Creating clean energy in Arizona: Interview Special

Posted Jul 12, 2018 by Tim Sandle
The Arizona Corporation Commission is to develop a new rule directing utilities to meet a new clean energy standard by 2050. The aim is for utilities in the state to source most electricity from renewables. A leading analyst looks at the implications.
Phoenix as seen from South Mountain
Phoenix as seen from South Mountain
As well as making a push for renewables (and a target of 80 percent of energy from this source), Arizona also intends to increase energy derived from nuclear power by 2050 and deploy 3,000 MW of energy storage by 2030, along with reforms to boost energy efficiency, electric vehicles and biomass. Last week, the commission released another letter on how they plan to proceed with the new rule.
According to Bryce Smith, CEO and founder at LevelTen Energy, these rules should lower energy costs for ratepayers and businesses around the state as well as require utilities to deliver an increasing portion of their renewable energy during peak electricity demand hours.
To discuss these implications in more detail, Digital Journal spoke with Bryce Smith.
Digital Journal: How important is addressing climate change?
Bryce Smith: Climate change is one of the defining issues of our time. The United States and the world are warming up every second, the global sea level is rising, and extreme weather events are becoming more frequent and more severe. Not only is it an immediate existential crisis impacting migration, drought and infestation but it’s also the biggest economic opportunity we’ve seen in our lifetime. There is an economic incentive to go green now, which we see in Congruent Ventures, a new VC firm led by clean energy vets with $92 million of available funding. When venture capital gets involved, that means there’s room for a market to grow and further monetize.
DJ: What are the worst-case outcomes with climate change over the short term?
Smith: Over the past few years, the impacts of climate-induced catastrophes are finally getting some attention. We have seen these events triple over the past 30 years. And unfortunately, we are only seeing the tip of the iceberg here. A few wildfires there, a couple hurricanes here are far from the worst things climate change is likely to cause.
DJ: Why did the Arizona Corporation Commission come out with the proposal that the commission will develop a new rule directing utilities to meet an 80% clean energy standard by 2050?
Smith: There’s a few factors that play into the proposal. One, the advent of low cost solar generation -- solar prices are going down and this trend will continue. Combine that with the advent increasingly economical and energy storage options and Arizona’s abundance of solar energy, and there’s a lot of momentum behind the proposal that make it both realistic and the most economical path forward. While the 2050 deadline isn’t necessarily ambitious -- targets as soon at 2025 are no longer considered aggressive-- it’s headed in the right direction.
DJ: How will utilities meet this?
Smith: I wouldn’t anticipate additional incentive or assistance programs beyond the procurement practices that APS already has, as there are ample resources to meet that 50 percent target. The solar industry in Arizona is already doing well and utilities there would be wise to hop on board as they continue to evolve from coal and nuclear power to new technologies such as storage.
DJ: What are the advantages for citizens?
Smith: The advantage of a move to renewables is that the costs are known and well-defined. What rate payers receive is stability, a well-forecasted cost, and, of course, a healthier climate.
DJ: Will businesses benefit?
Smith: One expected impact of this proposal would be the forced closure of Arizona’s Palo Verde Nuclear Generating Station. Long-term, this means business rate payers will not be saddled with unexpected rising infrastructure costs for those nuclear generators, like we saw with the Georgia Power’s Plant Vogtle nuclear expansion.
In a related sense, rate players would no longer be at the whim of volatile fossil fuel markets. The pricing volatility of fossil fuels, along with the difficulty of forecasting fossil fuel prices, puts energy customers and providers at risk of fluctuating energy rates.
That said, the effects of passing the cost through the ratepayers -- whether in real time or over a period of years-- are dependent on the actual underlying cost of the energy. If one can stabilize energy cost at a low rate then that will certainly benefit the customers.
DJ: How important is energy efficiency to these plans?
Smith: Energy efficiency will obviously impact the amount of renewables utilities will have to procure. A megawatt hour saved costs less than a megawatt hour generated. Intelligent efficiency programs are always complementary to a renewable procurement objectives.
DJ: How about energy storage? Can this be improved?
Smith: Energy storage is several years behind but we’re seeing significant drops in the price for storage, following a similar trajectory to wind and solar farms. Conversely, we are seeing the storage size of projects increase dramatically as demonstrated by Tesla’s latest California storage project. The project would have a total 1.1GWh capacity, which means Tesla could have a "gigawatt-hour scale" deal within months.
DJ: What part does LevelTen Energy play?
Smith: As an aggregator for renewable energy projects, LevelTen Energy makes it easy to understand the risk profile of any given renewable energy project. If utility companies are having to change their mix of energy to focus on renewables, the LevelTen Marketplace makes it possible for them to determine what projects are the best fit for their businesses needs. I also hope that legislation like this spurs more renewable energy project development to support both a more sustainable planet as well as make the marketplace even more competitive, and therefore more beneficial, for the buyer.