The Arizona Corporation Commission has decided to take another look at renewable energy standards, which requires that 15% of energy generated in the state come from renewable sources by 2025. Thirty percent of that energy must come from small energy generation sources, mostly rooftop solar. Arizona Public Service Company has asked the commission to end that requirement because the method of counting those sources has been eliminated. Solar panel installers fear it’s an attempt to eliminate the competition on the part of APS. Amanda Ormond, managing director of the Western Grid Group and former director of the Arizona Energy Office, will discuss the possible rule changes.
Ted Simons: The Arizona corporation commission wants to reconsider aspects of the state's renewable energy standards. Here to tell us what it means to Arizona's goal of increasingly generating energy from renewable sources is Amanda Ormond, managing director of the Western Grid Group and former director of the Arizona Energy Office. It is good to have you here.
Amanda Ormond: Thank you.
Ted Simons: Boy, this could get really complicated. Let's try to figure this out. Is the corporation commission reconsidering the renewable energy standard in TOTO or just a part of it?
Amanda Ormond: So, what they've said in a hearing a couple of days ago that they are looking at the distributed energy portion. The portion where the utilities are required to have a certain amount of solar rooftop systems. So, we have a 15 percent by 25 standard, and 30 percent of that has to be the small distributed energy projects.
Ted Simons: Mostly rooftop solar, windmills, water mills and these sorts of things?
Amanda Ormond: Absolutely.
Ted Simons: APS compliance, correct me if I am wrong, for residential is good for the next couple of years.
Amanda Ormond: Right. The great news about solar Arizona, this renewable energy standard has worked amazingly well. We have solar all over the state and we're generating clean, we're generating stable price electricity. The problem is for companies like APS. They look at these little solar systems or big ones and say this is competitors to us because these systems are generating electricity, which is their monopoly business.
Ted Simons: Distributed generation requirements, these are the credits, these RECs or is that a whole different ball game?
Amanda Ormond: It is a different ball game. A solar system produces a renewable energy certificate. So I'll say a certificate for every kilowatt hour of -- the utilities and -- corporation has set up a system that the certificates are used to show compliance. If they have enough certificates and have produced enough solar energy they can say we are in compliance with the program. Utilities bought the certificates by providing individuals with incentive payments to put solar on your roof. Solar has gotten so cheap and it has been so easy to deploy that APS is no longer giving incentives. So, they're not buying the RECs anymore. If they don't buy the certificates, they don't have the certificates. If they don't have the certificates, how do they in the future show that they are meeting the standard? So, it really -- I look at it as a compliance issue, because it's details. The other thing that is important to know about the certificates is that companies use them to meet internal mandates and they actually can be sold on the open market. They have a retail value.
Ted Simons: My goodness. That takes you into a whole different arena. You're right, it seems like a compliance and measurement issue. Why can't someone figure out some way for APS instead of using the certificates, going to a monitor, a meter, and saying we're doing this, we're doing that certificate or no?
Amanda Ormond: Right. Ted, so, the -- the -- the attorney at the corporation commission had put out a recommended opinion order on this issue, and what she had proposed was a track and record system. Essentially, the utility would not own the RECs for solar systems that they didn't have any part of but would track how much solar is being deployed in the state and could use that to show compliance. APS came back and said, well, what about -- they propose doing away with the distributed energy requirement. The commission at the hearing I think went one better and said let's open up the entire renewable energy standard rule and see if we need to change things. To me, this seems a little premature because we -- if it is truly an accounting issue, why do we need to open up the standard?
Ted Simons: Right.
Amanda Ormond: And as you mentioned, the energy office, Department of Commerce, just opening up the rule sent shock waves through the business industry. People, businesses say I'm not sure if Arizona is such a good place to invest because I don't know what the policy landscape is going to be. Business wants certainty in policy and this creates ripples.
Ted Simons: Current policy emphasizes the rooftop solar, smaller sources, windmills, water mills, whole nine yards. That's part of this requirement. What APS is saying and corporation commission is now saying, let's look again at the requirement. I would imagine critics are saying if that's the case, as you mentioned, some of the companies that put up the rooftop solar and windmills and water mills, they will go to a big power plant and we're all out of business.
Amanda Ormond: That is one of the criticisms. When they created the renewable energy standard, they did a carve out for distributed energy for just that reason. We want to maximize solar in all kinds of ways, and so let's make sure that we are requiring that big solar gets built, little solar gets built and that type of thing. So, we have set the landscape. We set the renewable energy standard. We said that there is going to be a certain amount of distributed generation. There is a plethora of businesses out there that built their business model on this long term policy that is supposed to go through 2025. It is of concern when we look at a fundamental policy like that and changing it.
Ted Simons: When you mention a lot of businesses are doing that. How many? Talk about the solar industry in Arizona and how so much of it is again based on what has been going on at the corporation commission and at APS.
Amanda Ormond: So, the -- because of the policy at the state we have seen a lot of businesses that have started to operate in the state and put up photovoltaic systems and hot water systems and windmills as well. The solar jobs report just came out for this year that is done by a group called The Solar Foundation, and we are number two in solar jobs in the country - number one being California. But we are slightly down this year from last year. My prediction is that if we keep monkeying with all of the standards, we are going to keep going down. Businesses are going to have a harder time selling their systems and staying in business.
Ted Simons: Has that argument been made? I would imagine that argument probably has been made as decibels we can't even comprehend.
Amanda Ormond: Right.
Ted Simons: Does the corporation commission do you think understand that just saying what they did -- we're discussing this now because this is a pretty complicated topic and a lot of folks are thinking that the entire energy standard is going to be completely overhauled and that is not the case?
Amanda Ormond: We don't know what the case is. This is a regulatory process and we have to see what the outcome is going to be. The corporation commission has an investigation open, docket open on innovation. They are going to be looking at new ways to regulate the utilities, what kind of impacts distributed generation is going to have. This is a very far-reaching look. To me that's where we really need to be concentrating, because if it isn't solar energy, there is going to be another technology that the utilities look at and say wait, that's cutting into my market share as well. We don't want to thwart all of the new, clean, stable-priced technologies. We need to look at the fundamentals. If APS is losing money because the competitors are coming into the marketplace, what do we do to incent APS to be the solar capital of the world? What do we do to ensure that if we want solar to thrive in the state and we know customers overwhelmingly support solar development, what do we need to do to align the business model with what people want and what is in the public interest?
Ted Simons: We discussed this on the show before. Fascinating discussion when you get into it because it talks about the future of energy companies as they exist. And comparisons have been made and I think reasonably so to MaBell. It sounds as they APS has been such a steward and has been here for so long, and, yet, it sounds as if the world is starting to catch up and pass by. I mean, are we looking at the end of an era as far as major utilities are concerned?
Amanda Ormond: I don't think so yet. Maybe far in the future, but not yet. But the concerns that APS has raised have been raised by the utility industry around the country. This is not particular to Arizona. Utilities have said that distributed energy, any kind, is -- is going to put the utilities into a depth spiral. Those are their terms, "death spiral." There is a lot of hype out there about how much trouble this could cause utilities and it is something that we need to look at. My perspective, this is not a crisis issue yet. We have time to give thoughtful deliberation to this issue, and it is going to affect the long term economic development and health of the state. We really need to take the time and collect information from multiple parties, compare what other states are doing, bring in certified smart people to talk about what is going on in other states, and really vet this before we take any, you know, drastic action or any action at all.
Ted Simons: Well, this great information. I'm really glad you joined us to help make some sense of it. Thank you so much. We appreciate it.
Amanda Ormond: You're welcome.
Amanda Ormond:Managing Director, Western Grid Group;
