program with $60 million in subsidies, which
could potentially enable 5% of Nevada’s homes to have energy efficiency retrofits, could create 1,680 jobs of various types during the
program. Longer term effects not captured in this figure include the impact of accompanying tax increases and energy bill reductions.

Figure 7: During a 1-year retrofit program addressing 5% of Nevada’s

housing stock, 1,680 jobs are created in a variety of categories
Jobs created during program, by job type
100% = 1,680

Other
18
Construction
32
Transportation, material moving 6

Installation, maintenance, repair 6

10
Management, business, financial 18
11
Sales, office, administrative
Manufacturing

Savings from energy efficiency measures can be large. For example, a 10% reduction8 in energy use in residential and commercial
buildings in Nevada due to energy efficiency would save $350 million per year in energy costs (electricity, gas and other fuels). An
optimized energy efficiency program could obtain this level of savings for $1.6 billion in upfront investment, paying for itself in less than
5 years.

8 This level of reduction would be equivalent to 27% capture of the economic potential identified in the 2009 McKinsey report “Unlocking Energy Efficiency in the U.S. Economy”, which is toward
the top end of the range (10-30%) of EE program historical performance and of expert estimates
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4. Exporting plan for Nevada

Figure 8: Clean energy scenarios

Scenario 1: BAU

Renewables ▪ 25% renewables / EE by 2025

– Of which, 6% solar (1.5% solar generation by 2025)
– Of which, up to 25% EE (6.25% EE by 2025)
Energy ▪ 6.25% by 2025 (assumes EE carve-out in RPS is maximized)
Efficiency

Transmission ▪ Add 600 MW from Northern to Southern Nevada in 2012 (ONLine)

▪ Add ~700 miles of 750 MW transmission from 2015-2025 for renewables
connection to grid and transmission to load centers

Scenario 2: Export

Renewables ▪ 25% of Nevada demand is from renewables by 2025

▪ No EE carve-out
▪ Goal of 3,000 GWh

Energy ▪ Separate EERS (Energy Efficiency Resource Standard) requiring 10%

Efficiency EE by 2025

Transmission ▪ In addition, add ~400 miles of 350 MW transmission from 2015-2025 for
renewables connection to grid, transmission to load centers, and export

To understand the overall economic implications for Nevada, we modeled two clean energy and EE development scenarios (Figure 8). In
the first scenario (“BAU”), Nevada develops renewable resources and achieves energy efficiency sufficient to meet its RPS target. In the
second scenario (“Export”), Nevada achieves additional demand reduction through energy efficiency, develops slightly more renewable
energy for domestic consumption, and develops a significant amount of renewable resources for export. Figure 9 shows the electrical
energy produced from various sources in Nevada with the corresponding generation capacities installed, and Figure 10 breaks down the
same information for renewable energy.9 Energy efficiency measures could significantly reduce electricity consumption, with savings
coming from residential and commercial buildings and industry (Figure 11).

9 Different proportions of energy and capacity are due to differences in the capacity factors of different technologies
13
 Renewables for export
Figure 9: Export scenario has lower demand,
Renewables
more renewables, and less gas Hydro
Gas
Coal

BAU Export Demand

43 45
Generation mix 41 3
39 7
TWh 37 37 3 9
3 4 3 3 4
3 3 3 3 3

23 23 27 23 23 24 In order to deploy
9 9 7 9 9 7
the renewable
2010 2015 2025 2010 2015 2025 resources for each
Capacity
10.0
11.0 10.6
11.4
0.8
of the scenarios,
GW 9.6 1.2 9.6 0.6
0.8
0.4
0.8
0.8 0.8
0.8
0.4
0.8
0.8 1.8
0.8
additional
transmission lines
7.0 7.0 7.9 7.0 7.0 7.0 and upgrades to
1.3 1.3 1.0 1.3 1.3 1.0
existing lines will
2010 2015 2025 2010 2015 2025 have to be
* Small hydro is included in total hydro, not renewables completed.

14
 Figure 11: Growth rate of electricity demand can be reduced, with greatest
savings in commercial sector

BAU - No action
Total electricity demand Electricity savings due to energy efficiency
TWh BAU - Nevada RPS TWh
Export scenario
10% EERS 4.3
45 0.3 Industrial
40
35
30 2.5 Commercial
25
20
1.3
15
0.3
10
0.6 1.4 Residential
5
0.4
0
2010 2015 2020 2025 2015 2025

In order to deploy the renewable resources for each of the scenarios, additional transmission lines and upgrades to existing lines will have
to be completed. In addition to the assumed completion of the initial portion of the ONLine transmission project (A 600 MW, 500 kV line
connecting the northern and southern transmission grids for the first time), we modeled a deployment of 750 miles of average 500 MW
capacity, at a cost of $1.3 billion (for BAU) and an additional 400 miles of average 350 MW capacity, at an additional cost of $0.7 billion
(for the export scenario). The transmission construction requirements were based on a recent study examining potential renewable
resource zones and transmission requirements throughout Nevada (Figure 12).10 The bulk of the new transmission would be along the
western border, connecting solar (in the south) and geothermal resources both to Nevada’s grid and to California, and in the east central
portion of the state, connecting geothermal and wind resources to the Nevada grid.

10 2009 Status of Energy in Nevada Report to Governor Gibbons and Legislature

15
 Figure 12: Proposed transmission to enable renewables deployment

Including the cost of

investment in infrastructure
for a robust clean energy
economy, Nevada
household electricity bills
would decrease because of
the reduction in energy use
due to energy efficiency
(Figure 13).

SOURCE: 2009 Status of Energy in Nevada Report to Governor Gibbons and Legislature

Implementing these scenarios would have the following impacts:

Electricity bills

Figure 13: Impact on household electricity bills

Including the cost of investment in infrastructure for a robust clean
BAU energy economy, Nevada household electricity bills would decrease
Export
because of the reduction in energy use due to energy efficiency
(Figure 13). Bills could be kept even lower if Nevada focused more
on energy efficiency and less on renewables in the early years. For
example, by loosening the intermediate RPS target (from 20% to
-1.03
-1.56
-1.33 15% by 2015) but also imposing an intermediate EERS target (5%
Impact on household electricity by 2015), the electricity bill savings would roughly double, from
BILLS relative to no action
$/month
-3.46
$1.50 per month per household to $3.00 per month per household.

16
Jobs and GDP
The total impact on Nevada’s economy in terms of jobs and GDP is positive in both scenarios in most years (Figure 14). This is because
the negative impact of higher prices is more than offset by the positive impact of clean energy investment and the savings due to energy
efficiency, including increased electricity exports and reduced natural gas imports (Figure 15). The export scenario has significantly better
outcomes than BAU, especially in 2025 when there is more clean technology investment and exported power.
PRELIMINARY
Figure 13: Macroeconomic outcomes are more positive in
export scenario BAU
Export

The export scenario has

Impact on GDP relative to no action Impact on employment relative to no action
significantly better
2008$ Millions Number of jobs outcomes than BAU,
677 2,700 especially in 2025 when
there is more clean
461 1,800 technology investment and
1,150 exported power.
266
228

2012 2025 -150

2012 2025

SOURCE: US Low Carbon Economics Tool

Additional effects
Manufacturing (only from the export scenario)
If half of the energy exported in the export scenario in 2025 were produced from solar PV, and Nevada were to establish the local
manufacturing capacity to supply those PV installations, an additional 1,200 to 1,300 jobs could be created.
Local taxes
Renewable installations contribute significant taxes and other revenue (e.g., land leases) to local communities. Since most renewable
power plants would be located in rural areas, these taxes could have a significant positive impact on rural communities. In the export
17
scenario, roughly $25 million in local taxes and assessments would be collected from renewable power installations. This would enhance
the services provided by local governments and create 300-400 rural jobs. Taxes on transmission lines would be significant too.

Figure 15: Export scenario delivers significant additional value to

Nevada’s economy
Renewable electricity exports in Natural gas generation in export
export scenario relative to BAU scenario relative to BAU In the export scenario,
TWh/year TWh/year
3.4
roughly $25 million in
2.3
-0.6 local taxes and
assessments would be
-3.5 collected from renewable
2015 2025 2015 2025 power installations.
Dollar value of exports* Avoided cost of natural gas imports
$M/year $M/year
173 147 34% lower
natural gas
99 imports
relative to
no action
25

2015 2025 2015 2025

* At CA wholesale price

6. What will it take to capture the opportunity?

In order to capture the clean energy opportunity in Nevada, three critical issues must be addressed. First, there must be a significant and
sustained investment in transmission – both new lines, and upgrades to existing lines. Second, several key barriers to renewable energy
development must be addressed and removed or reduced. Finally, multiple and persistent barriers to capturing the energy efficiency
opportunity must be addressed.
Transmission
The key challenge in developing renewable resources is transmission. Many resources are located far from load centers, and developing a
renewable industry for export will require additional long-distance transmission capacity and upgrades of existing transmission lines. The
planned 600 MW ONLine project connecting the northern and southern grids will help to deliver geothermal resources from Northern
Nevada to Southern Nevada, but additional high-capacity lines will be needed to connect individual installations to the grid and to export
renewable energy to California.
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 Cost allocation
Federal support in the The key barrier to transmission development is cost allocation. When transmission lines cross states
form of low-cost loans or multiple utility territories, or when they deliver energy between utilities and states, it is not
and/or subsidies would always clear who should pay for transmission. Because cost allocation often goes unresolved, new
also help enable transmission often does not get built. The most narrow view holds that those who directly benefit –
generation project developers and ratepayers physically connected by the transmission – should bear
additional transmission. the cost. However, adding transmission development risk and cost to a generation project can make
Given that an upgraded it prohibitively difficult to obtain capital and ratepayers may not be the only party benefitting.
grid could be a national Transmission expansion often has regional benefits. Several legislative and FERC proposals exist
security and climate issue, that would provide clear guidelines on how to allocate costs, including sharing the cost of
federal support could be transmission expansion regionally. Clear guidelines could help minimize the time spent litigating
cost allocation cases. Federal support in the form of low-cost loans and/or subsidies would also help
appropriate. enable additional transmission. Given that an upgraded grid would enhance national security, global
competitiveness and help address climate change, federal support could be appropriate.

Other issues
Obtaining rights-of-way along the entire route of a transmission corridor can be difficult and Another would be for the
involves working with a variety of private and public (federal, local, and state) entities, and often state and/or federal
requires extensive environmental impact study and mitigation. In Nevada specifically, military government to assume a
airspace constraints often affect transmission rights of way. A key enabler of transmission
expansion will be close collaboration between all of the stakeholders involved, likely with more portion of these risks.
active regional and Federal involvement. However, Nevada is positioned favorably compared to For example, the federal
California from a siting and permitting perspective,11 and this fact could give Nevada an government has recently
advantage when competing with California for renewables projects. agreed to help fund the
Barriers to renewables development exploration required for
Development risks geothermal projects
developed on some
Risks include regulatory risks associated with siting and permitting, the exploration risks
federally owned lands.
associated with geothermal energy, and the risk that transmission cannot be obtained. Several

11 This is because of several factors, including a lower population density, a large area of Federally owned and managed land, and a more streamlined regulatory process
19
ways to mitigate these risks exist. One would be for utilities to take a more active role in renewables development as opposed to simply
signing PPAs, for example by taking an ownership stake in projects, forming joint ventures, or forming a subsidiary devoted to
renewables development. Another would be for the state and/or federal government to assume a portion of these risks. For example, the
federal government has recently agreed to help fund the exploration required for geothermal projects developed on some federally owned
lands. Finally, it will be important for all stakeholders (not just developers) to work with regulatory and government agencies to
streamline the siting and permitting process and address issues such as military airspace constraints (for wind farms and solar power
tower plants), environmental impact, and impact on protected lands such as national monuments. Other ways to address permitting issues
include developing brown field sites for utility-scale projects, for example retired coal plants, and emphasizing distributed generation and
solar water heating, which are typically deployed on or above existing commercial and residential structures.

It is important to Other issues

maximize the local
economic benefits to
Nevada by supporting
the development of local
renewables knowledge,
R&D, and a
manufacturing base (e.g.,
university programs, tax
and other incentives for
manufacturing, coupled
with predictable long-
term renewables
demand).
Lack of grid parity often impedes the development of renewable resources. This cost issue can to
some degree be addressed through subsidies and tax incentives, such as investment tax credits,
production tax credits, investment subsidies, loan guarantees, and feed-in-tariffs. In addition, an
RPS will drive a State Commission to authorize ratepayer support of higher-cost power. Beyond
rate impacts, renewables have other impacts which can be extremely positive. It is important to
maximize the local economic benefits to Nevada by supporting the development of local
renewables knowledge, R&D, and a manufacturing base (e.g., university programs, tax and other
incentives for manufacturing, coupled with predictable long-term renewables demand).
Capturing the energy efficiency opportunity
In spite of the large and compelling energy efficiency potential that exists, much of the potential
remains untapped. This is due to multiple and persistent barriers to capture that exist at both the
individual actor and system level. One set of barriers is financial: efficiency measures typically
require a large up front investment in return for a long sequence of small payback amounts. Another
barrier arises due to the highly fragmented nature of the efficiency opportunity: it is spread across
more than 100 million locations and billions of devices, ensuring that it is a top priority for almost
no one. Finally, measuring and verifying energy NOT consumed is difficult.

20
Figure 16: Energy efficiency opportunity in the residential sector
Energy savings from energy efficiency, 2025
TBTU Retrofit
Measures to enable capture of New buildings
opportunity Heavy appliances
Consumer electronics
Retrofit ▪ Subsidies and/or financing BAU
▪ Require retrofit at point of sale or 100%=13
Lighting
upgrade

New ▪ Enforce and update building

10
buildings codes
▪ PACE, on-bill, or similar financing
▪ Building labeling (E.g.,
EnergyStar)
21
Heavy ▪ Appliance standards 47
appliances ▪ Appliance labeling Export
▪ Consumer rebates 100%=20
Consumer ▪ Standby power standards
electronics ▪ Device labeling
▪ Consumer rebates
10

Lighting ▪ Lighting standards

13
▪ Lighting labeling
▪ Consumer rebates Full
potential*
* For comparison only; not modeled here 100%=60
SOURCE: Energy Information Administration

21
 Figure 17: Energy efficiency opportunity in the commercial sector
Energy savings from energy efficiency, 2025
TBTU Retrofit
Measures to enable capture of New buildings
opportunity Heavy appliances
Consumer electronics
Retrofit ▪ Subsidies and/or financing BAU
▪ Require retrofit at point of sale or 100%=12
Lighting
upgrade

New ▪ Enforce and update building

buildings codes 22
▪ PACE, on-bill, or similar financing
▪ Building labeling (E.g., 34
EnergyStar)

Heavy ▪ Appliance standards

appliances ▪ Appliance labeling Export
100%=19
17
Consumer ▪ Standby power standards
electronics ▪ Device labeling

Lighting ▪ Lighting standards 15

12
▪ Lighting labeling
Full
potential*
* For comparison only; not modeled here 100%=55
SOURCE: Energy Information Administration

Despite the difficulty in capturing the full potential, many policy, market and other mechanisms exist and can be deployed to address the
barriers (Figures 16 and 17) and capture part of the potential. Effective measures include an overall energy efficiency target coupled with
removing disincentives (rate decoupling) or adding incentives (rate of return on EE investment, sharing benefit of EE with customers) for
the utility, information and education, incentives and financing, codes and standards and third-party involvement (in which a third party,

22
for example a utility, actually carries out the energy efficiency upgrade). The most effective capture of the energy efficiency opportunity
occurs when multiple mechanisms are deployed in a coordinated fashion.
Nevada has already put in place several mechanisms to increase energy efficiency. In addition to 25% of the RPS able to be met by
energy efficiency, the legislature has recently enacted the following measures:
1. Property tax abatement for commercial LEED certified buildings. This program has been extremely successful, including
adoption by one of the largest developments in the world, the $7B MGM CityCenter.
2. A stringent lighting standard, requiring fixed lighting to have a light output of 25 lm/watt by Jan 1, 2012.
3. Lost revenue recovery and annual EE investment expense recovery for the utility.
In addition, Nevada has the highest adoption of ENERGY STAR certified homes in the country, with 70% of new homes in Southern
Nevada complying with the standard.12
Additional policy and incentive mechanisms which could help drive the adoption of energy efficiency, some of which are being actively
considered, are:
1. Broader appliance standards (currently under consideration for TVs and portable light fixtures). Heavy appliances and
consumer/office electronics account for 30% of the potential energy savings, and adopting and strictly enforcing cost-effective
standards for all of these devices could dramatically increase the achieved energy savings, potentially doubling it from 12 TBTU to
24 TBTU in 2025 and saving an additional $180 million.
2. Innovative retrofit financing similar to a PACE program. Innovative financing could increase the penetration of retrofits from
less than 30% to almost 50%, savings an additional 7 TBTU of energy and $100 million. To push retrofit penetration even higher,
mandates and standards for efficiency upgrades at point of sale or whenever a major renovation occurs should be put in place.
3. A separate EERS (energy efficiency resource standard) to drive utility DSM and associated positive incentives for the utility. A
well enforced and incentivized EERS will typically achieve its mandated targets.
4. Adoption and strict enforcement of the latest building code standards, which increasingly include efficiency components. The
energy savings from new buildings could be doubled, from 6 TBTU to 12 TBTU in 2025, saving an additional $90 million.
5. Efficiency retrofits offered to all customers in a service territory, performed by an external party and paid for by the government
or utility have the highest penetration rate. Although this is a relatively expensive option, it has a high payback.

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 6. Energy efficiency credits (EECs) and markets can help stimulate adoption of energy efficiency measures. A market for
efficiency could take several forms, with the central objective that market participants compete for savings to meet an energy
efficiency target. This approach is already in place in two forward-capacity markets (New England and Pennsylvania-New Jersey-
Maryland power markets). Energy efficiency bids captured 26% of the 2,550 MW of new and existing demand resource capacity
in the ISO New England’s February 2008 auction.
7. A shared savings structure such that the utility could gain some of the value from installing energy efficiency systems.
6. Conclusion
Nevada has extensive renewable energy and energy efficiency resources and has set out on a successful path toward a clean energy
economy. By meeting the current laws for the Renewable Portfolio Standard, Nevada will create an additional 1,800 jobs by 2012. If
Nevada were to be even more ambitious in developing a clean energy future and meet the obtainable goal of 3,000 GWh for export
outside of Nevada, 9,000 clean energy jobs directly supporting the new clean energy infrastructure would be created by 2025. The total
impact on Nevada’s economy in 2025 would be an increase in GDP of $540 million. Although challenges and barriers exist to achieving
these outcomes, there are multiple ways of addressing these barriers and Nevada is already on the path to doing so.

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