Arizona Passes 15 Percent Renewable Energy Standard

 

In terms of renewable energy, Arizona is perhaps best known for this expansive 4.6 MW solar PV project in Springerville. The state will now be known as a state with one of the strongest renewable energy mandates in the country.

March 2, 2006

In terms of renewable energy, Arizona is perhaps best known for this expansive 4.6 MW solar PV project in Springerville. Arizona will now be known as a state with one of the strongest renewable energy mandates in the country.

Photo: Greenwatts

"In 2001, when we passed the current rules we were the first state to do so. Arizona was on the cutting edge. Now we've fallen behind. By passing these rules, we've put Arizona back in the forefront of renewable energy."

-- Bill Mundell, Arizona Corporation Commissioner

Renewable energy technologies got a boost in an Arizona Corporation Commission vote this week. In a state known for its sunshine but not as well known for large, swiftly moving rivers and streams or large-scale geothermal opportunities, state regulators set high standards for renewable energy, hoping to capitalize on Arizona's sunshine and other renewable energy technologies.

On Monday, Commissioners Marc Spitzer, Bill Mundell and Kris Mayes voted to require regulated electric utilities to generate 15 percent of their energy from renewable resources by 2025. For 2006, utilities must generate 1.25 percent of retail energy sold from renewable resources.

The Commission's Renewable Energy Standards allow utilities to use solar, wind, biomass, biogas, geothermal and other similar technologies to generate "clean" energy to power Arizona's future. The rules package outlines what technologies qualify and allow for new and emerging technologies to be added as they become feasible.

In addition to utility-owned projects such as Tucson Electric Power's large solar installation in Springerville, Arizona, the Commissioners also required a growing percentage of the total resource portfolio to come from distributed generation -- residential or non-utility owned installations. The distributed energy requirement starts at 5 percent of the total portfolio in 2007 and grows to 30 percent of the total renewable mix after 2011.

In many cases, distributed generation installations -- such as a large solar installation on the roof of a shopping mall or solar panels at someone's home -- qualify for utility rebates or state and federal tax breaks that offset some of the upfront costs.

Unlike other states that set aggressive standards but "grandfather" or give credit for existing projects, Arizona's Renewable Energy Standards are focused on adding new generation and taking advantage of emerging opportunities.

If a utility does not meet the standard, it can apply for a waiver and go through a hearing but the Commission may still assess a penalty for noncompliance.

To help offset the increased cost of meeting the more aggressive standard, the current Environmental Portfolio Surcharge amount will change. Currently, customers pay $0.000875 per kilowatt-hour. The new surcharge amount is $0.004988 per kilowatt-hour. There are monthly caps in place to limit the total impact on customer bills. Currently, residential customers are capped at 35 cents. The new cap will be $1.05. Nonresidential customers currently have a cap of $13 but that will increase to a maximum charge of $39.00. For extremely energy-intensive commercial accounts (mines, heavy- manufacturing, etc.) the surcharge is capped at $117, up from $39.

The Renewable Energy Standards were formerly known as the Environmental Portfolio Standard that topped out at 1.1 percent in 2007. In February 2004, the Commissioners voted to review the rules and consider adopting a more aggressive standard.

"In 2001, when we passed the current rules we were the first state to do so," said Commissioner Bill Mundell. "Arizona was on the cutting edge. Now we've fallen behind. By passing these rules, we've put Arizona back in the forefront of renewable energy."

The Commission convened a series of intensive workshops involving the Commissioners and staff, proponents of various technologies, environmental advocacy groups and the utilities. The Renewable Energy Standards rules package is the result of this collaborative process.

A recent poll showed that 75 percent of Arizona customers are willing to pay a little more to ensure our energy independence," said Commissioner Kris Mayes. "This will reduce the need for additional power plants and power lines while allowing us to meet the power needs of the thousands of new people moving into the state each month."

Commissioner Marc Spitzer also joined to support the bill while Commissioner Mike Gleason voted against it. Chairman Jeff Hatch-Miller was out of the country on previously planned travel. In a February 16 letter to his colleagues, Chairman Hatch-Miller signaled his opposition to the Renewable Energy Standards.

Before taking effect, the rules must go through a review by the Attorney General's Office and a formal rulemaking process with the Arizona Secretary of State's office. It could be late in the third quarter or early in the fourth quarter of 2006 before the regulations are binding.
 

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