TODAY’S STUDY: A Deeper Look At Utilities – Arizona Public Service
Arizona Public Service Company/Pinnacle West
Nancy LaPlaca, July 2016 (Energy and Policy Institute)
Despite the fact that Arizona is the sunniest state in the U.S., it is falling far behind on solar installations, and by the close of 2015, had fallen from 2nd in total U.S. installed solar to 6th. Not-so-sunny New Jersey has more small-scale, distributed rooftop solar than AZ (793 MW in NJ vs. 609 MW in AZ).
Why would the sunniest state in the U.S. have so little solar, when solar power purchase agreements have been signed in the Southwestern U.S. for 4 to 6 cents/kWh?
Why is Arizona less than 4% solar and over 40% coal?
Why, then, is Arizona less than 4% solar and over 40% coal? One reason is that Salt River Project (SRP), which has nearly 1 million meters, is not regulated and thus is not bound by the REST. SRP has only 15,000 solar roofs, plus , and its recent addition of ~$50/month demand charges to homeowners installing solar has resulted in a 95% drop in residential solar installations. Other Arizona utilities, such as APS and Tucson Electric Power (TEP), as well as UNS, with the same parent company as TEP, have expressed an interest in also adding high demand charges.
In a nutshell, it seems that Arizona utilities make far more money running old, polluting coal plants that generate electricity for ~3 cents/kWh, than risking a loss of sales to solar energy. Although utility-scale solar in AZ has been as cheap as new natural gas for a number of years, utilities like APS, TEP/UNS, SRP and the dozen or so electric cooperatives in Arizona have not lived up to the state’s solar potential.
As is illustrated by its June 2016 request for a $3.6 billion rate increase over only three years, APS is investing far more money in coal and natural gas than in solar. APS’ 2017 Integrated Resource Plan, which outlines its how it will meet electricity demands over the next 15 years, states that its current 26% natural gas will increase to 36% by 2031.
It’s baffling. What’s not to like about solar PV, with a 25% to 35% capacity factor (using single-axis trackers), that uses practically no water, generates no waste (coal ash, acid rain, greenhouse gas emissions or nuclear waste), generates no toxic emissions (acid gases, arsenic, hexavalent chromium and many others) and can be scaled up or down? And although solar PV output doesn’t exactly match Arizona’s peak load, technologies like the Solana Generating Station, which uses molten salt storage to generate electricity for up to 6 hours after the sun sets, can compensate when solar PV generation drops off, as could batteries, or natural gas peaking plants.
APS’ 2015 10-k shows that solar accounts for a paltry 1.5% of its owned generation, with 5.1% purchased clean energy (both solar and wind). Thus, APS’ total coal, oil and natural gas fired electricity is a stunning 66.6%, and after adding in nuclear, total fossil fueled generation for 2015 accounts for 93.4% of electricity generated.
In fact, APS’ 2012 purchase of Southern California Edison’s share of the Four Corners coal plant - adding 179 MW to APS’ owned coal capacity - is clearly a huge step in the wrong direction. And the staggering cost of emissions control for these units - over $400 million - is throwing good money after bad.
Adding insult to injury, APS runs coal plants on groundwater – as do other AZ utilities. In a state that’s increasingly facing climate-change-induced heat waves and drought, regulators refuse to recognize the obvious pollution and carbon emissions from coal plants and the fact that solar PV uses very little water.
APS’ Solana Generating Station, near Gila Bend, is a 280 MW Concentrating Solar Power (CSP) power plant that includes storage, providing up to 6 hours of electricity after the sun sets by using molten salt to store heat, which then turns a steam turbine. Although this plant was ‘expensive’ at the time it was built at an estimated 14 cents/kWh (which includes a 30% federal Investment Tax Credit), along with a $1.45 billion federal loan guarantee, the plant provides electricity at peak use times when it could cost APS 30 to 40 cents/kWh.
There is only one conclusion to be drawn from Arizona’s lack of solar, and that is regulatory capture. Arizona is one of only 7 states with regulators that have constitutional power – which means that only the 5-member Corporation Commission makes all water, electric and gas utility decisions – and one of 13 states with an elected Commission, which makes it subject to large campaign contributions.
This is amply illustrated by APS’ likely large ‘investment’ of over $3 million in a single election cycle, and the ongoing drama of front groups like 60-Plus and others that spend utility money on critical elections and also on public relations during debates over solar’s role in the state.
Arizona Public Service Company (APS)/Pinnacle West: Electricity Background: All Utilities
Electric Power Sector Energy Expenditure Estimates, 2013, Arizona:
Coal: $934 million
Natural Gas: $1.034 billion
Uranium: $302.7 million
Net summer capacity: 28,039 MW
Palo Verde Nuclear Generating Station (PVNGS), at 3,937 MW, is the largest nuclear power plant in the U.S., and the 2nd largest of any U.S. power plant.
Twenty-five percent of AZ’s electricity is used for air conditioning, four times the national average of 6%.
Electricity generation from Hoover Dam (2,080 MW) is down 25% since the level of Lake Mead is down to 37% full, the lowest level since it was first filled in the 1930s AZ’s Renewable Portfolio Standard, 15% clean energy by 2025, is one of the lowest in the U.S. AZ’s RPS is unique in that it includes a 30% set-aside for distributed generation. AZ’s Energy Efficiency Standard is one of the highest in the U.S. at 22% by 2020, and applies to all Arizona utilities (except for Salt River Project), with a slightly lower standard for coops
Although Arizona’s Native American lands are some of the richest in the U.S. for solar, geothermal and wind, the Navajo Nation has the highest percentage of households without electricity among U.S. tribal lands.
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