Arizona Renewable Energy Future

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Renewable energy advocates are concerned that the new Arizona Corporation Commission will slow Arizona’s renewable energy momentum. Former Corporation Commissioner Kris Mayes and Solar industry representative Lon Huber talk about some of the related issues the Commission will have an opportunity to decide.

Ted Simons: Good evening and welcome To "Arizona Horizon." I'm Ted Simons. The Arizona corporation commission, with its new mix Of members, is meeting this Week and taking a look at the renewable energy plans of the utilities the commission regulates. Back in 2006, the commission passed a rule that requires public utilities get 15% of their energy from renewable sources by 2025. After rapid progress, Utilities are now ahead of The game. What that means for current solar programs and incentives Is unclear. Here to give us a better idea Of what to expect is former Arizona corporation commission chair Kris Mayes, now the faculty director for the Program on law and sustainability at ASU's Sandra Day O'Connor college Of law. And Lon Huber, an energy Policy specialist who Represents the solar energy industries association. Good to have you both here. Thank you for joining us. Kris, we will start with you. What you have seen and heard down there.

Kris Mayes: They had a meeting this week which everybody is buzzing about in which they made decisions that I think surprised a lot of people in the solar industry. Took a lot of people by surprise. Essentially eliminated some solar incentives for certain categories, including commercial solar, commercial rooftops, and did some other things that I think, you know, a lot of people are saying that is, you know, wasn't the most pro solar decision that the commission has ever made. Probably the opposite of that.

Ted Simons: You mentioned a surprise, but considering the makeup of the commission, that much of a surprise?

Kris Mayes: You know, I think that is a fair point. I mean, clearly the commission was going in a much more conservative direction. Despite the fact as you know, renewable energy standard was established by an all republican commission. I was on the commission. I'm a republican. But this commission is all republican again, and much more conservative, much more inclined, I think, to sort of the reject renewable energy standard notions of a mandate and the renewable energy standard. That being said, I don't think anybody expected them on their first decision to come in and slash entire programs. That I think is the issue.

Ted Simons: How much of a surprise for you?

Lon Huber: A bit of a shock to the industry, to be honest. The impact of it is far reaching. The decision. And we're still working with the commission and commissioners to really break down the impact for the industry and what exactly their decision meant for us.

Ted Simons: Talk to us about what exactly the decision was.

Lon Huber: The first decision was to essentially zero out commercial incentive programs for businesses. For instance, if a, say a Wal-Mart wants to put up solar panels, they no longer have the support needed, you know, that was there in the past to do that essentially. So, you know, that -- it -- it is tough -- you know, the commercial side of things. You have to make things pencil and you have to compete against a regulated monopoly. These incentives and have been declining rapidly over the years but we weren't at this point that we self-sufficient just yet. I would say we are 80 percent there but just that last bit was-

I think Lon is making a very good point which is when we established the renewal energy standard we never believed that these incentives would last forever. We believed that over time we should phase them out. The problem with sort of abruptly discontinuing incentives for commercial rooftop solar radically decreasing what goes to residential solar, and solar on roof tops at home in an abrupt way right now, is that we haven't quite got over the hump where solar is completive. It is very close. Very close. Within probably a couple of years. To do it now, I think, you know, is what people have -- scratching their heads about.

Ted Simons: I want to get back to that in a second. You mentioned the rooftop residential, reduced, eliminated, and what happened? What does that mean if I was thinking I wouldn't mind putting solar things on my roof.

Lon Huber: Residential, still incentives available. Residential market has just great strides in cost declines. Very close to the point where the market is self-sufficient. I would say commercial is 80%. Residential is 95%, right? And you know, you -- you still have about what they call an up front incentive and it is 10 cents a watt. Typical-sized system, 7KW, you would get $700 for instance. So, it certainly helps, but it is not the main driver of that technology.

Ted Simons: Okay. Back to your point with the idea being that they can't -- it is not quite self-sufficient. It's getting there. Is the commission saying this is close enough to self-sufficiency, time to stand up on your own? Or is this purely ideological.

Kris Mayes: I think ideology plays a strong role in this. I am not a big believer in that. Especially in utility regulation. But I do think there is a sense down there right now that, you know, the cost of solar has come down pretty rapidly, which is true. We have been successful. The renewable energy standard has had a great impact on reducing the cost of solar. And that some of these technologies should be able to stand on their own. They're not quite there. I think the other thing, you know, that apparently there was an amendment that was offered that would have actually reduced the overall renewable energy standard target from 15% to something like 11%.

Lon Huber: 11 for tp --

Kris Mayes: Tucson electric power and more than that for APS. I think, you know, also struck people as odd given the fact that the -- you know, solar has never been more popular among Arizonans. The idea that we would go backwards instead of increasing that amount didn't make sense.

Ted Simons: How far backwards would we go?

Lon Huber: It's tough to tell. In the past, the industry -- to be fair, we've maybe raised the voice a little too loud sometimes when we saw a dramatic drop in incentives, right. But we were always able to meet that target. There is, you know, there is something to aim for. Costs down, both on, you know, soft costs, labor, customer acquisition and hard costs like modules, right. But the interesting part is that this commercial -- it is not reducing the incentive, it is zeroing out the entire program is what happened. It is an entirely different ball game. For instance, one installer at the meeting, he had 50 people down in Tuscon, and will probably have to reduce it to about 10 people. The industry has been such a bright spot during this recession. 270 companies, 10,000 jobs, billions in investment, and it is tough to see, you know, have that possibility of a market sector just go in rapid decline like that.

Ted Simons: You mentioned the idea of reducing the renewable energy standard. I remember hearing from the candidates, each and -- well, each and everyone of the major candidates, that's the law, that's in place. Not going to mess with it. It sounds like they want to mess with it.

Kris Mayes: To be fair, I believe they punted on that particular proposal. The folks who ran for office this time have not yet voted on that. Certainly I think that is a fair question of them. Perhaps there was not great understanding about what some of these amendments would actually do in that regard. But I think, you know, to Lon's point, the industry and those who support solar have a job to do here, which is to really go down to these commissioners and say, look, we understand your concerns. We understand you're concerned about rate payers. That's legitimate. That's your job. We understand where you are coming from ideologically. Here is out plan for over the next five year getting off these incentives and getting to a point of total competition -- I think if the industry lays out a clear plan for that, they can make an argument to the commissioners that we don't need to abruptly cease these programs.

Lon Huber: We understand the issues. Commissioners made it clear. We are here to watch repair costs, not only invest in the future but watch for rate payers there are other ways to do it other than ending a commercial program. That will save about four cents every month from an average residential bill for instance. We can find other ways to get that same savings. Still have a program in place. We look forward to work with the commission to find ways to get at their goal but without the collateral damage --

Ted Simons: That kind of a plan, has it been articulated or formulated? Have they heard the message?

Lon Huber: Well, we're still working on getting -- on getting it put together. Right now, it is just, you know, businesses just doing the best they can to lower the price, to lower the price. And, you know, that was really our plan was just get down -- get costs down as fast as possible. I think you're right. Maybe we can lay out, hey, this is where we think incentives are in two years or three years. Residential might be fine next year without one. Commercial still needs a few more years and maybe we can work financing and a few other angles. I think, you know, that is something that we are going to have to work on.

Ted Simons: And yet the cliche, elections have consequences. These folks were elected. Chairman stump basically said he the push for the cheapest form of energy available. He will ensure power that is affordable, reliable and abundant. Not going to cheerlead, wager or bet I think was the word he used on something that he is not sure about. Surprise in some respects on method and action but behind that it is pretty clear what these folks are thinking.

Kris Mayes: Well that is true. I know commissioner Stump very well -- also ran as the solar team for office. I think he would say that he supports solar. He just wants to make sure that we continue to put pressure on it to do what it needs to do in terms of price and get the price down. But I think that, you know, we really have to consider, you know, the need to maintain the stability of this market. And not do things that abruptly, you know, change, you know, without notice to the industry. And I -- I just think that we should also note that the incredible success story here. The fact that we are at this point right now where solar has almost got to the point where it doesn't need these incentives that we started back in 2006, at least for the residential market, that is a great thing.

Ted Simons: The idea of again putting pressure on solar to reduce price points and these sorts of things, do the industry need this pressure? Could that be a good for the industry?

Lon Huber: I think it is healthy, the right amount, everything in balance. I will say if you look at the utility plans for cost project and analysis that they have done for ultimately scale, solar is competitive with new conventional sources of energy. Either less than the cost or equal to a new coal plant. So on the utility scale we have gotten to a point on a parody scale for a new generation. Obviously more expensive than a 1960 coal plant, but everything is more expensive than that. I think the pressure has been great. Arizona has done so well, taking a gradual approach, which fits into chairman stump's speech. They have taken this approach where, yeah, we have been ahead of our targets, our yearly targets and the rest. But we didn't create a stop and start market. Oh, we're ahead and now let's stop. Hey, if you can meet these cost declines, we will continue it. Other states didn't take that approach. We are ahead and we are going to stop creating a boom and bust style. Companies couldn't invest, couldn't plan and they couldn't bring their costs down. Arizona we have some of the most cost-competitive installations in the country. One of the first markets where we don't really need an incentive for residential. We have a great story. My hope is that the current commission can see that and, you know, learn that it might be worth that investment now, even if we are going over our yearly targets. In the long run, it will save rate payers money.

Ted Simons: Good conversation. Good to have you both here. Thank you for joining us.

Kris Mayes:Former Arizona Corporation Commissioner; Lon Huber:Solar Industry Representative;

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