Arizona's Renewable Energy Standard & Rebates Arizona Solar Energy Industries Association (AriSEIA) Kris Mayes, Chairman Arizona Corporation Commission

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Arizona's Renewable Energy Arizona's Renewable Energy Standard & Rebates Standard & Rebates

Arizona Solar Energy Industries Arizona Solar Energy Industries Association (AriSEIA)Association (AriSEIA)

Kris Mayes, ChairmanKris Mayes, ChairmanArizona Corporation Arizona Corporation

CommissionCommissionJanuary 29, 2009January 29, 2009

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Energy Challenges Facing Arizona

Growth– Arizona has surpassed Nevada as the fastest growing state in the

nation.– In 2007, Domestic Net Migration totaled 90,402 or 7,500

monthly– Between 2000 and 2039, Arizona’s population will more than

double. By 2030 Arizona’s population will exceed 10.7 million people – becoming the 10th largest in the country.

– Arizona’s electricity demand is growing approximately 1,000 MW a year

• - Focus on Renewables, DSM, and Energy Efficiency to share the peak

Rising Energy Costs– Rate filings premised on volatile natural gas prices and

growth.– Nationally, energy expenditures account for $1 Trillion, or

8.4% of GDP. Infrastructure Needs

– Arizona electric demand is increasing by 1,000 MW (tantamount to two new power plants) a year.

– Natural Gas Infrastructure.

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Meeting Arizona’s Challenges with

RenewablesAs Arizona’s population grows each year, so

does peak electrical usage. This peak can be met by building new

transmission lines and power plants as well as by the use of renewable energy, energy efficiency and demand response.

In order to meet the ambitious RES goals, as well as increasing energy efficiency programs (such as DSM, and Demand Response), it will be necessary for Arizona to create a clean energy economy.– The RES alone has created a $115 million/year market in

Arizona.

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Energy DiversificationFacing the future in a carbon-constrained

world, what will Arizona’s electric generating portfolio look like?– Since 1998, all of the power plants sited in AZ have

been natural gas.– Coal represents approximately 28% of APS’

generating resources.– Coal represents approximately 69% of TEP’s

generating resources.Options for Arizona?

– New natural gas– “Clean” Coal– Nuclear– Renewables

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Renewable Energy in Arizona

Arizona was one of the first states in the nation to implement a renewable requirement for its electric utilities.

Arizona’s Environmental Portfolio Standard was initiated in 2001 to promote the use and development of renewable energy.

In October, 2006, the Commission approved the Renewable Energy Standard, which builds upon the EPS and will once again make Arizona a leader in renewable energy, particularly solar.

The Commission established a mechanism in the rules that requires each utility to file a tariff to recover the costs of implementing the RES program.

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Renewable EnergyRenewable Energy is the most effective

way to utilize Arizona’s resources and benefit Arizona’s environment:

• Solar Potential throughout Arizona• Wind Potential in NE, NW Arizona• Geothermal• Conservation of water from not having to

construct as many new power plantsRenewable Energy not only benefits

Arizona’s environment but will have a positive impact on the state’s economy.

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2009 Renewable and Energy Efficiency Funds Available

RES FundsAPS - $78.4 MillionTEP - $29.7 MillionSRP - $8 MillionSSVEC - $3.4 Million

Annual Total - $119.5 Million

DSM and Energy EfficiencyAPS - $25.5 MillionTEP - $6.4 MillionSRP - $200 Million over the

next six years

Annual Total - $65.2 Million (approx)

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Environmental Benefits

By 2025, the RES rules could prevent emissions of:– 93 billion pounds of carbon dioxide– 186 million pounds of nitrogen oxide– 129 million pounds of sulfur dioxide– 1,277 pounds of mercury

RES– Will power 500,000 homes in Arizona by 2025– 2,500 MW of renewable energy will be generated

pursuant to the RES

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Solar Energy in ArizonaSolar Energy in Arizona

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Wind Energy in Wind Energy in ArizonaArizona

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The RES: The Power of Distributed Generation

The RES rules require regulated utilities to generate 15% of their energy from renewable resources by 2025.

The RES allows 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 Commission 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.

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RES Percentage Requirement

Year Requirement

2017 7.00 %2018 8.00 %2019 9.00 %2020 10.00 %2021 11.00 %2022 12.00 %2023 13.00 %2024 14.00 %After 2024

15.00 %

Year Requirement

2008 1.75 %2009 2.00 %2010 2.50 %2011 3.00 %2012 3.50 %2013 4.00 %2014 4.50 %2015 5.00 %2016 6.00 %

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Renewables Portfolio Standards

State Goal

☼ PA: 18%** by 2020

☼ NJ: 22.5% by 2021

CT: 23% by 2020

WI: requirement varies by utility; 10% by 2015 goal

IA: 105 MW

MN: 25% by 2025(Xcel: 30% by 2020)

TX: 5,880 MW by 2015

☼ AZ: 15% by 2025

CA: 20% by 2010

☼ *NV: 20% by 2015

ME: 30% by 200010% by 2017 - new RE

State RPS

☼ Minimum solar or customer-sited RE requirement* Increased credit for solar or customer-sited RE

**Includes separate tier of non-renewable “alternative” energy resources

HI: 20% by 2020

RI: 16% by 2020

☼ CO: 20% by 2020 (IOUs)*10% by 2020 (co-ops & large munis)

☼ DC: 20% by 2020

DSIRE: www.dsireusa.org October 2008

☼ NY: 24% by 2013

MT: 15% by 2015

IL: 25% by 2025

VT: (1) RE meets any increase in retail sales by

2012; (2) 20% by 2017

Solar water heating eligible

*WA: 15% by 2020

☼ MD: 20% by 2022

☼ NH: 23.8% in 2025

OR: 25% by 2025 (large utilities)5% - 10% by 2025 (smaller utilities)

*VA: 12% by 2022

MO: 11% by 2020

☼ *DE: 20% by 2019

☼ NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops)

☼ NC: 12.5% by 2021 (IOUs)10% by 2018 (co-ops & munis)

ND: 10% by 2015

SD: 10% by 2015

*UT: 20% by 2025☼ OH: 25%** by 2025

MI: 10% by 2015

☼ MA: 15% by 2020 +1% annual increase

(Class I Renewables)

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Solar/DG Provisions in RPS Policies

NM: 4% solar electric by 20200.6% DG by 2015

AZ: 4.5% DG by 2025

NV: 1% solar by 2015;2.4 to 2.45 multiplier for PV

MD: 2% solar electric in 2022

CO: 0.8% solar electric by 2020

DC: 0.4% solar by 2020; 1.1 multiplier for solar

NY: 0.1542% customer-sited by 2013

DE: 2.005% solar PV by 2019;triple credit for PV

Solar water heating counts towards solar set-aside

DSIRE: www.dsireusa.org October 2008

WA: double credit for DG

DG: Distributed Generation

NH: 0.3% solar electric by 2014

NJ: 2.12% solar electric by 2021

PA: 0.5% solar PV by 2020

NC: 0.2% solar by 2018

OH*: 0.5% solar by 2025

* It is unclear at this point if solar water heating is eligible for OH’s solar carve-out.

MA: TBD by MA DOER

MI: triple credit for DG

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Largest RPS Markets for Solar Largest RPS Markets for Solar in Near-Term Include NJ, AZ, in Near-Term Include NJ, AZ,

NM, NV, NC, CONM, NV, NC, CO

0

200

400

600

800

1,000

1,200

2008

2009

2010

2011

2012

Sola

r Cap

acity

(MW

)

NJ

AZ

NM

NV

NC

CO

MD

PA

NH

NY

DC

DE

Slide Courtesy of Lawrence Berkeley National Slide Courtesy of Lawrence Berkeley National LaboratoryLaboratory

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Arizona Utility Solar Rankings

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Arizona Utility Solar Rankings

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Representative Solar Costs

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Funding for the RESThe RES features a sample tariff

designed to pay for the expansion of the program.

For APS, the monthly charge would be the lesser of $0.007937 per kWh or– Residential Customers: $3.17/month– Small Business: $117.93/month– Large Industrial: $353.78/month

Utilities will be required to file these tariffs yearly with the Commission

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Distributed Renewable Distributed Renewable Energy RequirementEnergy Requirement

2007 – 5%2008 – 10%2009 – 15%2010 – 20%2011 – 25%After 2011 – 30%Requirement that a utility shall

meet half of this requirement from commercial projects and half from residential projects.

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Residential Solar Rebate and Tax Credits

• APS and TEP customers can receive a rebate of $3 per watt in a grid-tied solar system and $2 for each watt installed in an off-grid solar system.

• Residential customers are also eligible for a $1,000 state tax credit and a 30 percent federal tax credit.

• Example:• For a 3.24 kW system (approximate cost $25,672),

residential customers will receive $9,720 from APS and $8,702 in tax credits, taking the “out of pocket” cost to approximately $7,250.

• For a 2.34 kW system, the “out of pocket” cost will be approximately $6,100

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Estimated Residential Estimated Residential Solar SavingsSolar Savings

Size Typical Cost

Rebate ($3/watt)

AZ Tax Credit

Federal Tax Credit

Net Cost

Annual Savings

3.24 kW

$25,672

$9,720

$1,000

$7,702

$7,250

$766

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Commercial Solar Rebate and Tax Credits

APS and TEP Commercial customers can receive a rebate of $2.50 per watt.

Larger commercial systems are moving to a Production Based Incentive (“PBI”) whereby customers contract with APS for credit purchase based on production (i.e. cents per kilowatt hour of production) in place of an up-front lump sum payment.

Federal tax credit of 30% of the system price

State tax credit of 25% of the system cost, capped at $25,000

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Frito Lay Project, Frito Lay Project, PhoenixPhoenix

201 kW201 kW

Slide Courtesy of American Solar Slide Courtesy of American Solar ElectricElectric

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Sulphur Springs Valley Electric CooperativeSolar Schools Program

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Looking AheadIn 2006, 150 TEP customers

installed solar PV, and 275 APS customers installed solar PV.

Statewide, Arizona will need to install over 4,200 3 kW systems next year to meet the RES goals in 2008.

This number increases to:• 5,500 in 2010• 9,100 in 2011 • 12,000 by 2012

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Net Metering

What is Net Metering?– Net Metering allows

customers to offset their consumption by allowing meters to turn backwards.

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Net MeteringOn October 16, 2008, the Commission approved Net

Metering Rules which are currently before the Attorney General for final approval.

Under the rules, if a consumer produces more electricity each month than he uses, he receives a credit for the electricity the next month, and then at the end of the year, the utility must true up with the customer and pay him for the electricity that he produced but didn’t use.

The most unique feature of Arizona’s net metering plan is that it has no statewide MW cap, and limits an individual who wants to net meter a home or building to 125 percent of the connected load of that building. Solar energy advocates see this feature as groundbreaking.

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Next Steps for Renewable Energy in AZ

1. Increase the RES to 25 percent by 2025.2. Allow higher Returns on Equity (ROE) for large

solar and wind projects.3. Add transmission to make AZ the export/import

capitol for solar.4. Pass Solar Manufacturers’ Tax Credit to attract

solar companies to AZ and realize economic development benefits of high wage high-tech solar jobs.

5. Use proceeds from any WCI cap and trade auction to do low-income solar and bolster energy efficiency programs in AZ.

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Conclusion

Arizona Corporation Commission documents and orders can be found by

visiting www.azcc.gov

Information on Arizona’s Renewable Energy Standard can be found by visiting

www.azcc.gov/divisions/util/electric/environmental.htm

Chairman Kris Mayes: 602-542-4143, [email protected]