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Arizona Solar Feed-in Tariff

Arizona's Solar Feed-in Tariff will attract billions of investment dollars to build a solar industry, create 10,000 new jobs, add new income and revenue stremas as well as feed billions of taxable dollars back into Arizona's government budget.
Arizona's Residential Solar Industry is Booming

Over the past two years, Arizona's solar industry has transformed itself from a sleepy, fragmented industry made up from just a handful solar installers that were running businesses out of their garages to more than 300 well-organized companies with a huge sales force, growing marketing budgets and a fleet of solar installation vehicles that can be seen installing photovoltaic (PV) solar power arrays in neighborhoods all over Arizona.

APS Residential Solar Installations Quadrupled During 2009

In fact, APS, Arizona's largest electric utility company, saw its solar installations quadruple from just 812 solar installations in 2008 to almost 3,000 installations in 2009. And during the first quarter of 2010, customer demand increased to more than 1,500 installations per quarter and completely exhausted APS' solar rebate incentives budget. And, if they would not have run out of money, they would have probably seen more than 6,000 solar installations in 2010. A state record. (Source: APS 2010 Quarterly REST Update)

Most Arizona electric utility companies experienced similar customer demand for residential solar installations and many had to put customers on solar installation waiting lists.

And while the lack of solar rebates slowed the signing of of new contracts for solar installation companies, it did nothing reduce the customer demand to install solar power systems. The good news is that customers will not have to wait long.

Arizona Solar Rebate Incentive Budgets Increase for 2011

Beginning January 2011, a new wave of increased solar incentive budgets will come online. Due to the utility companies' mandate to meet Arizona's Renewable Energy Standard (RES), all regulated electric companies will be required to increase their solar rebate incentive budgets for at least the next five years.

The bad news is that even though budgets will go up, the solar rebate incentive per kilowatt is expected to decrease to make money avaiable for as many customers as possible.

Arizona's Commercial Solar Industry Needs a Feed-in Tariff

And while the residential solar industry in Arizona is booming, the commercial side of the solar industry has not fared as well.

The interest among solar developers, financial investors and owners of commercial rooftops, parking lots and large land parcels is definitley there, but the Solar Request for Proposal (RFP) process that the utility companies have in place for the commercial solar industry are severely flawed and seem to be designed to make the commercial side of the solar industry as difficult as possible.

Solar developers and project managers are required to wander through a maze of changing incentives, forced to eat the parasitics transactional costs associated with generating expensive Requests for Proposals (RFPs), and a secretive bid selection process that prevents ratepayers and the solar industry from seeing the real costs involved and how the selection process is managed.

The real problems with this system are evident. Regardless of how the bids are selected, the utility companies seem to pick bids and partners that do not have financial backing to bring these large multi-megawatt solar power arrays and utility-scale solar farms to fruition.

Each year the utility companies promise the Arizona Corporation that they will try to do a better job next year and reference a long line of proposed utility scale solar projects that appear to be in the pipeline.

But after five years of these continued failures for the utility companies' Performance Based Incentive programs to put steel in the ground, the Arizona Corporation Commission (AZCC) has decided to jump start Arizona's commercial solar industry by implementing a new streamlined commercial system called a Solar Feed-in Tariff (FiT).

Solar FiTs have been very successful in places such as Germany and Ontario, Canada, at generating significant amounts commercial and utility-scale solar installations as well as other type of renewable energy projects such as wind, geothermal and biomass.

Drafting a Solar Feed-in Tariff for Arizona

In October 2009, the AZCC began the feed-in tariff process by issuing a Notice of Inquiry Concerning the Establishment of a Statewide Feed-in Tariff for Arizona's Electric Public Service Corporations.

Solar industry stakeholders provided a large amount of feedback to the AZCC Notice of Inquiry Questions and Topics and were invited to participate in a special April 2010 Solar Feed-in Tariff Workshop to discuss the details of establishing a fair and justified Arizona Solar Feed-in Tariff.

In July 2010, the AZCC issued its first draft proposal for Arizona's very first Solar Feed-in Tariff, which covers all renewable energy sources, not just solar.

There are a few details that need to be finalized before voting on the measure such as what price per-kilowatt-hour will be offered, will rates be adjustable based on the retail rates for electricity, will there be any caps on budgets or project sizes, and what types of solar power installations will be included.

Most solar industry insiders predict that the AZCC will vote on the Feed-in Tariff before the end of this year due to the fact that the Chairman of the Arizona Corporation Commission, Kris Mayes, political term ends this year. If so, Arizona may end up with a streamlined solar feed-in tariff that makes commercial solar installations more attractive to financial investors and streamlines the required paperwork for solar installation companies.

Both the Arizona Public Service Co. (APS) and Tuscon Electric Power (TEP) haveincluded Solar Feed-in Tariff Pilot programs in their 2011 Renewable Energy Standard (RES) implementation plans. But their programs are very small and the $0.20 price per kilowatt hour probably will not be sufficient to attract many takers. This may be a sign that the utilities do not want the feed-in tariff to be successful and have priced it low on purpose. Right now the feed-in tariffs are set for 20 year contracts. Considering that the price of electricity goes up 3-6% a year, the tariff needs to consider how much electricity will rise in 20 year's time and still make the price-per-kilowatt-hour attractive.

If the price is set at a price in the $0.29 to $0.35 cent range per-kilowatt-hour (kWh), investors from around the world will want invest their capital on Arizona's rooftops.

Approving a solar feed-in tariff will provide many long-term guarantees that have been missing from Arizona's financial community for a long time.

The result will be a large influx of investment capital that will flow into Arizona to finance small, medium and utility-scale solar power installations. Capital that will continue to grow a robust commercial solar industry, create tens of thousands of jobs, and generate a significant amount of taxable income that can be used to fix Arizona's state budget shortfalls.

What is a Solar Feed-in Tariff?

There are many, many different types of feed-in tariffs that have been implemented around the world. Some have been very successful, others have failed dramatically. We have included a section below that provides leading edge research reports that provide information on the complex decisions that policy makers need to evaluate before implementing a fair and justified Arizona Feed-in Tariff.

Solar Feed-in Tariffs Research Reports & Whitepapers
Arizona Solar Power Society Feed-in Tariff Support Documents
Funding an Arizona Solar Feed-in Tariff

Many people suggest that ratepayers and utility companies simply cannot afford to fund a Feed-in Tariff for Arizona, which is simply not true when you look at the numbers provided by the R.W. Beck Solar Impact study. The report shows that APS ratepayers along could save up to $3 billion over the next 15 years.

This chart shows the amount of money that could be saved each year by APS with low, medium and high penetration levels of solar. Simply put, solar requires no fuel, reduces the need for tranmission lines and offsets the need for new fossil fuel power generation stations that continue to produce dirty power that pollute our air.

Coal generation plants are very expensive to build and operate. A average coal-fired plant burns 10,000 tons of coal per day at a cost of $1,000,000 or $365 million per year. Utility companies like solar because solar power arrays they require no fuel or water to operate and produce zero carbon-based emissions.

Installing solar in neighborhoods and business parks where electricity is used cuts down on the need to transmit large amounts of power from the power generation plant to these locations. Over 30% of power is generated solely to push electricity from the plant to the end users. (Source: RW Beck - Distributed Renewable Energy Operating Impacts and Valution Study

According to the chart below, installing 250 Megawatts (MW) of solar per year would save ratepayers appproximately $25,000,000 the first year and would compound these earnings year after year by adding an additional 250MW per year. At this rate, by the year 2025, there would be 3,750MW of solar installed ultimately saving ratepayers approximately $3 billion over 15 years due to the reduction of fuel, generation, transmission, and distribution capital expenditures. (Source: RW Beck - Distributed Renewable Energy Operating Impacts and Valution Study)

Solar Power Conserves Water

Solar photovoltaic (PV) arrays also protect another valuable resource needed to live in the desert, water. According to the Arizona Corporation Commission, Arizona's electric generation stations use more 43 billion gallons of water per year. Unlike other forms of power generation, solar PV panels use zero water to produce to electric power. (Source: AZ Republic)

Solar Power Reducing Carbon-Based Air Pollution

Solar plays a big role in reducing carbon-based emissions including CO2, SO2, NOX and mercury. Installing more and more solar power arrays will help utilities reduce the more than 66,356,085 million tons of carbon-based pollution their plants emit into Arizona's skies every year. (Source: EPA 2008 Arizona Power Plant Pollution Report

Where Does Solar Make Sense in Arizona?

According to Philippe Welter, Photon Magazine: "On the surface, the challenge of satisfying US electricity needs and elminating CO2 emmissions from electricity generation can be solved with a small dot on the map. The current electricity consumption in the US is approximately 3,900 terawatt hours annually. In order to produce this amount of electricity from sunlight, it would be necessary to build a solar photovoltaic array measuring about 18,000 square miles."

Arizona has a tremendous amount of private, state trust land and bureau of land management land that is available that is flat and in the middle of nowhere. Until now, this land has no real value and is the middle of the desert. The only real challenge would be installing the high-density power transmission lines to serve these giant solar farms if they are located in very remote locations.

But according to the R.W. Beck report, solar makes a lot more sense when it is installed near the source of the electricity demand such as residential and commercial rooftops. In fact, solar meets the needs of on-peak demand for commercial businesses more so than residential rooftops, because the sun is producing more solar energy during the actual hours it needs to be used and when workers are at work.

And if we could find a way to store energy to meet the needs of summertime peak energy usage after dark, it would be even more attractive to utilty companies. Producing solar electricity on commercial and residential rooftops and storing it in community energy storage or off-grid battery banks for after sunset electricity needs or during cloud cover events is the last remaining hurdle for solar power arrays.

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Specified Electrical Contractors, Inc. (SECON) is a progressive electrical contracting firm specializing in design/build, commercial and industrial solar projects.

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