Proposed rules boost solar power, but where does that leave other energy sources?

Sep 17 - McClatchy-Tribune Business News Formerly Knight Ridder/Tribune Business News - J. Craig Anderson The Tribune, Mesa, Ariz.

Kris Mayes believes the future of Arizona's power supply is in panels, not poles.

Mayes and her like-minded colleagues on the Arizona Corporation Commission say it's pathetic that sun-drenched Arizona is behind California -- and even New Jersey -- when it comes to the amount of solar energy generated per capita.

They are prepared to invest nearly $5 billion in public funds to change all that, by approving new renewable energy standards and boosting incentives to increase solar panels on residential and commercial rooftops.

"The sun is our resource, and we need to be taking advantage of it," Mayes said.

However, opponents, such as Commissioner Mike Gleason, say solar is still too expensive and unreliable to replace fossil fuels. He said solar energy in its current form won't solve the state's power problems.

"This is 1950s technology," Gleason said. "Do we want to provide a subsidy to use an outmoded form of energy?"

Still, both sides acknowledge that something must be done to reduce Arizona's dependency on fossil fuels, which breed pollution, have become increasingly expensive and are limited.

The ACC voted 3-1 to approve a draft of the new standards in February, with Gleason dissenting and Chairman Jeff Hatch-Miller absent. The rules are under review by the Arizona Attorney General's Office, after which they will return to the commissioners for a public hearing and final vote.

Hatch-Miller said he opposes solar subsidies, and former Commissioner Marc Spitzer, who voted for the new rules, has since resigned to take a job with the Federal Energy Regulatory Commission.

Still, the new standards are almost certain to be adopted, since Gov. Janet Napolitano appointed former state lawmaker Barry Wong -- an outspoken advocate for solar energy initiatives -- to replace Spitzer.

RATES AND REBATES

The rules would require 15 percent of Arizona's power to come from renewable sources by 2025. About a third of that would have to be "distributed," meaning it could not be generated by a centralized plant.

"When you talk about distributed power generation, you're pretty much de facto talking about solar photovoltaics," said Gleason adviser Kenneth Rozen.

To achieve that goal, power utilities would be allowed to add a monthly surcharge of up to $1.05 to residential customers' bills for programs promoting renewable energy. The current surcharge cap is 35 cents.

The maximum monthly surcharge for commercial customers would increase from $13 to $39.

A major reason for the rate hike is to significantly expand rebate programs offered to customers purchasing solar energy systems. Both residential and business customers are eligible for rebates when they purchase solar photovoltaic or solar heating systems.

Photovoltaic systems convert the sun's rays into electrical current via solar panels. Heating systems involve passing water under a solar heating panel and then storing the hot water in a tank or running it through pipes to heat a building.

Arizona now generates roughly 12 megawatts of solar energy statewide, enough to power about 2,000 homes. Nearly 5 megawatts come from the Springerville Generating Station Solar System, one of the world's largest photovoltaic arrays, operated by Tucson Electric Power.

Utilities currently offer a $3-per-watt discount to residential customers for purchasing and installing solar photovoltaic systems. The rebate for commercial customers is $2.50 per watt.

Residential utility customers buying a typical, threekilowatt system receive a $9,000 discount from the utility in addition to a $1,000 state tax credit and a $2,000 federal tax credit. Since threekilowatt systems average about $21,000, those rebates cut the cost of purchasing such systems roughly in half.

Arizona Public Service Co. set aside $2 million in January for solar rebates, which the ACC matched, but Mayes said that money ran out in April because of high customer demand. At the commission's request, the rebate fund was doubled to $8 million.

"They may run out by the end of the year," Mayes said.

Salt River Project is not subject to ACC control, and therefore not required to offer the rebates. Still, SRP environmental initiatives manager Lori Singleton said the utility voluntarily offers an identical rebate program, setting aside $4 million for it this year.

"We think we'll spend the whole amount of money by the end of our fiscal year," Singleton said.

COST VERSUS BENEFITS

Despite the success of such programs, Mayes said they pale in comparison to what's expected under the new rules.

To meet the new distributed renewable energy goals, Arizonans would have to purchase thousands of solar photovoltaic systems in the coming years, far more than current customer demand supports.

"We may be doing a couple hundred rooftops a year now -- maybe," Mayes said.

In turn, the state would have to spend millions of dollars -- possibly billions -- in rebates.

Hatch-Miller said the heavy focus on solar energy concerns him, because there are several other forms of renewable energy that should be getting just as much attention.

"I don't think that any particular technology ought to be favored by the rules," he said.

Solar energy is more expensive to produce than any other type of power, Hatch-Miller said, quoting an estimate of 20 to 30 cents per kilowatt hour. By comparison, he said, the cost of wind power is 7 cents, coal is 5 cents and nuclear 4 cents.

Another problem with solar energy is that it can't replace traditional power sources because the sun isn't always shining, Gleason said. That means homes and businesses running on solar energy still must be connected to the power grid.

Still, Gleason said he favors additional research and believes solar energy will improve over time.

"Someday solar is going to be very good," he said.

Commissioner William Mundell said he disagrees with the notion that the commission is "jumping the gun" by investing heavily in solar energy programs.

He said simple cost comparisons between solar and other types of energy don't acknowledge important factors such as the limited future of fossil fuels and the many environmental benefits of solar.

"I don't think you can look at the issue in a vacuum," he said.

Mundell said the proposed 70-cent increase in monthly utility surcharges is nothing compared to the requests received from APS during the past 18 months to raise monthly utility bills by $40 to offset the rising cost of methane, which fuels several state power plants.

APS renewable energy manager Barbara Lockwood said she doubts increasing the surcharge from 35 cents to $1.05 will be enough to meet the state's new standards. That amount may have to be increased in the future, she said. "One of the most critical concerns about solar is the cost," Lockwood said.