Democrats Seek to Bolster Solar Energy Development by Winning Arizona Utility Board

Jim Efstathiou Jr. and Amanda J. Crawford, Bloomberg
October 23, 2012 | 15 Comments

Arizona Democrats are vying to wrest control of the state utility board so they can expand the use of solar energy in the nation's sunniest state.

Democrats running for the Arizona Corporation Commission are promising to expand use of rooftop panels and large-scale solar power plants in the state, the nation’s No. 3 generator of energy from the sun. Republicans, who hold three of the panel’s five seats, say they are concerned that could raise power rates.

At issue is a 2006 commission order that utilities get 15 percent of their power by 2025 from renewable sources such as solar and wind. Arizona Public Service Co., the state’s biggest utility, and Tucson Electric Power Co., are on a path to reach the goal ahead of schedule, erasing their incentive for further investments in solar, said Amanda Ormond, principal of an energy consulting firm in Tempe, Arizona, and former director of the state energy office.

“To me, the market is at a critical junction now and for the next couple of years because there is not a lot of demand,” Ormond said in an interview. “Those manufacturing facilities will only survive if there is demand.”

The Arizona race evokes partisan battles in Washington over government subsidies to green-energy companies, a cornerstone of President Barack Obama’s effort to promote economic growth and jobs. Mitt Romney has derided Obama for providing billions of dollars to solar and wind company, saying the president is in an “imaginary world” where renewable energy fuels the economy.

Support Waning

Support for renewable energy is waning nationwide, Ormond said, as a glut of natural gas lowers fuel prices. Plentiful sunshine has made the state attractive for operators such as First Solar Inc. of Tempe, which is building the world’s largest photovoltaic plant in Arizona.

“In this election cycle it’s become a blue or red issue somewhat, and that’s troubling to some of us who look long into the energy future,” Ormond said

Renewable energy in 2011 accounted for 16,790 Arizona jobs, or less than 1 percent of the state workforce, and pumped $2.1 billion into the state economy, according to a February study from Elliott D. Pollack & Co., a Scottsdale-based economic and real-estate consultant. About 268 companies build solar panels, install units and support the industry in Arizona.

‘Status Quo’

California and Colorado have higher renewable-energy goals, to be met by 2020. In California, 33 percent of the power must come from renewables while Colorado set the target at 30 percent.

Republicans “don’t have any interest in anything other than maintaining the status quo,” Marcia Busching of Phoenix, a lawyer and Democrat candidate, said in an interview. “I see Arizona having the opportunity to create a lot of jobs, to be a leader in renewable energy, to be a state where capital and investment want to come.”

Expanding the use of solar energy is backed by 94 percent of Arizona Public Service’s customers, according to a 2011 study by the Morrison Institute of Public Policy at Arizona State University. Most of those polled would be willing to pay higher rates.

The numbers have failed to persuade Republicans who oppose a higher target, according to Kris Mayes, a Republican who is director of the law and sustainability program at Arizona State.

‘Partisan Issue’

“Renewable energy has become a partisan issue,” Mayes, a commission member from 2003 to 2010 who helped push the target through an all-Republican board, said in an interview. “That polarization between the parties did not exist 10 years ago.”

“It’s a policy decision whether the state wants to subsidize an industry that today does not make a whole lot of financial sense,” Rick Merritt, president of the Pollock firm, said in an interview. “It doesn’t work unless there are incentives attached to the industry.”

In the second quarter, 173 megawatts of solar power were installed in Arizona, second to California’s 217 megawatts, according to the Solar Energy Industries Association in Washington. One megawatt is enough to power about 800 typical U.S. homes.

“The state has gotten to a certain level,” Carrie Hitt, vice president of state affairs for the solar association, said in an interview. “There’s a lot of activity there, a lot of investment, there’s jobs and there’s solar being generated. Now it’s what happens next, and this commission will decide that.”

Agua Caliente

First Solar, the world’s largest maker of thin-film panels, is scheduled to complete its Agua Caliente photovoltaic plant in 2014, company spokesman Ted Meyer said in an e-mail. In 2010, Jiangsu, China-based Suntech Power Holdings Co., opened a solar panel plant in Goodyear, Arizona, making it the first China-based clean-technology company to create manufacturing jobs in the U.S.

First Solar expanded manufacturing faster than demand rose, producing an oversupply of panels that contributed to a 50 percent decline in prices last year. First Solar scaled back plans to start manufacturing in Arizona, Vietnam and France and fired 30 percent of its workforce.

Commission Republican Bob Stump and Democrats Sandra Kennedy and Paul Newman are seeking re-election on Nov. 6. Also running are Busching, Republicans Susan Bitter Smith and former state Senate president Bob Burns, one candidate from the Libertarian Party and two Green Party candidates. Chairman Gary Pierce and Brenda Burns, both Republicans, aren’t up for re-election.

Waste Incinerator

The candidates sparred during an Oct. 1 debate on Arizona PBS station KAET-TV over whether to increase the renewable energy target, and a recent commission decision involving a waste incinerator.

In a ruling challenged by a public-interest group, the commission’s three Republicans agreed in July that Mohave Electric Cooperative Inc. can use energy from a waste burner to help meet the 15 percent goal.

“Solar, with all its benefits, does not provide the power at a rate that is sufficient, especially at night,” Burns said during the debate. “What do we do when the sun no longer shines?”

Democrats said the Commission was backpedaling with the incinerator ruling.

“We can’t move Arizona forward by allowing a trash incinerator as renewable energy,” Kennedy said. Voters have a “clear choice between the solar team and the trash team.”

Meeting Goals

Tuscon Electric, with about 400,000 customers, will be halfway to the 15 percent goal by the end of next year, spokesman Joe Barrios said in an interview. Arizona Public Service, with 1.1 million customers, will have 10 percent renewable power by 2015, spokeswoman Jenna Shaver said in an e-mail.

Democrats back a higher renewables target, citing the state’s abundant sunshine. On average, Arizona receives more solar radiation energy than any other U.S. state, according to the National Renewable Energy Laboratory.

Raising the target to 25 percent would create jobs and position Arizona as a leader on renewable energy, Barry Broome, president of the Greater Phoenix Economic Council, said in an interview. “The corporation commission can impact the economy over the next two to three years as much as the Arizona legislature can.”

Republican Burns said he’s concerned that moving the target will raise electricity rates for homes and businesses as utilities pass along the costs.

“I believe that would create a ripple effect that would be unsustainable,” he said during the broadcast debate.

Regulated utilities in the state are allowed to charge homeowners about $2 to $4 a month to promote renewable energy, according to Michael Neary, executive director of the Arizona Solar Energy Industry Association. Small businesses in Tuscon Electric’s area pay up to $130 a month. The charge must be approved by the commission.

Arizona is one of only 13 states that elect utility regulators. Stump said the commission is the “most important government body you’ve never heard of.”

“Not a lot of people really know what the corporation commission does,” Neary said in an interview. “That’s gradually changing.”

Lead image: Arizona sign via Shutterstock

15 Comments

Cliff Claven
October 26, 2012

As to the validity of specific technologies, it depends on what is the right degree of concern about atmospheric CO2 and the end of oil. If the alarmists are right about both, then oxy-combustion is worth looking into. It's the highest efficiency way to burn coal, but high CAPEX. If global warming is not the runaway crisis that some paint it to be, then conventional scrubbed coal plants are the way to go. Their emissions are down to the point where the US continent is getting more pollution blown over from China's coal plants and industry than from our own. Clean coal is not a myth. Everything power plants do is in tons, but tons of pollutants per tons of energy delivered really has become a good trade. People want zero pollution, (me too), but we forget that the streets used to be covered in horse crap and food was cooked on sooty wood stoves indoors. US health impacts from energy source pollutants are decreasing, not increasing. Great progress has been made and continues to be made in the balance of energy benefit versus cost, and much of that research was subsidized at a 50/50 cost-share between industry and DoE. As to CO2 capture and sequestration, the physics say we simply don't have enough space in the ground to sequester a meaningful amount of CO2. If we replaced all the oil and gas we pull out with an equal volume of CO2 at 10,000 PSI, it is only about 10% of annual emissions. And it costs 22-33% of output energy just to capture the CO2 depending on technology. The only real solution is for nature to sequester CO2 in living terrestrial or oceanic biomass. If humans are going to keep increasing, we need plant life to increase in direct proportion to provide the appetite for the exhalation of our civilization. The Earth is a biosphere after all. That's why the real issue to be flustered about is water. Fresh water is the Earth's limiting factor and peak water is much more imminent than peak oil.

Cliff Claven
October 26, 2012

The specific venture in Illinois, FutureGen, is a scam. It was supposed to be an oxy-combustion IGCC project with broad industry participation, but became a political pork project. When Bush's DoE and many of the industry participants saw where it was going, they pulled their backing. At the time environmentalists slammed them for not showing true commitment to clean coal and the environment. Obama revived it with $1B from DoE, and it became an Illinois-centric public works project to reopen a shuttered factory in someone's district and build a 170-mi pipeline back to the original site location to sequester CO2.

Gerry Wootton
October 26, 2012

@cliff - Are you suggesting that clean coal is a scam?

Cliff Claven
October 26, 2012

BTW, the reputable coal and power generation companies pulled out when the project morphed into an Illinois pork program.

Cliff Claven
October 26, 2012

Know all about it. It's an oxy-combustion/carbon sequestration scam that involves piping the CO2 170 miles across the state. Guess who's from Illinois? This administration has no boundaries on how it will spend our grandchildren's birthright to buy votes today.

Gerry Wootton
October 26, 2012

@cliff - here's something to get PO'd about. A federally supported project costing 5.81 $/Wp with a federal loan guarantee of $2.6B. Rates are being increased to pay for this with residential rates increasing 2 cents/kWh and industrial and commercial rates going up by 3-4 cents. (small detail -its a new coal fired plant in Illinois)

Gerry Wootton
October 26, 2012

@guy - they sell air, don't they. see http://yosemite.epa.gov/ee/epa/eed.nsf/fa6512c6e51c4a208525766200639df2/f52d181d1089121e8525774200597f2f!OpenDocument: this page contains a few representative meat charts but is by no means comprehensive. Many states have emission fees and/or toxic emission fees. Originally, the notion was that these fees would represent cost to society; however, through various legal and political wrangles they now are more representative of the cost of preventing the emissions - a pay to pollute scheme. This sets the fees lower and minimizes the incentive to actually reduce emissions. Worst case, when the cost of consumables or waste disposal goes up, they turn of the scrubbers and just pay the fees. If you go state by state you find that the fees (known as Title V fees or permits) are all over the map. It seems that polluters can reduce their impact through the purchase of politicians. Almost always, large polluters have a cap so their marginal cost is $0. Note: the effective fee (price where abatement is an economic alternative) for SO2 is ~$4700 / ton and NOx ~$1,200.

Gerry Wootton
October 25, 2012

@guy - I don't need to sell air - the government already does that for you. The going rate is $500 for every ton of SO2 and $3000 for every ton of NOx that you use air to dispose of. Carbon can be dumped much cheaper - after all CO2 is good for plants. It's what they call a 'user pay' system except, of course, charges come out of before-tax revenue so the tax payer gets to help out too. Perhaps you can consider the smog in the Grand Canyon National Park as a value add and rebate some of that cash back to the producer.

I hesitated to put a price on carbon emissions, what with the goofy carbon credit market scheme which attributes a cost driven by public policy as if policy somehow influenced the impact of carbon on the environment. But thankfully, the feds decided that the tax payer should pay out $90 for every ton captured so that becomes the defacto market price. Still trying to work out the price for mercury, arsenic and cadmium.

Cliff Claven
October 25, 2012

Solar panels and wind turbines don't float down from heaven--they are manufactured by the same dirty process and with the same dirty energy as everything else. Other things don't try to hide it and pretend they are clean and green. All the environmental and health costs for the fossil fuel used to make solar panels and wind turbines should count against solar and wind, not against fossil fuel. They should also have to pay for the environmental damage from tearing up the Earth to mine silica and bauxite and iron and copper and the rare materials needed to dope semiconductors and make the magnets, glass, steel, and concrete. We also need to reimburse the taxpayers for any public land used for solar and wind farms, and for the pristine natural views and property values ruined by vistas of mirrors and panels and towers. Even more importantly, we need to calculate the cost of the extinction of species and loss of biodiversity from industrializing millions of acres of natural habitat with heavy equipment to install the farms and permanent access roads and cable runs. We also need to price in the toxins associated with the storage batteries and capacitors and fuel cells necessary to make this viable, and reimburse the taxpayers for new rights of way for new continent-spanning HVDC transmission lines and the costs of forcing existing fossil fuel and nuclear electrical power plants to operate inefficiently as spinning reserves, idling to make up for unpredictable lapses in variable solar and wind power that otherwise endanger the grid. Of course we can't forget the tragic costs of bird and bat murder. There will be lawsuits about who is responsible and how to dispose of millions of acres of panels and towers when they wear out. Let's be rational and intellectually honest and recognize that all forms of energy entail costs to health and the environment. Solar and Wind don't yet offer enough offsetting benefit over their lifecycles.

Gerry Wootton
October 25, 2012

@cliff - surprise, surprise: the actual capacity was a bit higher than the estimated capacity. The base saved $1.2M on 17.6 GWh used out of a total 32 GWh produced.
But go ahead. Assume that the cost of electricity isn't going to escalate. Assume that no other energy project does not get tax concessions, below par loans and loan guarantees; for example, new coal plants chasing over $5B in tax credits over and above the general industry rate. Throw in tax exempt financing and subsidized bonds also not available to industry in general which dings the tax payer for tens of billions. Or take a look at tax payer exposure for new nuclear plants. Then throw in the billions in super-build money used to clean up the messes left behind. Or, not.

Gerry Wootton
October 25, 2012

@guy - it would be a better deal than the current one where you commit to sacrifice your lungs and lose a few million more brain cells so that someone else can make bigger profits and use your taxes to increase their profit margin. That's democracy except for those who choose to disagree with that deal. It has certainly been somebody's right to pee in my lake for free.

Cliff Claven
October 25, 2012

GeraldR is confusing energy and power. The nameplate peak power capacity of the Nellis solar plant is 14MWdc/13MWac, which is the number I mentioned in my post. It has been operating with a 22% capacity factor, providing 25GWh/yr of energy on an 140-acre parcel, which equates to 5.0W/m2 on a 24/7./365 basis. It only provides 25% of the base's power needs at peak, so what power there is to sell back is a mystery. The land lease and power purchase agreements and operations and maintenance contracts are for 20 years, not 25. As GeraldR alluded to, the Air Force pays only 2.2cent/kWh for the solar power instead of the market rate of 9.0cent/kWh, and this is the margin that generates the savings on their utility bills. I am at a loss as to find how this scheme generates any cost savings for any US citizen or Nevada Power utility customer, especially since both were hit upfront for construction subsidies and the rate payers get higher utility bills to offset the cheap power for the air base. I'm sure some profit was made by SunPower installing 72,000 Chinese Suntech solar panels, who went on to do the exact same thing to the Navy in China Lake, CA. (1. "Nellis AFB Solar Power System". U.S. Air Force, August 22, 2012. http://www.nellis.af.mil/shared/media/document/AFD-080117-043.pdf.
2. http://commercial.sunpowermonitor.com/Commercial/kiosk.aspx?id=1dd14d57-7840-4b2d-af0a-0fe0fdd5c872)

adrian wilson
October 25, 2012

I love the fact that the republicans are so "focused on reducing the debt as to not burden the next generation with a fiscal disaster" however when it comes to environmental issues, global warming or pollution the really don't care if their kids cant breathe the air or find clean water. So as long as they have pocketfuls of cash, the sun can burn the skin off their kids or destroy your lungs. Maybe they bekieve that the will be rich enough to get special treatment. Once again this math doesn't add up, our non responsive attitude is going to cost us much more at a later stage, and dearly too, if we do not address these issues. Money is not everything, cant eat it, cant drink it, cant breathe it. The eco-system of this planet has to be considered if we are to endure otherwise we will be crying later. Maybe we should say to people we do not believe in the fallacy of global warming that if they are proven wrong about it that they lose all their ill gotten gains they made at the expense of our environment. Lets see who still calls it a hoax!!

Gerry Wootton
October 25, 2012

And of course, cliff is off course. The Nellis plant produced 32 GWh of power. The airforce purchased ~17.5 GWh at 2.2 cents per kWh and saved $1.2M. The remaining energy had a value of $1.3M. The airforce fixed price will result in increased savings over 20 years amounting to ~$44M while external sales will amount to ~$48M. And that's only if the utility can keep electricity price escalation down. After that, assuming a 25 year lifetime, sales in the next 5 years >$35M.
But then, why always think like a cheapskate? Coughing your lungs out in hospital - $1449 a day; breathing clean air - priceless.

Cliff Claven
October 25, 2012

Nevada Power customers are already paying a premium for inefficient solar, and putting in more will only make it worse. The 14MW 140-acre Nellis Air Force Base solar plant installed in 2007 is a case in point. The math is pretty simple, $100M capital cost up front to put in a system that saves the Air Force a maximum of $1M a year in utility bills for a period of 20 years. Total savings to the Air Force are a maximum of $20M and end when the free government land lease and the hardware and the power purchase agreement expire. That leaves an $80M loss on the project that was partially paid up front by US taxpayers as federal subsidies, while the rest is paid between now and 2027 by increased Nevada Power customer rates. BTW, the solar plant has to be shut off if city power goes down because they couldn't afford to install transfer switches to isolate it from the city grid. The end result is zero energy security improvement, $80M net loss, and taxpayers and electricity rate payers fleeced--exactly what we should expect from government and military-managed projects. Instead of learning a lesson from Nellis and its ill-considered pursuit of solar, Nevada has boxed itself in with legislation and is committed to more self-inflicted injury.