Governors' Wind Energy Coalition

MOAPA, Nev. — Roads often follow rivers, taking advantage of the level ground created by water. But here in the desert of south central Nevada, the road and the river grew together. Only the river does not carry water. At the edge of Interstate 15, a crackling river of electrons provides power not just to Nevada’s homes, mines and casinos, but to parts of California as well.

For years, many of those electrons were generated by coal, a fuel now largely abandoned here thanks to both economics and legislative decree. Now an increasing percentage of them are coming from renewable sources —geothermal, solar and wind. This makes them all the more salable now that California, the biggest energy market in the West, severely restricts the purchase of electricity associated with excessive greenhouse gases.

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Thanks in part to the transmission lines alongside Interstate 15, Mr. Buffett’s company, Berkshire Hathaway, and its subsidiary Berkshire Hathaway Energy stand to make steady, predictable profits in an energy market undergoing transformations.

“This is not a value play,” said Christine Tezak, managing director of research at ClearView Energy Partners, referring to Mr. Buffett’s normally conservative investing approach. “He’s looking at this as a way to participate in the structural shift taking place in the power and energy industry.”

In the short term, the transition is going to mean construction of many renewable power plants in Nevada. Around sunbaked Las Vegas, these have been solar plants. Further north, they have been geothermal plants. They help make Nevada, a state whose energy was largely coal-fired 10 years ago, a good fit for the Environmental Protection Agency’s pending rulediscouraging coal-fired plants.

“The goal of the rule was to send a small market signal to the utilities of the direction they should move in,” said Jared Blumenfeld, the director of E.P.A.’s Region 9, which covers the Southwest and Hawaii. Existing state mandates, he said, ensured that “in some cases they were already moving in that direction.”

California’s newly formed “energy imbalance market” — a multistate grid system that aims to ensure steady power despite the variable output of wind and solar — will create more customers for the new renewables as well as the considerable coal-generated energy of PacifiCorp.

Stefan Bird, a senior vice president of PacifiCorp, said the system would use power sources spread over the region to increase the grid’s efficiency. “You get into different geographical regions; wind performs differently in different areas,” he said. Similarly, solar plants in California not at optimal power in the morning could be offset by Nevada installations to the east already at full strength.

Regulators overseeing the market say they believe the system will save consumers money and eventually will be able to include everything from PacifiCorp’s Wyoming-based wind projects to Nevada’s solar and geothermal resources, ensuring that power can be dispatched in minutes to areas of unexpected demand. NV Energy expects to join the new California market in a year, after it gets federal approval.

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It has taken years to assemble the pieces of the puzzle that have made these investments enticing to Mr. Buffett and others. In those years, the energy market in the Far West and Southwest has been transformed, by both the falling price of natural gas and the rise of renewables.

In 2005, Berkshire Hathaway Energy bought PacifiCorp, a Western utility now providing about 10.5 gigawatts of energy from Oregon to Wyoming, for $5.1 billion. In 2013, Mr. Buffett, who has long expressed his conviction that coal-fired energy will be a thing of the past, paid $5.6 billion for NV Energy, which has more than six gigawatts of generation capacity — more than 15 percent of it renewable power, largely solar and geothermal. Much of the rest is fired by natural gas.

One pressing early need for the new plants was finding new routes to the energy market. For decades, generating plants have been located near coal train tracks or natural gas pipelines, with power lines designed for them.

But solar, wind and geothermal energy cannot travel by train or pipeline. In Nevada, a new high-voltage line now runs more than 230 miles from Ely in the north — near the wellspring of the state’s geothermal resources — to the Las Vegas area. A $343 million federal loan guarantee undergirded the $552 million project.

The inverted triangles that carry some of this line, called the One Nevada Transmission Line or ON Line, now parallel Interstate 15 near Las Vegas, along with the older, arms-outstretched towers of earlier lines. The new ON Line now has limited capacity to send power through hookups to California; it must be enhanced to send more Nevada energy south and west.

In March, a variety of stakeholders broke ground for the Moapa Southern Paiute Solar Project, designed to produce 250 megawatts of solar power to be used by the Los Angeles Department of Water and Power. A second, 200-megawatt solar plant is also planned on Moapa Paiute tribal land. That solar energy will partly make up for the Los Angeles agency’s decision last year to sell its stake in the Navajo Generating Station in Arizona, divesting itself of coal-fired power to comply with California law.

NV Energy’s Reid Gardner power station — not far north of Las Vegas and near the Moapa Paiute reservation — also provided coal-fired power to California. Its stored coal ash waste, reservation members believe, hurt their health. Along with the Sierra Club, they sued NV Energy; the lawsuit is pending. Aletha Tom, the chairwoman of the Moapa band, said, “I never thought of the power plant as a threat” years ago. “I never knew the danger it would do to people’s health,” she said. Now the solar projects will be an economic asset, she said.

The federal carbon reduction rule was not the only government signal pushing Nevada to abandon coal and embrace renewables. Harry Reid, the Senate majority leader, as well as the State Legislature and Gov. Brian Sandoval have pitched in. Both Mr. Reid and Mr. Sandoval supported a 2013 state law that forced the closure of the Reid Gardner coal boilers and made it easier for NV Energy to use ratepayer dollars to build new plants.

Critics see a political quid pro quo. “The intent of the legislation was clearly to reward the utility for the early closure of Reid Gardner by enabling it to replace that capacity with its own new power plants paid for by the ratepayers,” said Robert D. Kahn, the executive director of the Northwest and Intermountain Power Producers Coalition, which opposed it.

NV Energy responded with a statement saying the new law required it to replace the disappearing coal-fired energy with 600 megawatts from its own resources and 300 megawatts from outside providers.

Looking at the utility’s plans to build new renewable energy sources, and attempts to constrain state regulators’ efforts on behalf of ratepayers, Mr. Kahn asked, “What are their economic objectives — to meet Nevada load, or will they expect and plan on markets farther west?”

California’s changing energy market makes the latter objective more attainable.

As Geoffrey Lawrence, a senior legislative analyst with the Nevada Policy Research Institute, explained, NV Energy is a more attractive investment even without an expanded market because the 2013 legislation envisions ratepayers’ shouldering much of the cost of new facilities.

Plants that the ratepayers buy increase shareholder value. “They are spending more money to produce the same amount of power,” Mr. Lawrence said. “And they are guaranteed an 8 to 11 percent return.”